21st of February 2019
Maintaining Home Ownership for Seniors
A plan to bring low-income senior renters into home ownership is welcome and highlights the need to give seniors security of tenure over their homes, says Homesafe.
KPMG recently unveiled plans to move low-income renters towards homeownership. One part of KPMG’s proposal involves giving renters a chance to acquire a stake in their own homes, via a shared-equity co-investment model.
Homesafe works with the senior Australian demographic, and sees the benefits of home ownership for this group first hand, every day. The Australian social security system has traditionally been underpinned by high rates of home ownership and this continues to be the case for senior Australians.
Homesafe supports KPMG’s initiative, given the recognised benefits of home ownership for people of all ages. Benefits of home ownership include:-
- Security of tenure – including not having to deal with costs and logistics of moving from one home to another at short notice
- Being able to continue living in the same area and maintain consistent access to services and social networks
- Possibly owning a home outright before retiring, therefore not having to pay rent in retirement.
Rates of home ownership are falling, but more slowly at older ages than younger ages, due to existing home ownership. Although social security recognises a lack of home ownership via rental assistance and a different means test, this recognition does not financially compensate for a senior homeowner incurring rental costs, and does nothing to address security of tenure.
The KPMG plans could work to make home ownership possible for people who might otherwise never be able to own a home. There are also many homeowners who own homes, but may be unable to afford to continue to own them in retirement. The reasons for this vary but include:-
- home affordability
- earlier than planned retirement due to job insecurity or ill health
- having accessed too much home equity via flexible “line of credit”-type home loans to increase spending in the years preceding retirement
- incurring other types of debts – credit card, gambling, outstanding rates etc.
Many of our customers seek Homesafe’s equity release offering to sell a share of the future sales proceeds of their home in return for a lump sum advance today which enables debt to be extinguished. Alternatives include a reverse mortgage or assistance from family. In some cases, downsizing might be viable.
For senior homeowners unable to access any of these options, there may be no choice but to sell the home and commence retirement as a renter. A focus on maintaining home ownership is needed.
As well as considering plans such as those outlined by KPMG, government should be encouraging a healthy home equity release market to maintain home ownership amongst senior Australians. Over the last two years, the remaining big four banks that offered reverse mortgages withdrew from the market. Homesafe operates with strict eligibility criteria however is currently limited to Australia’s two largest cities, Sydney and Melbourne.
In some parts of Australia, and for some types of housing, there is a market failure as home equity release products are not available to seniors.
Homesafe Solutions Pty Ltd is the provider of Homesafe Wealth Release™ which is the only debt free equity release solution for senior homeowners. www.homesafe.com.au