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

Property
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)

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47 Comments

There is a very simple solution to the Salvo's "biggest problem" - DON'T retire in Auckland if you can't afford it. There are lots of better alternatives and the matter is, or should be, NO concern of any government.

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I'll tell you something for free , the Sallies are right .

I know a superannuant who is renting ........... big problem , his wife is under 64 and does voluntary work , 87% of his income is going in rent at age 69 , five years from now they will be destitute

The only thing that will change the game is if there is a massive drop in property prices behind a global slowdown

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The real benefit in your golden years is collecting UBI from age 65. It's the best time to start working harder and take on a job or start a business because you don't have to worry about making the minimum income. Never mind that your health is declining and medical costs can consume large portions of your income.

More seriously don't anticipate a decline in property prices that would have any lasting benefit unless the property bubble bursts. The global slowdown we're seeing just means that more property is being bought to preserve wealth while the central banks keep pumping out currency.

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Shock! Horror! High housing costs screw over almost everyone.

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Well, at least the RONS programme is gonna generate a good supply of dry spots under all a them bridges....

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What have these oldies been doing for the last 60 years? They should have read "The Ant and the Grasshopper" instead of drinking and smoking their security away.

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You can't judge, as we don't know these peoples stories. But they are likely to have paid tax, which was for a super, that was supposed to be enough to live on, and we are a welfare state, which means that people are supposed to pay their fair share of tax (although many people and organisations don't). The big problem is the Auckland housing market, and the fact that if you have a house worth far more than it should be, if it is rented out, the rent toowould need to be a lot higher. eg The income a house generates would need to be more than the interest payments, as well as what the interest payments are predicted to go to in the future. People who brought at the top of the market, and aren't prepared to stay in these houses for the next 10-20 years are likely going to take a hammering as their house will likely not appreciate much in value for a long time, and they may have to sell at a loss. Banks too may have lend out more than the house maybe worth in the future. Look at Wellington, house prices have barely moved since 2007, yet prior to 2007 they were trending upwards on Aucklands scale. I wouldn't touch the Auckland housing market.There are jobs in other parts of the country, where there are far cheaper houses.

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Can't be right. According to Bernard Hickey of yore, ALL baby-boomers are filthy stinking asset rich

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Most though have paid their taxes, and super is an entitlement, not a benefit. Perhaps they could remove the gold card, as you get multimillionaire retirees travelling for free around the region, yet low wage people under 65 have to pay full price, and that was never it's purpose. The gold card is also quite a new thing, unlike universal super. I don't believe in scrapping super, as it penalizes people who have saved. Instead I am more for a universal minimum living wage that everyone is paid.

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Absolutely correct. If you are still renting or paying a mortgage at age 65, there is this thing called an income cliff.
Reading this site it clear that New Zealanders are interested in what they can borrow. More thinking is needed about saving and working from a position of ownership

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even those with no mortgage, on the super in auckland are now starting to feel the bite as the increased house prices bring in increasing running expenses whilst there income is restricted.
i expect to see the level of reverse mortgages pick up

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Why would it increase running expenses? Rates rises should be proportional. eg If everyones property goes up 25%, then everyones rates should remain about the same.

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super increases by the rate of the CPI this year 1.38 % and the rate rises this year more than wiped that out and then some.
if they need any work done materials are up in price not to count tradesmans wages.
add in insurance

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this has been like watching a slow car crash, what did this and the previous government think was going to happen, of course they will have to increase the housing supplement to house there citizens that can not afford a home, no politicians wants stories of the elderly living in cars and on the streets.
and in the future the cost to the governement will grow as we have an aging population.

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This has been looming for a long time. Things were pretty easy in my grandparents day as they owned two townhouses, lived in one and collected rent on the other. That combined with the generous pension and their term deposits and things were good.

My parents generation still own their homes and some have rentals so can live the dream.

The last of the baby boomers and their children are in for a pretty bad time. Paying increasing rents on a fixed income is going to send quite a few people into living on the streets. It will be a disaster in 25-30 years when the retired population hits the peak. New Zealand will be a horrible place to be for a retiree unless major changes are made. Kiwisaver isn't going to be enough to bail people out.

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But wait, the government is doing something ... after winning the 2008 general election, didn't everyone get a personal tax cut? Far better for individual taxpayers to decide what to do with their $$$ instead of the government taking it in taxes. Just think of all the choices that everyone has had since the tax cut, with all that extra cash! And, if you haven't bought a house, that's because it's cheaper to rent and invest the difference, so you'll be better off, anyway. Isn't that what we've been told, so many times?

But seriously, the plight of some of these boomers is a tip of the iceberg compared to the next age groups Gen X and Y, etc. Either, individuals will have to get really smart about how to handle money starting from age 20, or the government is going to have to give a hand. I fear neither will happen. It's only going to get worse. The Salvation Army's report is about the dark consequence of what is flippantly referred to as "personal responsibility" :(

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Don't forget the free train set we all got in 2008 too! Now that's the gift that keeps on giving.

"Since the company was bought by the previous government in 2008, Crown investment in KiwiRail now totals $2.4 billion – excluding investment in metropolitan rail projects. In addition, there have been writedowns totalling $9.8 billion."

http://www.beehive.govt.nz/release/further-198m-kiwirail%E2%80%99s-turn…

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They need to find a way to extract income from all the gorse that is growing along the lines!!

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Again its about the decisions we make in life, what do you expect if you keep renting all your life ? the writing is on the wall, quite literally. Expecting to get to retirement and then have the government bail you out for the rest of your life and pay your rent is a bit rich Seriously I don't know what some people do with all their money, especially two people together, how do you get to the end of your life and not own anything ? perhaps you "Lived it up" a little much along the way and you then expect the government to keep the party going. Too many people looking at home ownership and going "Hey thats too hard".

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that may be true for most in the 60 + group now, but what about those that got divorced late in life and had to start again, or those that lost there job after 50, not to mention those that were on low wages all their. At the moment that number is manageable
then you come to the under 30's now in Auckland there opportunity is severely diminished with the high prices, deposit needed, low wages and competition to buy from investors.
FHB are looking at the same housing stock as investors and unless you level the playing field now the government will be paying later

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The big problem is we are letting too many people into NZ, without the housing stock for them. Rents can't really get too high, unless there is a lack of houses. Once supply is met, there will be competition in the rental market, and rents should then srop with supply. More people will end up living in cheaper apartments, which will end up becoming like ghettos. I can see much of Aucklands suburbs heading this way with the all the poor urban design going on. .
It will be those people who paying $900,000 + at the top of the market, for a timber shack in Auckland that will end up hurting.

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it's ok. we millennials will help them even if they didn't help us.

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Yes I can see the younger generation looking around and going WTF how did we get to this in NZ?

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As Winston Peters said the other day. Immigrants are bringing in their parents and 100,000 have arived in the past few years.
This puts a burded on everything Pensions, Benefits, Hospitals and so on

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I've always said there would be a group of tail-end BBer's who were going to be in trouble financially including in their retirement.....however I would not lay all the blame on Ruth Richardson's - mother - of - all - budgets........this tail-end group started their working days when NZ had a period of age-related wages, high income taxation and high secondary income taxation......in other words a crap start to working life enforced upon them by Government policies. This group was not able to get much/any lift from the 1970's inflation that people born prior to 1960 were able to get....

This group then suffered the second blow of the 1980's and in particular the 1987 crash which again political interference produced extremely high interest rates, high priced imported goods, high practical workforce experience/low to no recognised qualifications, inefficient healthcare and ACC......these latter two forced people to buy insurance policies to cover medical and accident incidents..........they suffered high costs with low incomes for a very extended period.......the heavy costs of bureaucracy have been very unfairly apportioned to this group.

The group of people born 1960 to 1965.....have been the ultimate sacrifice group economically.....they have been taxed heavily to pay for all the excessive Government spending that went on prior to their working lives starting.......they are a small group by population percentage so could never effect change at a national level.......many of this group chose to leave NZ........This group should never have been labelled as part of the BB generation.......a more fitting label would be the DOORMAT generation!!

This group was smart enough to make sure their kids got a good education.....but I have the feeling this is going to work against them as their kids have not had the experience or skills to match their parents.

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I think this is a nuclear crisis of expectation, expecting that it is normal to spent retirement living in a one or two bedroom place on your own or with your partner/spouse. The boomers grandparents retired into multi generation households. This nuclear family of 4 business is post WWII. Multi generation households would stretch the money further. Some boomers had no children, some boomers children have all moved overseas, some families don't get along, so those without the resources to live independently will have to flat together. Say 4 retired old guys rent a four bedroom house. If they pool their resources/pensions they should be able make the money work. It may not be fancy, or the lifestyle they desire, but it isn't sleeping on the street either.

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yes us baby boomers have had it harder than X and Y who are lucky enough to earn more than us and who have the world at their feet travel wise.

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Was the world closed to travel when you were growing up Gordon?

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frazz we did not have the income and the costs of travel were dearer than they are today.

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Well the Boomers seem to making up for that now don't you think....massive liners checking out the far corners of the world with overweight oldies lining up at the bars and buffets sending facebook updates back to their kids.

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Some have done okay. From my experience the majority of them and their parents are just getting by. They never had big enough incomes to put money aside for their retirement as they were spending on looking after their kids.

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Yes and I know some who have been retired for over 25 years with plenty of dollars, gold cards, rental properties, and time on their hands. Lots of travel, coffee and muffins, and going to funerals. Some of the better ones volunteer and give back through education (as they received a free one)...I'm hoping you are in that latter camp Gordon?

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Glad you used the word "some". Yes a school board chairman.

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Free tertiary education, Government bursaries, cheap houses, subsidized government loans, free state housing for everyone... Oh what a nightmare it was back in the day.

Now the oldies have taken away all these perks and afforded themselves new ones (e.g. NZ Super; Gold Cards) that they expect the next generations to fund until their demise.

If you couldn't become rich as a baby boomer it was never going to happen. Just sit back and be thankful the next generations are supporting you.

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If the new generations unstuck their faces from their latest igadget for 5 seconds, they might get somewhere in life. Otherwise tough luck.

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And their cars,clothes,coffees,gadgets,overseas trips, concerts, sky tv, expensive tv's, takeaways,eating out, phone bills etc etc etc etc

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Could easily describe the Boomer Generation as well, just add Harley Davidson, small loud dog, Bach, and Wine Cellar.

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obtained by some because they lived within their means and saved. Were lucky because they did not have the access to travel, coffees,cafe meals, takeaways etc etc.

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plus, (From heavy G) Free tertiary education, Government bursaries, cheap houses, subsidized government loans...free child care (Mum stayed at Home),
We have had this debate too many times..

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Yawn I think my bursary was $150 per year. Maybe more X and Y mums could stay at home if they had more modest first homes like us, less cars and toys, second hand furniture like us, less overseas holidays compared to us who had none generally, less meals out, less takeaways, generally less expectations at their time in life. I appreciate we did not have the distractions you have like cell phones and their running costs, less expectations of how you dressed and how you lived and what you drove, less access to travel.

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Cruise ships have a passenger capacity for a reason. They don't just keep on loading them up. Auckland seems to be selling more tickets to the top decks, but the trickle down (as the plumbing fails) on to those less fortunate and jammed into the steerage, becomes rather unsavoury.

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Yes there are serous problems developing in NZ due to a lack of leadership which the SA has pointed out.

Incomes are low for most people while expenses escalate.

One old couple he 70 and she 72 there landlord put the rent up on them by $100 week.

Where has compassion for people gone?

The madness for the pursuit of money i have never seen the likes of it in my life time.

Once NZ was a simple caring society what happened?

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but is the landlord responsible or us as a society? If the market rent is the new payment then the landlord is merely getting the fair market return. Also if its a long term landlord he/she is looking to make a living, (bear in mind his/her costs eg rates, insurance are also rising) not an unreasonable wish IMHO.

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This is a rigged market Steven.....the landlord didn't rig it the politicians and bureaucrats did......it has nothing to do with fair market return!!! It has everything to do with reading how the market evolved and what happens next and the truth is the truth will never be understood by the masses.

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The thieves are running the World affairs. And now poor little Old New Zealand.

If you want the simple...Truth.

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Didn;t the Baby Boomers make heaps of money and buy all those houses which are going up massively in value now ? I think that was the reporting till now, right ?

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Its paper money - you cant eat it.

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