Lending constraints for older Australians criticised: AHURI

The Australian Housing and Urban Research Institute (AHURI) shed light on the growing challenges faced by older Australians on lower incomes, estimating 440,000 older households will be unable to find or afford suitable housing by 2031.

Over the past two decades, the situation for older Australians seeking affordable housing has deteriorated significantly, with home ownership rates plummeting and a rising number of retirees finding themselves saddled with mortgage debt as they enter retirement.

Additionally, access to social housing has diminished, leaving many vulnerable older citizens in a precarious situation, the new inquiry has highlighted.

The research also revealed the mortgage debt burden for older Australians has surged by a staggering 600 per cent over the last three decades, exacerbating their financial woes.

Of particular concern is the revelation that older Australians are increasingly utilising their superannuation funds to pay off mortgage debts, potentially jeopardising their quality of life as they age.

This has led to a rising number of defaults on mortgage repayments, pushing a significant proportion of middle-aged and older households out of home ownership.

As such the report found low-income older Australians who were surveyed had clear preferences for a shared equity home ownership model, a cooperative housing model, and a transportable housing model.

Lead researcher from the University of South Australia, Dr Debbie Faulkner, said the preference for shared equity models stems from the deeply ingrained cultural norm of home ownership in Australia.

“The subdued response to the other options we presented indicates people’s long-entrenched aspirations and a lack of familiarity older people have with ‘alternative’ housing options,” Dr Faulkner said.

The inquiry developed and tested seven composite alternative housing models and explored their suitability through a survey of lower-income households.

Lending constraints

However, AHURI’s report underscored a significant hurdle: the reluctance of banks to provide mortgages for these alternative housing models.

Dr Faulkner criticised this inconsistency, highlighting that banks readily lend for depreciating assets such as cars but hesitate to support secure housing arrangements for older citizens.

“Not all buyers have sufficient cash to purchase a land lease home, but some could support a small mortgage as a way of obtaining security of tenure and preserving their capital,” Dr Faulkner said.

This paradoxical stance further exacerbates the challenges faced by older Australians in securing stable housing.

Thus it is more likely households will rely on government equity partners that will need to be patient before they recoup their investments on the future sale or transfer of the property, Dr Faulker noted.

The report suggested shared equity mortgages and land lease mortgages as ways to provide home ownership options to those who can only afford smaller loans.

In a land lease arrangement, households own their dwellings but not the land, making them eligible for Commonwealth Rent Assistance and improving housing affordability.

The report also raised concerns over the decline in home ownership for older households and called for regulatory changes to better support alternative housing market expansion.

For example, the report noted responsible lending obligations have created a conservative lending environment, where the circumstances in which age should be grounds for refusing a mortgage loan and assumptions about capacity to service loans need to be examined.

It suggested financial regulators could study the patterns of income and consumption of older people as well as loan defaults and rent arrears to understand the risk of lending to this age cohort and the ramifications of not servicing this cohort.

In addition, initiatives like Nightingale Housing’s ‘Teilhaus’ apartments, which promote non-speculative owner-occupation and social connection, were supported by mortgage lenders. However, once settlement neared, some lenders were less enthusiastic.

However, it highlighted micro-apartments as a potential solution to the housing crisis for older Australians.

Regional life opens affordable options

Regional centres were also recognised as viable solutions due to their ability to accommodate low-density development models and cater to individuals seeking more secure and lower-risk housing solutions.

Predictions indicated shifts in population distribution by 2031, with a focus on suburban and peri-urban areas experiencing higher concentrations of ageing residents.

Notable regions expecting significant increases in older, low-income renters include Orange North, Muswellbrook, and Maitland West in NSW, Horsham, Shepparton, Ballarat North, and Wodonga in Victoria, Victor Harbor, Port Lincoln, and Murray Bridge in South Australia, Albany and Busselton in Western Australia, and Sorell-Richmond in Tasmania.

These regions are projected to experience varying degrees of growth in their older, low-income rental populations.

[Related: Home ownership rate drops for young FHBs: AHURI]