The unstable nature of Australia's home ownership sector is set to create "significant challenges" for policy makers planning for an ageing population, new research has found.

The Australian Urban Housing and Research Institute released its Mortgage stress and precarious home ownership: implications for older Australians report on Tuesday, which investigated the implications of Australians over 55 carrying mortgage debt into retirement. 

According to the report, real mortgage debt of older mortgagors aged over 55 blew out by 600 per cent between 1987and 2015, while real house price and income growth lagged behind, tripling and doubling respectively over the period.

The research also revealed older mortgagors’ average mortgage debt to income ratio tripled from 71 per cent to 211 per cent between 1987 and 2015, reflecting a severe increase in repayment risk.

In addition, repayment risk is correlated with mortgage payment difficulties.

AHURI found when faced with mortgage payment difficulties, males’ SF-36 mental health scores are reduced by around 2 points and females’ by 4 points.

Late mortgage payments also raise males’ K10 psychological distress scores by nearly 2 points.

AHURI says the growing number of middle-aged Australians who are carrying mortgage debt into retirement has significant consequences for older Australians’ wellbeing and affects the ways in which older home owners manage their wealth portfolios and labour market transitions. 

"Home ownership has often been dubbed the fourth pillar of the retirement incomes system," the report says.

"However, this pillar may be crumbling due to rising mortgage indebtedness and threats to home ownership’s status as Australia’s majority tenure."

Looking ahead, the report forecast that tenure and demographic change would prompt a rise in demand for Commonwealth Rent Assistance, which is expected to increase by 60 per cent from 414,000 in 2016 to 664,000 in 2031. 

At the same time, the unmet demand for public housing from private renters aged 55+ is expected to rise by 78 per cent—from 200,000 to 440,000 households—between 2016 and 2031.

In the report, AHURI outlines five policy development options "likely to be pertinent" to forward-looking policy planning, including:

• long-term planning for financial security in retirement
• limiting exposure to mortgage debt via innovations and regulations
• systemic reform to the housing sector to address the twin challenges of population ageing and precarious home ownership
• budgeting for housing assistance for the growing population of elderly low-income renters
• understanding substitution between two key pillars of the retirement incomes system—the family home and superannuation.

Click here to view the full report.

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