Seniors should be encouraged to downsize: Senate affordability committee report

The Senate committee on housing affordability reports recommends that the Federal government investigate new policy settings to address barriers to downsizing by retirees, including schemes along the lines of the Housing Help for Seniors pilot. 

The report noted many older people would prefer to move out of the family home and into more appropriate accommodation, but financial and other barriers prevented them from doing so.

While submissions generally talked about 'downsizing', the committee noted policy discourse might benefit from reframing the issue to be about 'rightsizing'.

The committee argued against inclusion of the family home in the aged pension assets test given the attachment many people have to their home and the benefits of allowing people to age in place. 

But they noted "it may be that the exemption of the family home from the aged pension means test encourages some over investment in housing and, in some cases, discourages people from moving to accommodation better suited to their needs.

"However, improved housing affordability achieved through policy which pressures older Australians to sell their homes to access capital, potentially disrupting their ties to family, friends and community, would be a hollow achievement."

The committee believed a better approach would be to explore innovative and affordable policies that allow retirees to downsize (or 'rightsize') when they wish or require to do so, without the sale proceeds necessarily jeopardising their pension eligibility.

"Programs such as the Housing Help for Seniors program, announced by the former government in the 2013–14 Budget but abandoned by the current government in the 2014–15 Budget before it was legislated, would be worth exploring in this regard," the report noted.

In the 2013–14 Budget the then Labor government announced its intention to implement the Housing Help for Seniors pilot program, with a commencement date of 1 July 2014.

The report noted had the pilot been implemented, it would have allowed a homeowner who had lived in their home for at least 25 years to sell their home and have at least 80% of the proceeds from the sale of the home (that is, the sale price less any valid encumbrance such as a mortgage, and less the purchase price of the new home), up to a cap of $200,000, quarantined in a special account so that it was not considered as part of the aged pension asset test.

The money in the account plus any interest earned would have been exempt from the asset test for up to ten years, providing there were no withdrawals during the life of the account. 

The exemption was to be available to people assessed as home owners who moved into a retirement village or a granny flat, but would not have been available to people moving into residential aged care.

The program, according to the budget papers, would have cost $112.4 million over the forward estimates period.