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Housing decisions of older Australians

Commission research paper

This paper was released on 1 December 2015. The report is the third flagship research paper and it continues the investigation of issues relating to the ageing of Australia's population, this time focusing on the housing choices made by older Australians.

It considers available statistical evidence on the financial and accommodation aspects of housing decisions and draws out some of the policy issues affecting the wellbeing of older Australians and the broader community.

The report examines the policies affecting the supply and cost of residential aged care and other age-specific housing, the influence of the tax and transfer system on housing decisions, and the issues in using home equity release to support living standards in retirement.

In reaching its conclusions, the Commission drew on evidence from a survey of older Australians conducted on its behalf.

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  • At a glance
  • Contents summary
  • Infographic
  • Survey supplements

Media release

Housing decisions of older Australians

Many older Australians, especially the less wealthy, continue to save well into old age, increasing net wealth as they face increased health and aged care costs.

'When faced with lower incomes, older Australians are more likely to cut expenditure than draw down on their wealth, a surprising tale of precautionary saving,' explained Commissioner Karen Chester. Most notably this includes not accessing the wealth embedded in the family home.

'This is despite the fact that most older home owners could actually achieve a modest retirement living standard over the remainder of their lives by drawing on their home equity,' she said.

A Commission initiated survey and analysis of older Australians housing preferences shows older Australians have a strong preference to 'age in place' and access in-home aged care services if they need them according to a new flagship research report released by the Productivity Commission.

'Since home care is considerably cheaper than residential aged care, it is not only what most people want but also potentially more fiscally sustainable for Government,' said Commissioner Karen Chester.

'We are seeing that residential aged care is increasingly becoming an end-of-life option, with the average age of admission increasing,' she said.

Reforms in aged care have supported these trends. 'But further reform is still needed to deliver better consumer choice by encouraging competition and innovation by residential aged care providers,' emphasised Commissioner Karen Chester.

Research also shows that an increasing proportion of older Australians are looking to move into homes that are more suitable to their needs. These may be either in the private market or in age specific accommodation such as retirement villages.

15 per cent of older Australians expect to downsize to a more suitable dwelling or age-specific housing. State and local planning systems remain the most significant barrier to the supply of innovative and affordable housing options.

While most older Australians are home owners, older renters are a significant and vulnerable minority. They are more likely to be experiencing housing stress and have insecure tenure. The support available through social housing and Commonwealth Rent Assistance is inadequate.

'This highlights the imperative of further and comprehensive focus on retirement income policy and housing affordability for low income households, reviews which would have benefits for older Australians, as well as the broader community.

Key points

  • Housing is integral to people's wellbeing, particularly for older Australians. For many older people home ownership provides security and independence in retirement.
  • Older Australians strongly prefer to age in place. Most people are happy staying in their family home, despite a common perception that such homes are too big for them.
  • For others, age-specific housing options provide more integrated accommodation and care, offer a way to release home equity, and may delay entry into residential aged care. Growth in retirement villages and manufactured home estates has been strong, despite planning restrictions.
  • About 15 per cent of older Australians are renters, and these people are generally a highly vulnerable and economically disadvantaged group.
  • There is a general lack of affordable downsizing options for older Australians, due in large part to the red tape and inconsistencies within state and territory land planning regimes.
  • Residential aged care is effectively transforming into an end of life care service. The age of admission is increasing (now 83 years on average), average tenure is about 2 to 3 years, and care needs are higher.
  • Many older people are reluctant to plan or get advice for possible future care and end of life needs. Decisions can be prompted by crises, and made when the person is vulnerable.
  • There are positive signs from the recent reforms in aged care, including improved financial viability, transparency, and consumer sovereignty. However, further reform is needed.
  • About 800 000 older Australians receive home care. Older people's desire to age in place aligns with governments' fiscal goals - in most cases, assistance for home care is considerably less costly than for residential aged care. Nevertheless, there may be merit in increasing co-contributions for both home and residential aged care.
  • Most of older Australians' wealth is in the family home, but it remains an untapped source of retirement income. Many older Australians, including some of the poorest retirees, continue to save (spending less than their Age Pension) even very late in life. The main reasons for such behaviour are precautionary saving and a strong aversion to debt in old age.
    • This precautionary saving is driven by uncertainty around longevity, health and residential aged care needs, and is a potentially expensive form of 'self insurance' that can lower living standards in old age.
  • Most older Australian home owners on low incomes could achieve a modest retirement living standard over the remainder of their lives by drawing on their home equity.
  • Financial equity release products could facilitate withdrawal of home equity to fund retirement needs. However, this market is small and unlikely to grow in the near term:
    • Most providers are diffident due to small market size and the risk of reputational damage.
    • Broader reluctance by older people to tap into home wealth and strong aversion to debt, coupled with the high cost of such products are impeding demand. The tax and transfer treatment of the family home further reinforces this.

Chapter 2 formulates the objectives for housing policy, and sets out a framework for analysing older people's housing decisions, the factors affecting these decisions and the policy implications.

Chapter 3 presents evidence on older Australians' housing and financial decisions in current and recent historical contexts.

Chapter 4 examines age-specific housing options that address the accommodation and care needs of older Australians, and discusses barriers to the supply of age-specific housing. It also considers the effect of recent aged care reforms, and future directions for reform. (A more detailed description of recent progress on aged care reform is given in appendix B.)

Chapter 5 explores the impact of Australia's current tax and transfer architecture on the housing decisions of older Australians, with a particular focus on the treatment of the principal residence in the means test for the Age Pension.

Chapter 6 outlines developments in the home equity release market and discusses the extent to which older Australians are using equity release products to draw on the wealth in their homes. It also considers possible barriers to efficient operation of the market for these products.

Appendix A contains details of stakeholders consulted for the study.

Appendix B summarises progress to date against the 2011 Caring for Older Australians recommendations.

Appendix C gives details of the methodology used for the Commission's survey.

Appendix D describes the methodology behind the illustrative quantitative work.

Download the infographic

Housing Decisions of Older Australians infographic. Text version follows.

Housing Decisions of Older Australians (Text version of the infographic)

Housing is an integral parrt of the wellbeing of older Australians. It provides independence and security inretirement.

Housing has a dual role

Housing as a place to live

Most older Australians prefer to age in place.

Where do older Australians live?
Home owners (excluding age-specific housing)
Average age: 74 years
Private rental
Average age: 74 years
Residential aged care
Average age: 84.5 years
Social housing
Average age: 75 years
Retirement villages
Average age: 81 years
Mobile home communities
Average age: 67 years
There is a strong preference to live at home
Living in my own home 83%
Other 8%
Living in a retirement village 6%
Living in a manufactured home park/
mobile home park
Living in a residential aged care facility 1%

We surveyed people aged 60+ and asked them their preferred living arrangements - most preferred to live at home.

A case of aligned interests: it is much cheaper for the Government to provide in home care and it is what older Australians need and want.

Housing as a source of wealth

Most older Australians are reluctant to use their home equity top pay for their living and care costs.

Do older people see the family home as a way to fund their retirement?

Do they plan to leave their house to their children?

How comfortable would they be with drawing on their home equity?

Older households are asset rich and income poor...
Age group Wealth Weekly income
15-24 $115,000 $1,370
45-54 - $2107
65-74 $1.2M -
75+ $851,000 $650
...more likely to be home owners and own most of Australia's home equity
Age group Owner without a mortgage
55-64 45%
65-74 73%
75+ 80%

We surveyed people aged 60+ and asked them under what circumstances would they use their home to fund their retirement.

Circumstances to use home to fund retirement
Health/medical/aged care 40%
Not under any circumstances 38%
Living expenses/bills/clear debts 14%
Better lifestyle 8%
Home repairs/renovation 7%
Repair/replace household goods or car 7%
Needed for children/grandchildren 3%

Most older Australians don't want to draw on their home equity even if this would help them enjoy a more comfortable retirement.

Read more in the report.

The Commission engaged RFi Group to conduct a national survey of older Australians on the reasons for housing decisions relevant to this study.

The survey was conducted online in September 2015, and involved 1500 Australians aged over 60 years.

Key results from the survey are presented throughout the report. A more detailed description of survey methodology is given in appendix C.

Chart pack


Raw data

Printed copies

Printed copies of this report can be purchased from Canprint Communications.

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