Many older Australian women face an uncertain future. People who are single, divorced or widowed are much more likely to suffer from poverty, housing stress and homelessness.
Our new proposal from the Grattan Institute for a national shared equity scheme could help many people escape this fate.
Single women who rent rather than own their homes are most at risk of poverty in retirement and are the fastest growing group of homeless Australians.
They are financially vulnerable because they are more likely to have worked in low-paying jobs, are more likely to have worked part-time or casually, and are more likely to have taken long breaks from paid employment. to take care of others.
Later in life, women suffer all the consequences of lower lifetime incomes, generally ending up with less super than men and, in many cases, missing the opportunity to buy a house or losing half of their money. a house they owned.
Women who separated before age 65 are three times more likely than still-married women to rent, and they have two-thirds of the assets of separated men.
Home ownership matters in retirement
A home is usually a family’s greatest asset. When couples break up, one or both partners often lack the equity needed to buy a new home.
Only 34% of women who separate and lose their home manage to buy another within five years, and only 44% manage to do so within ten years.
Many older women who rent have more than enough savings for a deposit, but cannot buy because they will not stay in the workforce long enough to pay off the mortgage when they retire.
This condemns many to poverty. Nearly half of retired tenants live in poverty, including 63% of single retired tenants.
That’s because retirees with mortgages are spending less and less as they pay them off while rents keep rising.
The typical outright homeowner over 65 only spends 5% of their income on housing, compared to nearly 30% for the typical renter.
A national shared equity plan would help
Whoever wins the election should introduce a national system of shared equity.
Under our proposal, the federal government would co-purchase up to 30% of the home’s value, taking up to 30% of any capital gains when it’s sold.
The limits would include a requirement for buyers to have at least a 5% down payment, to earn less than $60,000 for singles and $90,000 for couples, and to buy a property priced below the median of their city or region.
The government would charge no rent or interest for its 30% stake.
However, buyers would be required to cover all costs associated with buying and selling the house, including transfer of ownership and stamp duty, as well as ongoing costs such as council fees and maintenance.
Read more: 400,000 women over 45 at risk of homelessness in Australia
The device should start with a trial of 5,000 places.
Although not specifically aimed at separated older women, they would be among the most likely to benefit.
Shared equity would reduce the amount of borrowing many women need to take out to buy a home, allowing it to be paid off in retirement, including using some of their super.
Women who lose their homes through separation could use the government’s 30% stake to quickly get back on the market.
The targeted program we are proposing should have a modest impact on house prices.
Read more: Home is what matters: most well-off retirees, some very poor
Even if it were to eventually offer 10,000 equity loans a year, with each buyer buying a $500,000 home, that would only add at most $5 billion in housing demand each year to a $9 trillion market, and probably less.
The direct cost would be low – $220 million over the first four years.
In fact, the regime could be a net positive for the budget in the long run, if house prices rise faster than the interest rate on the public debt.
Existing state programs, such as WA’s Keystart, have generated profits.
It should not be a substitute
Shared equity does not replace governments making the tough decisions necessary to make housing more affordable, such as relaxing planning laws and removing housing tax breaks such as negative gearing and reduction capital gains tax.
And the Federal Government should help older women who are already renting in poverty with a 40% increase in Commonwealth Rent Assistance and a further increase in JobSeeker.
But the program we are proposing would allow many older women to continue dreaming of home ownership.