Retired and renting – is this our future?

One of the assumptions underpinning the level of New Zealand Superannuation payments is that by the time people retire, they will at least own the roof over their heads.

But for one in six that is not true.

Statistics New Zealand’s latest household labour force survey found that in the March quarter, 118,000 of the 678,000 people aged 65-plus did not live in a dwelling they owned, or one held in a family trust. These figures do not include people living in residential aged care facilities, of whom there were about 32,000 at the time of the 2013 census.

Of the 118,000, one in five were employed, compared with one in four for the age group as a whole.

The number is liable to grow as the population ages and virulent house price inflation weighs ever more heavily on home ownership rates.

The data challenge the smug but widespread belief that while New Zealand has a problem with child poverty – about which people are rightly indignant – it does not really have a problem of elder poverty.

It gets worse when you look at what we know about the income distribution among the 65-plus age group.

The best source on that are the hefty Household Incomes reports compiled by Bryan Perry of the Ministry of Social Development. Last year’s, based mainly on the 2015 household economic survey, found that 8 per cent of the 65-plus age group fell below one standard measure of the poverty line (60 per cent of the median income after housing costs).

That is, admittedly, only half the proportion of the total population who are classified as poor by that measure.

But it still represents more than 50,000 people. Most would either have to pay rent (out of super of $300-odd a week) or move in with one of the kids (not always an option).

For single people over 65, the proportion was 14 per cent, compared with 5 per cent for couples.

The elderly are heavily reliant on New Zealand Superannuation and other government transfers such as veterans pensions, disability support and accommodation supplement.

When those 66 or older are divided into deciles – or tenths by gross income – 40 per cent had less than $100 a week from other sources. Among single superannuitants, half got at least 95 per cent of their income from government transfers.

Another 20 per cent of those 66 or older got around 70 per cent of their income from NZ super and other government transfers.

Income from employment is now a much larger component of total income than it used to be for “younger” older New Zealanders – those aged 66 to 75 – especially couples, the Perry report says.

In 1989, on average for couples in that age range, employment or self-employment provided 16 per cent of their income. By 2001 it was 23 per cent and by 2015, 41 per cent.

But this is not happening across the whole income distribution. It has only been evident from the middle of the range (deciles 5 and 6) and higher.

A different dataset, Statistic NZ’s annual income survey, found that in 2015, the most recent figures available, the average weekly income for people over 65 was $602, of which $330 was from government transfers. Income from wages and salaries, including self-employment, provided an average of $163 a week and investment income $107.

But while labour income has been trending higher (it averaged $115 in 2011) in line with rising labour force participation among over-65s, investment income has stuck around $100 a week over the same five years.

The Perry report found that “other income” (not from the state) made up more than half the income of about 40 per cent of older New Zealanders (25 per cent of singles, 45 per cent of couples). The size of this group has climbed from 15 per cent in 1998 and 30 per cent in 2009.

But what about the rest, and in particular the four-fifths of the over-65 non-homeowners who are not employed?

This problem will only get worse as the population ages and home-ownership rates decline.

It is a phenomenon with multiple causes, of course.

Some if it might be seen as part of the social scar tissue left by the rapid rise in income inequality which arose from the neo-liberal economic reforms of the late 1980s and early 1990s.

Some of it represents collateral damage from runaway house price inflation.
That in turn also has multiple causes. Clearly, as long as the demand for housing (driven by population growth) exceeds the supply (constrained by planning restrictions, infrastructure funding and structural weaknesses in the construction sector) prices will rise.

But it is facile of the Government to insist that it is all about the supply side. Just how much house prices have to rise in order to burn off, to frustrate, the excess demand depends on how much the marginal buyers are able and willing to pay.

And that depends on factors like interest rates, macro-prudential restrictions and taxation.

For decades now, the tax system has told people the best way to provide for your old age is not to save money, but to borrow money and buy housing.

So we end up with absurd house price-to-income multiples, especially in Auckland, and a household sector which collectively spends more than its income.

Addressing those issues will come too late for the tens of thousands of elderly and impoverished.

But it might not be too late for those heading towards joining their ranks.

– NZ herald