The Retirement Income Review found the treatment of housing in the Age Pension assets test provides more support to homeowners compared to non-home owners.
The review found the preferential treatment given to home ownership leads to inequities in the retirement income system.
"The exemption of the principal residence in the assets test particularly benefits age pensioners with high-value homes," it said.
"Around 15% of retirees on the Age Pension own homes worth more than $1 million.
The RIR noted that the larger free areas in the assets test for non-homeowners benefit only a small share of retirees who are renting.
"About 6% of non-homeowner Age Pension recipients have a level of total assets above the homeowner thresholds and below the non-homeowner thresholds and could benefit from this preferential treatment," it said.
"Even the limited number of renters who benefit from the higher assets test free areas and hold their wealth in forms other than a home are still at a disadvantage relative to homeowners."
The review said, compared to a homeowner with identical total wealth, a renter receives about $4000 less Age Pension per year.
"Compared with the Age Pension, Commonwealth Rent Assistance is more targeted to lower-wealth households," it said.
"About 20% of Age Pension expenditure goes to the top two wealth quintiles, while close to 90% of Commonwealth Rent Assistance expenditure goes to the bottom wealth quintile."
The report noted that homeowners and renters have large differences in their income and wealth accumulation during their working life.
"While working, home owners generally have higher incomes than renters. They typically have higher educational attainment and longer employment history, in part due to the requirements for down payment and ongoing servicing of mortgages," it said.
"Home ownership also serves as a savings commitment device. Working-life differences result in different retirement outcomes for home owners and renters."
The review found that despite home owners and renters have about the same income in retirement due to government payments to lower-income households, home owners have lower housing expenditure and therefore higher disposable incomes.
"Home owners are less likely to face financial stress and poverty in retirement. Apart from working-life differences, some government policies affect home owners and renters differently," the RIR said.
"The Age Pension assets test treats retirees in similar economic circumstances differently based on their home ownership status."