Home truths for the elderly

Asilent housing crisis is developing, but it’s not the one making the headlines. There’s been a vocal preelection debate about affordable housing for the young, and about the need for rentals healthy enough to raise children in.

But Bill Rayner from the Auckland millionaires’ suburb of Devonport says many of his fellow retirees are facing housing woes as well. High council rates, rising power costs, maintenance and leaky building remediation costs are straining their ability to stay in their homes.

And rising rents, plus a dearth of council pensioner units, are causing a cash crunch for elderly renters.

The pain is real. The Government has pledged to lift the accommodation supplement to help renters on New Zealand Superannuation make ends meet.

But Rayner says the voices of the elderly are not being heard.

‘‘Politicians seem to be taking their votes for granted,’’ says Rayner, who campaigns for Grey Power in the Auckland region.

He’s able to stay in his home thanks to a lifetime of working in high-level jobs, and saving assiduously.

Many others lack a retirement nest egg to fall back on.

Figures from Kiwisaver provider Kiwi Wealth’s website suggest the cost of housing in retirement is the number one factor that will determine how much money Kiwis need to save by the time they stop working.

It’s Futureyou retirement savings tool offers three target lifestyles to aim for. They are Massey University’s ‘‘no frills’’, ‘‘flexible’’ and ‘‘deluxe’’ lifestyles.

Each lifestyle option assumed rental accommodation costs of $370 a week.

But many people, including homeowners and those planning on skipping from expensive cities to cheaper rural centres for their twilight years, wanted to put in their own housing costs figure.

Both groups wanted to enter lower amounts, reducing the huge sums the calculator said they needed to save.

‘‘Everyone’s costs in retirement will be different and that’s especially true when it comes to housing,’’ says Kiwi Wealth’s Ramesh Naran.

‘‘Some people will be renting, some will move to the cheaper regions, some will be mortgagefree and others may still be paying a mortgage.’’

So Kiwi Wealth changed the calculator to let users enter their own figures. ‘‘Renting in retirement is an increasingly important issue,’’ says Naran.

‘‘More than 25 per cent of retirees are already doing just that, and that’s increasing. Add in those still with mortgages at retirement age, which is now at around 30 per cent of over-65s and also trending up, and there’s a lot of people who are already, or [are] likely, to be paying a big chunk of their retirement income to the landlord or the bank.’’

Naran says that buying your own home amounts to pre-funding some of your retirement accommodation costs.

‘‘The higher costs of buying a house, and paying it off, over your working life effectively ‘frontloads’ your housing costs,’’ he says.

But owning a home often isn’t enough. Capital is needed too.

Rayner’s waterfront home in Devonport is a modest home, but it’s superbly located.

He bought it in a kinder age, when homes in the suburb cost tens of thousands of dollars, not over a million.

He needed only a $15,000 mortgage, but even that made him ‘‘shake like a leaf’’ when it was approaching time to refix.

‘‘There’s a lot of people who are already, or likely, to be paying a big chunk of their retirement income to the landlord or the bank.’’ Ramesh Naran of Kiwi Wealth

But the cost of being a Devonportian are rising. Rates are now more than $3000 a year, and rising. Insurance spiked up after the Christchurch earthquakes. Power bills are rising.

Rayner’s coping, but he sees plenty who are not, and are ultimately forced to flee the city, or take on expensive reverse mortgages.

Several years ago, Rayner tried a reverse mortgage for himself ‘‘to find out how it worked’’, but the costs were just too high, and he cleared it.

Currently, reverse mortgage rates are between 7.55 per cent and 7.8 per cent. The interest compounds until the loan is repaid.

Rayner’s experience led him to launch a lobbying campaign to convince the Government to run a reverse mortgage scheme for elderly homeowners, taking security over their properties in return for releasing up to $10,000 a year, and lending to them at the Government’s low borrowing cost plus expenses.

‘‘They’d have rock-solid security for $10,000 a year lent on a house worth hundreds of thousands of dollars,’’ Rayner says.

The venture could be run at no cost to the taxpayer, he believes.

It’d let borrowers stay in their homes for longer, and live decently, but nobody in the big parties seems to be listening.

Rayner would also like to see help for retirees with little or no savings, and no way to borrow, who have found themselves facing big bills for fixing leaky buildings.

And he has been lobbying for councils to end the freeze, or even decline, in building pensioner units, a segment of the market that private property developers have ignored.

‘‘Everybody’s pounding away to get the young people to vote for them, but nobody is talking to us,’’ Rayner says.

There are a wide variety of strategies people use to stay wellhoused in retirement.

Rayner has lost friends to the regions.

One couple shifted to Kerikeri, swapping a modest home in Glenfield for a nicer one which was also a great deal cheaper.

Others are opting for retirement villages, effectively locking down their future costs in return for losing a big chunk of their housing equity.

Mark Collins from Mike Pero Mortgages saw one deal go through earlier this month where an Indian couple sold their home to their son, releasing capital, while also remaining in the home in a comfortable multi-generation arrangement.

Some people may find their Kiwisaver nest eggs do little more than save the taxpayer some money.

Many pensioners get by on NZ Super boosted by the accommodation supplement to help them pay the rent.

But the accommodation supplement is means-tested, and not paid to individuals with more than $8100 in savings.

Someone with $75,000 in Kiwisaver could probably produce an income (including some capital drawdown) of about $4000 a year, according to ANZ’S Kiwisaver calculator. That’s a little over $75 a week.

Someone on NZ Super alone, renting a place in West Auckland for $361 a week, would qualify for an accommodation supplement of around $100 a week.