Politicians are all too aware that a metaphorical poverty freight train is coming for a generation of renters, but can a collision be avoided, asks David Taylor.
It's a disturbing statistic: half of all people renting in retirement are living in poverty.Why would that be the case? It's pretty simple: the age pension assumes home ownership. So, if you add on even the cheapest rent, you need extra regular income to fund it.Again we hit a problem because, analysts say, assuming many of us live to a ripe old age, renters will need a nest egg worth hundreds of thousands of dollars just to keep a roof over their head.
For example, the median weekly income is roughly $1,300 —that means an annual salary of just under $70,000.The age pension comes close to matching this at just under $30,000. "You probably need to have a super balance of about $300,000 at retirement to be able to pay out rent of between $15,000 and $20,000 a year — which is what you would probably need to put a roof over your head in retirement as a single renter."That's what we see with home owners — the age pension is enough for people to get by as long as they own their own home.
To put it another way, in theory, CRA would need to rise to completely cover the cost of the cheapest rentals to help aged pensioners keep a roof over their heads. "We also want to help more renters become home owners through our Help to Buy shared equity scheme, which will bring home ownership back into reach for 40,000 Australian households.
Outside of government support, avoiding the freight train requires a significant improvement in housing affordability for younger Australians or mechanisms to ensure low-income earners achieve substantially higher superannuation balances in retirement.
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