Salvation Army warns falling home-ownership rate will see renting baby-boomers struggling in retirement

By Bernard Hickey

The Salvation Army has warned that the number of pensioners being forced to ask for top-ups from the Government to pay for rental accommodation is likely to almost triple to 100,000 as the collapse in home-ownership rates in recent years filters through to younger baby-boomers as they retire.

It also warned some baby-boomers facing relationship breakdowns, job losses or health problems faced becoming completely homeless for the first time, as researchers in Australia were already beginning to see.

The Salvation Army published a report today titled “Homeless Baby Boomers: housing poorer baby boomers in their retirement” that estimated the number of pensioners who would be forced to ask for an accommodation supplement from the Government would triple because of a slump in the home-ownership rate to a 60-year low of 64% from 74% in 1991. This would mean up to 35% of baby-boomers, particularly those born from 1960 to 1965, would have to rent in retirement, the Salvation Army estimated.

The report recommended a Government review of the level of the Accommodation Supplement, which had been set on rent levels in 2005 and had not been changed since 2007.

The report’s author Alan Johnson said the deterioration in the outlook could be linked back to the 1991 Mother of All Budgets.

“The change in fortunes for those retiring is a direct result of actions taken in 1991 by Finance Minister Ruth Richardson’s in the so called ‘mother of all budgets’,” Johnson said, pointing to the scrapping of home ownership programmes, the introduction of market rents for state houses and cuts to welfare benefits.

“Nearly two thirds of the almost 430,000 new households formed between 1991 and 2015 are tenant households,” he said.

Just over 5% of those receiving the New Zealand Superannuation benefit were receiving the Accommodation Supplement, but this had grown by more than a third or over 9,000 people in the past five years.

“The numbers of people receiving both payments could rise from around 35,000 in 2015 to as many as 100,000 by 2025. This expense will likely remain affordable for the State, but the more relevant question here is around that of adequacy,” he said.

“The Accommodation Supplement has suffered from quiet neglect at the hands of successive governments since 2007. The present policy regime applies one of four maximum payments depending on which region a person lives in. These maximums have not been adjusted since 2007 and were on any account based on 2005 rents,” he said.

“In other words, the policy settings are ten years out of date and there appears little appetite to change things given the money Government saves by ignoring the problem. The problem here is that low income households, and especially tenants in Auckland and Christchurch, are being squeezed between rising rents and static income support which was meant to assist them with high housing costs.”

Particular problem in Auckland

The Salvation Army said the biggest problem would be in Auckland, where almost 100,000 soon-to-retire baby boomer tenants were living. It said the assumption they would simply retire to the regions to solve the problem was not justified.

“There are just over 150,000 rental properties in these three regions and most are already happily occupied by tenants. There are emerging signs of older people shifting out of Auckland in search of sunnier climates and cheaper housing, but given the size of Auckland relative to surrounding populations and housing markets it will not take much for such a trend to swamp these populations and markets,” it said.

“In the upper North Island alone up to 33,000 extra rental properties will be required to meet the need of retiring Baby Boomers in the next few years.”

It estimated that the number of people requiring both rent assistance from the Government and New Zealand Superannuation would rise from 35,000 now to 100,000 by 2025.

‘Homeless and destitute’

The Salvation Army said Australian researchers were seeing more cases of first time homelessness among those in later middle ages and early retirement years, particularly after major personal setbacks such as health problems or job loss.

“They become street homeless and destitute. There is little to stop such a trend from emerging in New Zealand. In the present environment of rising rents, increasing numbers of people retiring without home ownership and a patchy and neglected income support regime, there is a real risk that we will begin to see rising rates of absolute poverty amongst our elderly population,” John said.

The Salvation Army also called for the Government to extend income related rent subsidies, which are currently only available to registered Community Housing Providers (CHPs) and Housing NZ, to Councils “as a first step to local government taking a leadership role in the provision of rental housing for older people.”

It also called for “a programme of interventions be developed to limit the risk of those in late middle age and early old age becoming homeless for the first time due to financial hardship, relationship breakdown and health problems.”

Govt downplays report

Social Housing Minister Paula Bennett said it was a “bit of a leap” for the Salvation Army to say that lower home ownership would lead to homelessness.

“Superannuation goes up at 66% of the wage so that will be increasing as wages continue to increase,” Bennett told reporters in Parliament.

“Equally there is the accommodation supplement which we pay about NZ$1.2 billion for at the moment and is income related. Only about 5% of older people actually take that extra supplement and that’s low, and part of its pride and not wanting to ask for exta assistance from Government,” she said.

“We can see more of that. It’s demand driven, but it’s not capped, so I do see it going up as there might be an increase in need.”

Bennett said the Government had no plans to increase the maximum supplement.

“To increase it by 1% is a cost of NZ$200 million, so I’m sure in the future you will see it increasing. It’s just not something we’re planning in the next 12 months,” she said.

“We’ve got one of the most generous pension systems in the world from a state government one, but equally there’s people needing to look forward to their own retirement. I certainly accept with lower home ownership there will be increased rental costs for people who haven’t paid off a mortgage and freed up some of that weekly income.”

Bennett said it was possible the Government could extend Income Related Rent Subsidies to Councils.

“Maybe. I am completely concentrating on any money I’ve got and increasing supply in Auckland. That’s got to be my number one priority right now. In the future it might.We have a deal with councils that if they own less than 51% and they’ve gone into a partnership with a CHP, then the IRRs can be extended to them,” she said.

“It doesn’t house me a single other person. Instead of the ratepayer paying, the taxpayer does, and it doesn’t house me a single other person and that has to be my priority right now.”

Opposition reaction

Labour Housing Spokesman Phil Twyford said the Salvation Army had exposed a looming crisis because of falling rates of home ownership and no increases in the building of state and social housing.

“You can live a modest but decent life on superannuation if you own your home mortgage free. If you are living on super in a private rental – especially in the expensive Auckland market – it can get very tough. We need to re-invent pensioner housing for the 21st Century,” Twyford said.

“Older Kiwis would love to have low maintenance, secure, one and two bedroom homes that are close to the shops, designed for mobility access, and most of all affordable. But those kinds of homes are simply not being built in any numbers,” he said.

“Instead of pressuring Councils to sell their pensioner housing, the Government should make the Income Related Rent Subsidy available to Councils and encourage them to provide more and better housing for senior citizens.”

The Green Party said the Government’s failure to ensure enough long-term and healthy rentals had created a “ticking time bomb of homelessness.”

“The report reveals the grim reality facing hundreds of thousands of Kiwis in their 50s and 60s now, who don’t own a home, and who the National Government has set on course for an insecure retirement,” Green Party Co-leader Metiria Turei said.

“Those people without home ownership face being turfed out of multiple rentals throughout their retirement, no guarantee that the homes they rent will keep them warm, dry and safe, and the real prospect of ending up homeless,” Turei said.

“National’s hands-off approach has ensured that there are not enough affordable homes being built, and landlords can charge what they like for homes that in many cases are barely fit to live in,” she said.

“Report after report has described how the private sector is not delivering the affordable homes that Kiwis need, and called on the Government to step up and build thousands of quality affordable homes. But the calls are falling on blocked ears.”

(Updated with reaction)