A longer lease on life: issues for older renters

With a surplus of $3.9 billion for 2016-17, the 2018 NSW State Budget had its winners and losers. The latter include seniors and renters. This blog examine some of the issues confronting older renters.

How does one define 'older person'. There is a helpful discussion of the definition of 'age' in the Australian Law Reform Commission's Discussion Paper on 'Elder Abuse'. Paragraphs [1.33] and [1.36] read:

The idea of someone being an ‘older’ person is a relative concept — chronologically, medically and culturally. It does not have a precise definition and specific ages may be used for particular purposes. For example, the Australian Bureau of Statistics (ABS) groups people into population age cohorts, and differentiates between ‘15 – 64’, ‘65 years and over’ and ‘85 years and over’. People over 65 are generally classified as ‘older’ for ABS purposes.

Family and Community Services’ NSW Ageing Strategy 2016-2020 (pp 26-28) identifies older people’s ability to live in affordable, accessible, adaptable and stable housing as a priority of the NSW Government. It asserts:

... older people increasingly prefer to ‘age in place’ and grow older in their own communities – close to friends, family and services.

The NSW Government does not have an explicit ‘ageing-in-place’ policy. Certainly, it would be worthwhile implementing an explicit policy and, further, establish benchmarks against which wider Government policies can be measured regarding consistency. The value of this will become obvious further into this blog.

Nevertheless, a number of significant documents commissioned as part of the NSW Ageing Strategy refer to it, where a basic principle underlying it being that older people know what is best for their own lives and have the right to make decisions on their own behalf. An ‘ageing-in-place’ friendly policy provides the incentives for individuals to remain living in a community to which they have a strong attachment, either in their existing residence or alternate accommodation, with service supports.

Dire circumstances

Alan Morris’s book entitled The Australian Dream: Housing Experiences of Older Australians draws on the stories of 125 Australian pensioners and compares their experiences with the trends and needs of an ageing Australia. He probes the growing divide between older private renters, those who live in social housing and pensioners living in their own home. Here's an excerpt about private renting:

It's like a pressure cooker. You don't know where to go or what to do.' ... 'It was so desperate, the search for affordable accommodation, that I went down with a heart thing and was rushed to hospital.

On 26 October 2016, quoting from Alan Morris's publication, Jennifer Duke says that at least 100,000 older Australians in the private rental sector are living in 'dire circumstances' ... and this figure is expected to grow substantially if current policies and approaches to housing affordability aren’t changed.

On 12 December 2016, Alan Morris penned an article for The Conversation entitled ‘Why secure and affordable housing is an increasing worry for age pensioners’. He writes:

An increasing proportion of older Australians on the age pension will be dependent on the private rental sector in coming decades ... and the prospects for this group are grim.

An increasing number of older women in the private rental market face homelessness and have been described as ‘the new face of poverty. Read an article called ‘Older renters: the new face of poverty’. It reads:

The evidence mounts. The number of older, single women in the private rental market increased by a massive 50 percent between the 2006 and 2011 ABS Censuses.

The private rental sector across Australia has grown in size and significance in the last 30 years. Between 2001 and 2010 about 1.7 million Australians dropped out of home ownership and shifted back to renting. More than one in three did not return by 2010.

Private rental now provides long term tenancy for a growing and diverse number of Australian households. If large numbers of long term renters aged 45-64 years remain in the rental sector, they could swell the number of long-term private renters aged 65 years and above quite substantially in the coming decades.

Many older women experiencing a housing crisis or homelessness have led conventional lives and never previously had a housing crisis. As private renters, especially in tight housing markets like Sydney and some regional centres, they are at great risk of unaffordable rents, insecure housing, eviction and homelessness.

Also, an excellent essay by Anwen Crawford picks up this same theme. She writes about 'Nowhere to go – older women and housing vulnerability’ and finds:

The number of older women who are rental tenants in Australia is growing, and these women ... are increasingly vulnerable to poverty and homelessness ... Housing affordability and security for rental tenants will only become a more pressing issue as Australia’s population continues to age. And with more people unable to afford to buy a home, changes to housing policy now will help to determine the living conditions of tenants in the future.

2016 Census

The 2016 Census found a significant increase in the number of people renting in New South Wales. Indeed, there was a slight shift away from home ownership towards renting. There were 826,922 renter households at the 2016 Census, which was 83,870 more than there were in 2011. To put this into context, that's almost double the increase we saw between 2006 and 2011. It also means our renting population has gone up in percentage terms since 2011, too - from 30.1% to 31.8% in 2016. It also means that more people are renting for longer. Read more here. On top of this, Australia’s population is ageing. Those aged 65 years and over now account for 16% of the total population, compared to 14% in 2011. The median age has increased to 38 years, after remaining at 37 years for the past decade. Read more here.

Following the release of the 2016 Census, there have been a number of reports highlighting the problems of life-long renters.

In March 2017, The New Daily examined the most recent population statistics. Australia is ageing and life expectancy is greater. The stats show that from 2012 to 2016, the proportion of the Australian population aged 65 and over increased from 14.14 to 15.27 per cent.

Kirsten Robb writes: 'Life-long renters face financial stress in retirement'... according to a paper by Swinburne University, which found more Australians are renting in retirement and facing financial stress. The report that she refers to is one by Andrea Sharam, Liss Ralston and Sharon Parkinson of Swinburne Institute for Social Research. They found:

The proportion of aged persons in Australia is set to increase significantly, posing many challenges. Amongst these is the growing number of households who lack housing security in retirement. ... Our findings indicate that social change, and adverse ‘critical life events’ have significant impacts on households by and at midlife, and beyond. Of particular concern is that the housing market itself is a key source of wealth accumulation and dispossession. A very marked outcome is that to be private renter at 45 years of age is likely to mean being a renter and highly impoverished, in retirement.

Teresa Somes of Macquarie University writes for The Conversation: 'More and more older Australians will be homeless unless we act now.'

Eileen Webb and Gill North write: 'Suitable, affordable housing is key to our population ageing well'.

Ben Phillips of the Australian National University writes for The Conversation:

... the more pressing social problem for Australia remains the lack of affordable rental housing for lower-income families that is close to jobs and services in our capital cities. ... An ageing population with potentially lower home ownership rates will add to this problem in future years.

And Ned Cutcher of Shelter NSW writes that more people are renting much later into life.

More recent media

You will find recent media coverage, reports and publications on older renters in this document.


What is the reality for older renters?

Various words have been used to described the plight of older renters: Overlooked, A distinct financial disadvantage, Condemned, Vulnerable and Financial stress … and that’s just for starters.

As discussed above, there are many issues confronting older renters. So here's my summary:

• Shortage of affordable housing in well serviced locations. True for all renters, but compounded if you are older ... Check out Anglicare’s annual rental affordability snapshot ... and National Shelter’s Rental Affordability Index, published in May 2018.

• Weak security of tenure. True for all renters, but compounded if you are older ... check out Choice’s publication entitled ‘Unsettled’. Read about it and find a link here. Also, check out the ‘Make renting fair’ campaign. Indeed, Australia fairs poorly in an international comparison of security of tenure for renters.

• Only token acknowledgement of ‘ageing in place’ ... The redevelopment of old public housing estates poses real hardships for many older tenants. The forced relocation of residents of Millers Point in inner Sydney highlights the failings of Government when only lip service is given to ‘ageing-in-place’. Read the blog in The Brown Couch here. In 2015 and 2017 the Tenants' Union of NSW made submissions to Elder Abuse Inquiries of both the NSW Legislative Council and the Australian Law Reform Commission (ALRC) here and here. We argued that a government policy, in itself, may constitute a form of elder abuse. We submitted that the NSW Government’s decision to relocate all the social housing tenants in the suburb of Millers Point is an example of systemic elder abuse.

• Restricted access to home modifications ... private landlords have little incentive to modify properties to suit the needs of older tenants. Older renters are forced to move as dwellings are no longer appropriate to their needs and residential tenancy legislation fails to adequately address this. Here’s the current state of play.

• Residential land lease communities (also called ‘residential parks’) as an alternative for older people ... Today business is viewing residential parks as money-making ventures, with some being promoted as an alternative to retirement villages. But, homes in residential parks, once seen as a cheaper option, now are regularly sold for amounts over $300,000. Indeed in 2016, two on the North Coast of NSW sold for over $1 million. Residents may own their home, but they do not own the land and remain vulnerable should the park be sold from under them.

• Pets is an issue with particular meaning for older tenants. Check out this site. Recently, there has been increased media coverage of this issue in Australia. Read Wendy Squires’ article called 'Landlords, have a heart and let your tenants have a pet'. The Tenants Union of NSW wants to see the decision to keep pets to sit with the tenants rather than the owners.

What can we do?

For an excellent discussion on what to do in order to address the more dire needs of older renters, check out the 'Ageing on the Edge’ report released on 29 November 2017. It contains thirteen recommendations that the NSW Government can act on now. The Tenants’ Union of NSW is represented on the ‘Ageing at the Edge’ Working Group in NSW. You will find a summary of the report here and the full report here.

Postscript on 26 July 2018

Here's three new links which are food for thought ...

Allison Worrall writes: 'Choice of food or rent: Housing crisis deepens.' Read her article here.

Isabelle Lane writes: 'Older Australians are falling off the housing ladder and face spending their retirement as renters, with the situation expected to worsen for coming generations.' Read her article here. You may check out Grattan Retirement Incomes Model (GRIM) here.

AHURI provides an excellent analysis of the situation facing older low income tenants in the private rental sector. This link also points to some current research. Check it out here.

Economically viable supply

Speaking at a Sydney Alliance assembly on housing affordability last night, the NSW Minister for Planning and Housing, the Hon. Anthony Roberts MP, dismissed targets for affordable housing in new residential developments as a simplistic and unrealistic housing solution. "In reality all these targets do is reduce the supply of affordable rental housing because it makes many developments economically unviable." Instead, he talked up the Government's intention to solve Sydney's housing affordability crisis by rezoning large swathes of the city and fast-tracking new supply.

Inclusionary zoning is like a box of chocolates...?

This is a curious position for a Housing Minister in the Berejiklian "housing-affordability-matters" Government to take, given the overwhelming evidence suggests a single-minded focus on new supply is a simplistic and unrealistic housing solution.

Since the beginning of 2017 - dubbed "the year of the renter" by Domain as there will soon be more renters than homeowners in Sydney - we've discussed the issue of housing affordability and supply many times on the Brown Couch.

In late January we released a Rent Tracker report, which highlighted how rents have gone up even in suburbs where large numbers of properties are being added to the rental market. In February we discussed how Sydney's new housing development is producing the wrong kind of supply, driven by the demands of investors rather than householders and home makers. In April we noted the findings of Anglicare's seventh Rental Affordability Snapshot, showing that rental affordability is as bad as it has ever been and still gets worse every year.

In May the latest Rental Affordability Index was released, confirming what Rent Tracker and the Rental Affordability Snapshot had already suggested about deteriorating rental affordability despite increasing residential development activity. We dug in a little to look at exactly what's going on, exploring how the wrong kind of supply has changed the shape of the rental market. It produces higher rents rather than improving rental affordability.

In June we joined the dots on housing affordability, looking at how the NSW Government's housing affordability package is likely to impact upon the market for supply. We suggested it might be combined with both the NSW Opposition's housing affordability package, which includes targets for affordable housing, and some of the Australian Government's Federal Budget measures, which includes a method for funding new affordable housing, to help keep residential property developers afloat while ensuring at least some new supply is delivered into the affordable rental housing sector.

Also in June we discussed the release of data from the 2016 Census, which shows that the renting population is still growing faster than the population generally, and the stress of high housing costs affects renters far more than it does homeowners.

Something we haven't yet discussed is the Australian Housing and Urban Research Institute's recent report into "Housing supply responsiveness in Australia". This report found that most of the growth in Australia's housing supply has been taking place in the mid-to-high price segments, rather than low price segments, and suggests "there seems to be structural impediments to the trickle-down of new housing supply". It also says that "targeted government intervention might be needed in order to ensure an adequate supply of affordable housing." The report hasn't received a lot of attention other than a quick report in the Guardian when it was released earlier this year. It could do with some more, so we'll take a closer look at it when we can.

In the meantime, let's get back to the Minister's words from last night. "In reality all these targets do is reduce the supply of affordable rental housing because it makes many developments economically unviable."

On the other hand, current developments are causing rental affordability to deteriorate again, and again, and again. So at what point do we stop and wonder - if we still can't afford to live in them, what is the value of an economically viable development after all?

The answer to that question might make more sense to someone who values housing as nothing more than a financial asset, rather than a place to call home.

Rental affordability deteriorates, again

Hot on the heels of the Anglicare Rental Affordability Snapshot for 2017, the SGS Economics and Planning, Community Sector Banking and National Shelter Rental Affordability Index for December 2016 reveals what most Sydney-siders and New South Welsh-folk already know: the squeeze on rents is getting tighter.

Picture by thepurpah

The headline finding is that Sydney's rental affordability is as bad as ever, having plunged to a record low towards the end of last year. The average household now pays around 29% of their income on rent - meaning that renters with even reasonable wages are heading towards a form of housing stress, if they're not already there.

Unsurprisingly, the least affordable suburbs are harbour-side. They include Elizabeth Bay, Rushcutters Bay, Potts Point, Woolloomooloo, Double Bay, Milsons Point, Kirribilli, Darling Point, Point Piper, Edgecliff and Woollahra. For a dual income household with kids, bringing in $140,000 a year, a three bedroom home in any of these iconic suburbs would be unaffordable (30%-38% of income) or severely unaffordable (38%-60% of income), according to the index. For a single working parent earning around $70,000 per year, a 2 bedroom home in most of these suburbs would come in at the unaffordable range. Rent for an unemployed person looking for a single bedroom unit would be extremely unaffordable (60% or more of income) in all of these suburbs.

There's still some hope for working families. The dual income couple with kids might find a three bedroom home with an acceptable rent (20%-25% of income) around places like Hornsby, Epping, Lidcombe, Lakemba, Earlwood, Kogarah or Miranda. A single working parent might pay an acceptable rent for a two-bedder around Liverpool or Penrith.

But there's no such hope for the single unemployed person. Rents for one bedroom homes remain in the extremely unaffordable range for this cohort, throughout the entire Greater Sydney area. Even if three or four unemployed folk decided to pool resources and go in together for a sharehouse, rents for suitable properties remain extremely unaffordable until about Blacktown, Liverpool or Engadine. Further out they become severely unaffordable, but that's as far is it goes across the remaining suburbs.

Things improve for dual income households with kids once you get past the limits of Sydney, with the rest of New South Wales showing rents for three bedroom homes as generally acceptable, affordable (20%-25% of income), or very affordable (less than 20% of income). Of course, that's based on an annual household income of $140,000, which might be harder to come by in some of the further flung parts of the state, so take that with a grain of salt.

Single working parents will also do better outside of Sydney, subject to the same caveat: two bedroom homes for a household with an income of $70,000 per year will be acceptable, affordable or very affordable in most parts of New South Wales. Wollongong, central Newcastle and Byron Bay are the exceptions.

Where available, single bedroom homes remain severely unaffordable or extremely unaffordable to an unemployed person receiving an income support payment, right across the state. For those prepared to share, a two bedroom place might be moderately unaffordable for anyone on an unemployment benefit (25%-30% of income) around Wellington, Parkes or Cobar. If you can find a third person, rent for a three bedroom home might be acceptable in Cobar. Of course, your income payments might take a bit of a hit if you leave Sydney for one of these towns, as your chances of finding paid work will be somewhat diminished. You'll probably have your payments cut for up to 26 weeks after moving to an area with lower work prospects so don't forget to factor that in...

Why is this happening?
Conventional wisdom is that prices go up when supply doesn't keep up with demand, but there are a number of indicators telling us things are a little more complicated when it comes to rents. For a start, contemporary discussion around housing affordability tends to focus on the supply and demand of housing as a financial asset, rather than for its purpose of providing shelter. "Housing demand" has become something of a proxy for "mortgage demand", and "housing supply" is geared towards meeting the needs of mortgagors rather than home-makers - even if at the micro level these are often the same thing.

A quick look at where the current demand for residential property finance is coming from reveals a whole lot of it is going to investors.

Aust. property lending monthly ('000), investment (red) v owner occupation (blue), Jun 2001 - Feb 2017. Source: ABS

Evidently there's been more money pulled into the rental market than for owner-occupation over the last little while. In other words, the rental market is currently enjoying the lion's share of supply. But we can't assume this puts us on a path to affordability because the vast majority of supply into the rental market is coming from investors purchasing established dwellings rather than new builds.

NSW property investment lending monthly ('000), June 2001 - Feb 2017, established (red) v new (blue) dwellings. Source: ABS

Much of the increase in rental market supply comes at the expense of supply for owner-occupiers. Potential first home-buyers are particularly impacted by this, and they're remaining in the rental market for longer. Increasing rental market supply is absorbed by a more-or-less corresponding increase in demand for rental housing. But as we can see from the blue line above, investors have been putting larger amounts of mortgage finance towards new construction over the last little while. New construction delivers supply to meet "mortgage demand" - not just the demand for shelter - which should be putting downward pressure on rents. But, as the index shows, it's not.

Our latest Rent Tracker report shows this as well, indicating that rents have gone up in Sydney even where large amounts of new supply has been brought into the rental market. Based on the number of new rental bonds lodged, Rent Tracker doesn't distinguish between new rental supply coming from construction compared to that which comes from increased investment in established dwellings. But checking this against data from the NSW Department of Planning & Environment we can see that a great many new dwelling completions across Sydney are in the form of new apartments. These are most likely being purchased by investors.

New dwelling completions, Sydney. Source: NSW Dept L&E

With a high proportion of one and two bedroom units turning up for rent over the last few months, despite families with children making up the highest chunk of demand for rental housing, it's evident that this kind of investment is not being driven by what households really need. Rental supply is not being driven by renter demand, because housing supply is being driven by mortgage demand.

That's the story with new construction, but it's also the story with increased rental market supply in general. Investors aren't pulling established dwellings away from owner-occupiers because they want to provide housing for people who can't afford to buy, but because they hope to grow their wealth. The allure of wealth, after all, is what is driving demand for mortgages. Aided by tax settings that expedite the debt-to-wealth strategy - negative gearing and capital gains tax discounts - investors are encouraged to buy property based on prospects for profit rather than any measured demand from renter households. They're buying more expensive property as higher price tags come with faster and bigger gains. They're leaving the cheap stuff to developers who can turn it into more expensive property in order to meet investor demand...

Over time, this has changed the shape of the rental market. Affordable rents are a thing of the past.

Volume and rents ($/2011) of Australian rental properties over time. Source: AHURI

For that matter, we don't measure demand for rental housing like we used to. Back in the olden days the National Housing Supply Council - now defunct - used to report on the affordability and availability of rental housing. Then, as now, there was a shortage of properties available for rent to households on the very lowest incomes, for much the same reasons that we can see today. But it's easy to imagine that if this work had continued with appropriate levels of government support, we'd have a much clearer understanding of our rental affordability challenges and how to tackle them once and for all. Instead we've allowed things to get much worse.

Last week's Federal Budget has pinned a lot of hope on measures to increase supply. This includes the renewal of the National Affordable Housing Agreement, to be renamed the National Housing and Homelessness Agreement (NHHA). Under the NHHA the Australian Government will work with the states and territories to increase the supply of (mortgage driven) private rental housing through measures such as planning and zoning reforms. With the latest Rental Affordability Index in mind, we'll take a closer look at these Budget measures in a later post. In the meantime, parties to a new National Housing and Homelessness Agreement would do well to consider monitoring both rents and demand for private rental housing across the income spectrum, to ensure this Budget's impacts are being properly accounted for down the track.