This report considers the housing futures of the around 200,000 people who in 2030 will be aged over 65 years old and not own their home. A large proportion of these people will be baby boomers - the generation born immediately following World War II between 1946 and 1965. In general the baby boomers have done well out of New Zealand - its economy and social infrastructure. They grew up in a time of growing prosperity and rising levels of home ownership. As they left secondary school from around 1963 at least through until 1973, they enjoyed cheap university education and easy access to jobs. With the support of the State they often gained access to affordable home ownership.
During this period home ownership rates rose on account of these State programmes. In 1951 as these programmes were starting up the home ownership rate was around 61% and this rose to 70% by 1976, and on to 74% by 1991. However, in 1991 New Zealand’s social policy – including its housing policy took a radical turn. This occurred in the so-called ‘mother of all budgets’ which was administered by the first baby boomer finance minister Ruth Richardson. This budget not only reduced the value of welfare benefits as an incentive to get the unemployed to work, but scrapped home ownership programmes and sold off the State’s $2.4 billion mortgage portfolio representing the second largest privatisation of that era.
Predictably home ownership rates have fallen ever since and now stand at around 64% - the lowest level in almost 60 years. Nearly two thirds of the almost 430,000 new households formed between 1991 and 2015 are tenant households and there is clear evidence of a structural shift in both housing tenure and the ownership of wealth. The baby boomers’ children and grandchildren face the real prospect of remaining tenants for their whole adult lives – at least under present policy settings.
While the baby boomers have in the majority benefited from these changes, many who did not make it into the ranks of home ownership before 1991 were not so fortunate. This is especially the case for younger baby boomers who were born between 1960 and 1965 and who now have significantly lower rates of home ownership. Perhaps only 62% of those born in 1965 can expect to be home owners by the nominal retirement age of 65 compared with 77% of the oldest baby boomers who reached 65 in 2011.
It is the case that home ownership rates for any given age cohort peak around retirement age. Although for some who may suffer ill health, relationship breakdown or redundancy in late middle age, this loss of home ownership can occur earlier. On any account ownership rates fall slowly beyond 70 until around 85 when they fall sharply on account of people becoming frail and unable to live independently.
These trends of falling rates of home ownership prior to retirement for younger age cohorts, and the requirement for aged residential care in later old age create two sorts of housing demand. The first is the demand for rental housing amongst as many as 30% to 35% of retired baby boomers and the second is increasing demand for aged residential care as baby boomers reach 85 – an event which will occur from 2031 onwards. These two demands will place some stress on the financial resources of the State and significantly more stress on the housing stock.
It seems likely that more and more elderly people living on New Zealand Superannuation (NZS) will require some form of income top-up in order to pay their rent. Already over 5% of those receiving NZS also receive the Accommodation Supplement and this number has grown by more than one third or over 9000 people in the past five years.
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