Last-home buyers grant: The help older Aussies AND the property market needs?

Does anyone really want to maintain and pay the bills for a four-bedroom family home with a quarter-acre garden despite the kids flying the coop years ago? Probably not.

But even though moving somewhere smaller later in life sounds appealing at face value, the majority of older Australians don’t do it. Although a February report from the Australian Housing and Urban Research Institute found that 55 per cent of over-55s were open to downsizing if they found the right property, a 2019 report from the same institute, which analysed data from the Census and Melbourne Institute’s HILDA survey, found that about 65 per cent of homeowners aged between 65 and 74 in 2001 were living in the same property 15 years later.

So, although older Aussies are open to downsizing, and the lifestyle benefits for most seem fairly obvious, they don’t tend to actually do it.

This week, James Kelly, the MD of the over-50s residential and land-lease communities company Lifestyle Communities, argued there was no real financial incentive for older Australians to downsize. According to Kelly, the costs associated with selling, buying and moving houses is one of the hurdles that force many retirees to stay put in their family homes.

“Many Baby Boomers remain in properties bought to suit their growing families 30 years ago … to the detriment of their golden years,” he says. “A lack of incentive for older Australians to contemplate downsizing impedes any motivation to consider changing their living arrangements.”

When faced with these roadblocks, not only do retirees who don’t to downsize contribute to the estimated three million empty bedrooms across Australia every night but also to the continued short supply of family housing available for younger generations in areas commutable to employment centres.

This is why Kelly now suggests Age Pensioners should be able to access a government grant that helps them downsize to their final ‘forever’ home, rather than bearing the entire financial burden of the move. This potential scheme is, he says, the Last Home Buyers Grant.

A market built for younger generations

There’s no doubt that government assistance in the market is driven towards a younger demographic.

Twenty years ago, the government instated the national First Home Buyers Grant scheme to encourage first-time buyers to enter the market with anything between $7,000 to $20,000 (depending on location) in government funds behind them. There have been others since then, with states and territories also offering incentives such as rate freezes or exemptions for first-home buyers.

But the only ‘incentive’ offered to older Australians, the majority of whom entered the property market decades ago, is the ‘downsizing-to-super’ scheme under which an individual can make a maximum super contribution of $300,000, or a couple $600,000, thus overriding super contribution rules, from the proceeds of the sale of their primary residence.

The only downside (and it’s a big one) is that the individual’s or couple’s higher super balance and resulting higher income  is taken into account when determining eligibility for the Age Pension and can easily reduce their benefits payment.

This year the Morrison government instated the HomeBuilder Grant, which provides eligible home owners with a grant of $25,000 to either build a new home or substantially renovate an exisiting one – a payment that was accessible to older Australians.

But that grant, brought in as a temporary boost to the economy during Covid-19, comes to an end in December 2020, making it useful only for over-60s who had made the downsizing decision and were read to act fast. So Kelly raises a key question: “If Baby Boomers were incentivised to downsize in the same way that Millennials were incentivised to buy, could this address the undersupply of affordable housing in Australia?”.

Government help for pensioners

Kelly suggests that this is where the government needs to step in to “provide Australians with a fair go” and ease the issue of  housing affordability with a Last Home Buyers Grant.

“Rather than grinding this economic kickstart to a halt, maintaining the grant in some form would continue the ripple effects across all aspects of the property and construction industry including real estate agents, developers, architects, builders and removalists,” he says. “Now is the time for the Australian Government to pivot their fair-go home-owning initiatives to include senior Australians on an ongoing basis.”

Continuing the government grant for seniors who want to build or renovate would not only change the attitude of those who were determined to stay in oversized homes and, in turn, change the face of the property market in Australia, Kelly reckons, but also provide seniors with their first financial incentive to downsize since being largely excluded from home-buyers grants for the past two decades.

“These retirees could begin to view the positives of cashing out in a different light; able to imagine a simpler lifestyle without the burdens of a high-maintenance home,” Kelly says. “A smaller home does not imply a smaller life [but] rather a fuller life free from the fetters of mowing a lawn or dusting another empty bedroom.”

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.