Who supports the elderly renters?

Renters and homeowners alike need security in their retirement

When discussing rates and who should pay more or less, one group that is consistently placed at the forefront of the discussion is the elderly. It’s not hard to see why; most people over the age of 65 are trying to get by on a fixed income or a dwindling pool of savings and an ongoing cost such as rates can be a real burden.

Here at Common Ground Aotearoa we believe that elderly homeowners on a low income should be given greater support to bear the cost of rates, whether that’s by improving access to the rates rebate scheme or by allowing postponement of rates payments until a property changes owners. However we also think that these discussions frequently ignore those retirees that rent, for whom housing costs are an even greater struggle. Essentially we want to pose the question:

If it’s so hard to be a retired homeowner on a low income - and it is hard - how on earth do you expect a renter to get by?

The cost of renting

Let’s put some numbers on this. Residential properties in Wellington pay about 0.4% of their total value in rates each year. Meanwhile, a good rule of thumb is that annual rent is about 5% of a property’s value, or 12 times more than the rates. The writer of this blog post lives in a three-bedroom rental in Thorndon, for which the total rates bill (city and regional) is $3,132. The rental cost of living here each year? $41,600. It doesn’t take a mathematician to see that one of these numbers is much bigger than the other.

Of course, homeowners have other costs to manage as well, such as mortgage payments and insurance, but these nearly always add up to less than the cost of rent. Homeowners also have the option of selling their house and renting more comfortably with the money that provides, renters have no such out — they are simply stuck in their situation.

Not only do elderly renters face higher ongoing housing costs, but they also tend to have a weaker safety net to support them, such as family to support them or a sizable nest egg to live on. The deck is stacked against them.

Who rents in their old age?

The difficulties of renting as a pensioner are not equally distributed. 26% of New Zealanders aged 65+ are renters, but this number is highly dependent on factors such as income and ethnicity. You’re far likelier to rent in your retirement if you’re on a lower income; over 60% of elderly people who are on an annual income of less than $5,000 are renters, compared to just 11% of those whose income is over $70,000. The NZ Census lists 14,484 individuals who are over 65 years old, who rent their house and whose income is a tiny $5,000/year or less. Are we not failing these people?

There’s also a strong racial inequality in retirement. The proportion of the 65+ group that rent is 42% for Māori and over 50% for New Zealanders of Asian, Pacific, Middle Eastern or Latin origin.

If we want to support people of all incomes and backgrounds to have dignity and security in their retirement, it is imperative that our approach to issues such as local government rates and housing place the needs of renters at the same level of importance as the needs of homeowners.

A rates system for renters and homeowners

What we need is a rates system that will keep rates low for homeowners and encourage more housing supply in order to lower rents. Land Value Rates is that system. Every city in New Zealand would see the average rates bill go down under Land Value Rates and it’s a proven solution to the housing shortage: if you pay the same no matter what you build then you’re incentivised to build as much as housing as possible. Let’s make Land Value Rates happen so our cities are more affordable for everyone.