By Frank Chung
Copyright news
The warning comes as the latest Household, Income and Labour Dynamics in Australia (HILDA) Survey, released on Friday, paints a grim picture for the future if urgent steps are not taken to address housing affordability.
The long-running survey, which has been tracking the same households since 2001, reveals that the share of retirees who rent has doubled from 6 per cent in 2003 to 12 per cent in 2023.
“If things in Australia don’t get worse, which I think is an optimistic assumption, we could be looking at something like 24 per cent of retirees living in rental accommodation by 2043,” Dr Kyle Peyton senior research fellow at Melbourne University’s Faculty of Business and Economics and co-author of the HILDA report, told news.com.au.
“Today’s renters who are in their 30s and 40s and don’t have a home, those are going to be your future retirees in the rental market.”
Dr Peyton, who has slammed the “pathetic” pace of home building at 170,000 per year, said the “main thing here is we don’t build enough homes to keep up with population growth and we haven’t in a long time”.
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AMP estimates that Australia now has an accumulated housing shortfall of 200,000 to 300,000 dwellings, built up over the past few years as underbuilding has failed to keep up with population growth.
Australia currently builds around 170,000 homes a year.
“Unfortunately, with home building still running well below the Housing Accord objective for 240,000 homes a year, the shortfall is likely to remain for some time to come,” AMP chief economist Shane Oliver said in a note earlier this month.
Dr Oliver warned the federal government’s 5 per cent deposit and shared equity schemes for first home buyers would “add to demand and make housing affordability worse in the near term”.
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“Housing affordability remains very poor,” he wrote. “This is evident in the ratio of home prices to wages and incomes being around record levels.”
The HILDA report notes that over the past two decades, house prices have risen more than 400 per cent, more than double the growth in wages, and the average Australian now faces more than a decade of saving to afford a deposit.
The share of retirees who own their homes outright declined from 75 per cent in 2003 to 66 per cent in 2023, the study found, while the proportion with a mortgage increased slightly, from 13 per cent to 17 per cent.
In 2023, about 83 per cent of retirees owned their home, either outright or with a mortgage, down from 88 per cent in 2003.
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The proportion of retirees living in other arrangements such as social housing or rent-free has held steady at around 5 per cent.
Retirees who rent had no housing wealth, by definition, and had far less in superannuation.
More than one quarter of retirees in private rentals in 2023 had no superannuation at all, compared with fewer than one in 10 of those who owned their home outright.
For those renters with superannuation, their average superannuation balance remained relatively low, rising from about $83,000 in 2015 to $277,000 in 2023, compared with around $500,000 for homeowners.
In 2023, 59 per cent of renters retired with less than $100,000 in superannuation, compared to just 26 per cent for homeowners.
“Superannuation associations recommend that you need $100,000 in super to live a comfortable life in retirement if you have a home,” Dr Peyton said.
“But if you are renting you need more than $340,000 as of 2025. Renters going into retirement are just at a structural disadvantage.”
The HILDA Survey findings echo similar warnings from experts.
A Grattan Institute report in February calling for an increase in the level of Commonwealth rent assistance to retirees noted home ownership was falling fast among poorer Australians approaching retirement.
“Between 1981 and 2021, home ownership rates among the poorest 40 per cent of 45-54 year-olds fell from 68 per cent to just 54 per cent,” the report said.
“Most older working Australians who rent do not have sufficient savings to keep paying rent in retirement. The poorest 40 per cent of renting households aged 55-64 have less than $40,000 in net financial wealth.
“Today, two in three retirees who rent in the private market live in poverty, including more than three in four single women. Half of retirees who rent have less than $25,000 in savings. And a growing number of older Australians are at risk of becoming homeless.”
Dr Peyton points out Australia’s retirement system is “built on the assumption of home ownership”.
“That’s been a fine assumption for the Baby Boomers because most of them do own their own homes,” he said. “Fifty years ago in Australia you could own a home on the median wage.”
Dr Peyton said the growing number of retirees in the rental market would have “profound implications” for future generations and would require major reforms.
“The amount [of homes] we’d have to build to reverse this trend I don’t think it’s feasible, so we’re in a damage control situation,” he said.
One major focus would have to be on reforming Commonwealth rent assistance, to prevent an ever-growing number of retirees slipping into poverty and potentially even homelessness.
“It’s not very generous, it’s not keeping up with the prices of properties to rent, and one of the craziest things about it is it’s regionally invariant — you get the same amount in Mildura as Melbourne,” he said.
Life after Covid
Another key theme of the latest HILDA report is how Australians are faring in the aftermath of Covid.
“It is mostly a story about inequality and widening inequality,” Dr Peyton said.
“The rich are getting richer and ordinary people are worse off.”
According to the report, Covid ushered in a dramatic increase in income inequality, which had remained largely steady between 2001 and 2019.
In 2020, as lockdowns hit and government handouts flowed, inequality dipped substantially — before spiking to its highest level ever in 2022.
Household disposable incomes in 2023 were below their 2020 levels, falling to an average of $116,432 and median of $99,372.
Post-Covid price rises, particularly for petrol, mortgage payments have taken a hit on of family budgets.
Between 2021 and 2023, average household spending on motor vehicle fuel rose 25.3 per cent to $2866 and mortgage payments rose 20.4 per cent to $12,404.
The items that saw the biggest declines in average expenditure between 2021 and 2023 were tobacco products (–22.3 per cent), childcare (–21.1 per cent), home repairs, renovations and maintenance (–11.1 per cent) and alcohol (–8.2 per cent).
The study also highlights how working from home has become a permanent fact of life after lockdowns.
Prior to Covid, around one quarter of workers at least some of their hours from home, while just 5 per cent worked mostly from home.
In 2023, that had risen to 35 per cent and 15 per cent respectively.
Covid also took a toll on Australians’ mental health and relationships.
The HILDA Survey includes questions on psychological distress every two years, with the 2023 data now providing the first post-pandemic estimates.
In 2023, 27.5 per cent of females reported being in distress, down from 28.9 per cent in 2021 for females, while for males the figure remained constant at 22.8 per cent.
In the 10 years from 2013 to 2023, the prevalence of psychological distress has increased by roughly 55.1 per cent among males and 46.3 per cent among females.
Australians are also socialising less since Covid.
The frequency of socialising has declined steadily since 2001, and while rebounding from pandemic dips, has continued its long-term trend.
In 2023, 30.3 per cent of people saw their friends or relatives about once a week, 18.8 per cent once per month and just 2.4 per cent on a daily basis.
Similarly, agreement with the statement “I seem to have a lot of friends” has fallen noticeably from 2010 to 2023.
“The decline in friendships has repercussions for people’s wellbeing,” the authors write.
“The report shows a low perceived number of friends is associated fewer social activities, greater feelings of loneliness and poorer mental health. This is all the more concerning because it often gets harder to make friends as life goes on.”
