Rent stress threatens retirement security

Declining home ownership is deepening Australia's housing divide, with lower-income households facing growing rental stress and potentially entering retirement with significantly less wealth, according to the Actuaries Institute.

The report, Spotlight on Real (e)State - Understanding changes for home ownership and renting, examines how rising housing costs and delayed entry into the property market are reshaping housing security across generations, alongside five scenarios for reforming Commonwealth Rent Assistance (CRA).

Home ownership among Australians aged 25 to 34 fell seven percentage points between 2001 and 2024, while the decline among those ages 65 to 74 was two percentage points. The impact has been more pronounced for lower income households, with ownership among the lowest income group aged 25 to 34 dropping 16 percentage points over the period.

While many Australians are still projected to eventually buy a home, the report warns delayed ownership can leave more people carrying mortgages into retirement. Those who reach retirement without owning their home have less than 20% of the average wealth of homeowners, despite growing superannuation balances.

Rental affordability is also deteriorating for those least able to absorb rising costs. Among private renters into the lowest income quintile, 65% spend more than 30% of their gross income on rent while 30% spend more than half.

"Stronger competition and low vacancy rates are creating a 'musical chairs' effect with poorer and more vulnerable households potentially squeezed out, increasing housing stress, overcrowding and homelessness," Actuaries Institute co-author Laura Dixie said.

The research assesses five possible changes to CRA, including adjustments to payment levels, eligibility and location-based support. One scenario suggested changing minimum rent thresholds and maximum payments could reduce modelled housing stress by $283 million without increasing government spending, although some current recipients would lose eligibility.

Expanding assistance to more low-income renters could provide greater relief, but a scenario involving a 25% funding increase would cost an estimated $1.3 billion.

Actuaries Institute chief executive Elayne Grace said policy settings needed to reflect changing housing patterns and better support vulnerable households.