So – where will we put them?
When I left you last week, I had outlined where our population is headed, demographically, in the coming years, and the types of living arrangements that are available to our country’s aging population. I’m sure to most, the piece held no real surprises – economists and politicians have talked about seniors, their spending habits, and the necessities for their care since, well, forever.
The three types of living and care I outlined were retirement living (high quality over 60s villages and gated communities), independent living (an in-home care model), and aged care (Government approved and funded facilities). How the glut of our ageing population utilize each of these will have a real and significant impact on the Australian economy, most of all the housing industry.
So – in last week’s piece, I identified the problem: where will our over 60s, 70s, and 80s go when there is a lack of property, services, and beds that go along with each of the above aged and living care styles?
There are some measures being put in place. But will they work?
The Federal Government has announced that as of July 1, 2018, Australians 65 and older will be able to make post-tax contributions of up to $300,000 to their super from the sale of their principal home. Both members of a couple can do this, for a grand total of up to $600,000 that can be contributed to super from the sale of one home. Of course, this doesn’t help the fact that there is not enough supply in the market, asset testing of the cash windfall from downsizing could affect their pension, and high stamp duty on a subsequent home purchase can prevent them from relocating.
One measure that government could consider is allowing seniors retirees, say 75 and up, wanting to downsize, free stamp duty. Alternatively, they could remove the windfall from any asset means testing for senior retirees. Or both? If retirees choose to move to retirement villages, the benefits of these and other measures could be numerous - research has shown that government saves significantly on residential aged care, hospitals stays, and mental health expenditure from people living in retirement villages. Also, downsizing to retirement villages frees up more housing for others and helps with the current housing supply shortfall that we’re experiencing in most of our major cities.
All this being said, it seems as though simply financially incentivising our seniors to downsize doesn’t take into consideration that most of them (and really, most of us) are emotionally attached to their home and their neighbourhood. For those that prefer to stay in their homes, independent living is likely the best option. Thankfully, the Government has committed it will provide a further $5.5 billion for home support services showing us that the commitment to this very real situation is genuine.
Something else to consider is whether we should be approaching this from a completely different angle. Is the solution to improve transit, create more business parks in outer suburbs of major cities, and incentivise our young people to take jobs in more suburban, regional and remote areas? This type of shift could very well take some pressure off an already tight market in inner-city suburbs, thereby giving our retirees and elderly ‘permission’ to stay where they are – taking the pressure off of them to move?
Ultimately, if we get it right, the wins of the proper mix of strategies are two-fold: better care for our parents and grandparents in a location where they’re happy, and more housing in better spots for our up-and-coming future generations.
The Federal Minister for Aged Care, Ken Wyatt has said it best – “As the Australian population ages we owe it to our nation builders to provide access to the very best quality care and safety.” I couldn’t agree more.