Late last year the Salvation Army published an interesting report into housing Baby Boomers. The report claimed there will be around 200,000 people who in 2030 will be aged over 65 years old and not own their home. That should interest all forward thinking rental property owners.
Due to Government incentives, the home ownership rate increased from 61% 1951 to 74% in 1991. Home ownership programmes were scrapped in 1991 and ownership levels fell to around 64% today.
According to the Salvation Army, nearly two thirds of the almost 430,000 new households formed between 1991 and 2015 are tenant households.
While baby boomers have generally benefited from the pre 1991 incentives, many didn't. The report suggests that only 62% of those born in 1965 can expect to be home owners by the nominal retirement age of 65 compared with 77% of those born in 1946.
According to the report, this will 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 from 2031 onwards.
Retiring or elderly tenants could be an extremely attractive market for rental property owners. It is interesting to think about how we can cater for them. I remember in the 80's there was a popular thought that retirees may return to flatting again to save on accommodation costs. Could this be an opportunity for rental property owners now that the number of retirees is expanding? How could we modify our properties to meet these tenants needs or would we sell existing rentals to buy property with this tenant type in mind? Would the usual tenancy agreement still work for this tenant group?
It will be interesting to discuss this with others while on holiday or at the next PIA meeting.
Another interesting point that the Salvation Army report raised is how elderly tenants will be able to afford to pay rent.
The report says "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. The numbers of people receiving both payments could rise from around 35,000 in 2015 to as many as 100,000 by 2025."
The report believes that low income households, especially tenants in Auckland and Christchurch, are being squeezed between rising rents and static income support which was meant to assist them with high housing costs.
According to the Salvation Army, "the Accommodation Supplement (AS) has suffered from quiet neglect at the hands of successive governments". The present Accommodation Supplement regime has four maximum payments depending on which region the tenant lives in. These maximums have not been adjusted since 1987 and were based on 1995 rental prices. The report concludes that the AS settings are ten years out of date and need adjusting.
As the cost of providing rental property continues to rise it is impossible for rental property owners to keep rents from rising. The NZPIF agrees with the reports recommendation that Accommodation Supplements for tenants need to be updated.