According to a new report from the Retirement Living Council (RLC), changes to the Age Pension assets test and Commonwealth Rent Assistance eligibility could encourage older Australians to “rightsize” into more suitable accommodation without financial penalties.
The RLC is urging major political parties ahead of the Federal Election to implement two key reforms that would remove financial barriers preventing seniors from downsizing.
The first proposed change would allow single homeowners who rightsize to own assets up to $550,000 before their Age Pension income is affected, a significant increase from the current $314,000 threshold.
A proportionate increase would apply for couples.
The second reform would remove the incoming purchase price threshold for Age Pensioners moving into retirement villages to access Commonwealth Rent Assistance payments, making eligibility consistent with other seniors’ communities.
RLC Executive Director Daniel Gannon said outdated policies are creating unnecessary barriers during a housing crisis.
“Prehistoric policies are locking older Australians in large family homes during a housing crisis when ‘rightsizing’ initiatives should be front and centre to ease pressure on housing and healthcare systems,” Mr Gannon said.
The report highlights a clear disparity in how housing market changes have been reflected in government policies.
While capital city median house prices have increased by nearly 600 per cent over the past 30 years, the allowable assets to receive a full Age Pension have only increased by 178 per cent for single homeowners.
This gap has created a situation where asset-rich but cash-poor seniors are effectively penalised for moving to more suitable housing.
“Tens of thousands of older Australians are trapped in big and underutilised homes while young families are stuck in housing limbo,” Mr Gannon said.
“Frankly, it’s unconscionable.”
The RLC report, prepared with Ansell Strategic, claims the reforms could encourage an additional 94,000 seniors to access retirement village housing options and generate $2.95 billion in stamp duty revenue for state governments.
The average value of homes that could be released through these reforms is estimated at $825,000, with most being three or four-bedroom properties in outer metropolitan areas, ideal for younger families.
Commonwealth Rent Assistance policies have also failed to keep pace with housing market changes.
In 1997, the CRA cap covered 55 per cent of the median house price, but today it covers just 26 per cent.
“Different people receive CRA based on different circumstances, and it even differs between housing types,” Mr Gannon said.
For example, people who are on the Age Pension and live in land lease communities are eligible for rent assistance from the Commonwealth, regardless of purchase price.”
The projected cost of implementing the CRA reforms would be approximately $244 million annually, while the Age Pension reforms are not expected to create additional costs for the government.
“This election is an opportunity for the major parties to prioritise older Australians and fix a broken system to improve outcomes for everyone,” Mr Gannon said.