Home ownership and unequal ageing

Older people (aged 65+) currently make up around 17 percent of New Zealand’s total population. By 2028, this will have increased to 19 – 20 percent, and by 2073, to 24 – 32 percent. Today’s inequalities in life experiences and circumstances with regards to income and wealth accumulation are compounding to create an increasingly unstable and precarious retirement for many. 

Home ownership rates are falling across the board. The home ownership rate for the total population fell from 75 percent in 1991 to 60 percent in 2023 and is projected to fall to 48 percent in 2048. Today, around 13 percent of senior households are paying off a mortgage, and an additional 20 percent are still renting. There are large disparities here. For Māori senior households, 18 percent are paying a mortgage, and 35 percent are renting. Pacific People fare even worse, with 27 percent paying a mortgage and 46 percent renting.  

We are quickly hurtling towards a bleaker outlook for future generations. The home ownership rate for those aged between 30 and 40 fell by over 20 percentage points between 1991 and 2018. Over the next few decades, the cohort of people aged 65+ who are still making mortgage repayments or renting will be significantly higher than it is today. By 2048, the share of renters in the older population is expected to double to 40 percent. The severity of the issue will be even worse for women, and Māori and Pacific Peoples. The home ownership rate for Māori aged between 30 and 40 was just 32 percent in 2018, compared to 55 percent for the total population.

Early signs of the impending crisis are already visible. The housing register, which reflects the excess demand for public housing, shows the extent to which this need is growing within the older population. The number of older applicants increased by 215 percent between 2015 and 2024, the fastest increase amongst all age groups. Exacerbating this issue is the mismatch between the type of homes the older population needs, i.e., smaller houses, and what is available. Just 11 percent of the public housing stock and 13.6 percent of the private housing stock are made up of one-bedroom homes, while 50 percent of the people on the housing register require a one-bedroom home. 

Superannuation (NZ Super) is an important lifeline for a large number of older people. 60 percent of seniors either rely solely on NZ Super or have only a little more. But the universal, flat-rate design fails to account for distributional impacts, and more older people are slipping into poverty. In 2020, 16.8 percent of people over 65 were living in poverty. For women, this was even higher at 20.1 percent. New Zealand had the largest increase in income poverty for older people in the OECD between 2000 and 2020. By comparison, the rate fell by 0.8 percent in all of the OECD on average.  

Given that the primary objective of the NZ Super is to “protect from poverty in old age”, the current design is rapidly failing to meet this intended goal. Te Ara Ahunga Ora — Retirement Commission assessed that New Zealand currently compares well to other OECD countries on elderly poverty but makes the point that living in owner-occupied homes is a key factor in this, and that there is a “risk of increased elderly poverty if home ownership amongst pensioners decreases.” Arguably, this is a “risk” that is materialising at an unprecedented pace.

Te Ara Ahunga Ora — Retirement Commission itself recommends that settings remain unchanged and suggests that the retirement outcomes of women, Māori, and Pacific Peoples be improved through other channels such as “stronger pathways to home ownership” and addressing “gender and ethnic pay gaps and occupational gender segregation.” It only recommends changes to the design of NZ Super to address the financial sustainability of the scheme from a government spending perspective, not from the perspective of the outcomes of its beneficiaries.

It is true that the retirement income system sits within the context of broader government and market provisions, and these play an important role in determining outcomes for older people. It is also true that the assumptions regarding this broader system that the current retirement income system is built on, particularly around home ownership, are failing.  

Good policymaking involves making judgements on outcomes against robust evidence, and is flexible in the face of changing evidence. Ultimately, it is also a reflection of our values as a society, and so far, we continue to collectively value the principles of universalism and equality over inter- and intragenerational fairness and equity.