Judith Davey 11/12/20
Looking back over nearing 200 blog posts which I have written for the Age Concern New Zealand since 2012, I notice a considerable number on housing for older people and one, in September 2019, on inter-generational conflict. The latter came to mind when I read two articles in a recent Policy Quarterly (Vol.16, 2, 2020) on the housing crisis. It seemed to me that they had the potential to raise another possible cause of inter-generational conflict, adding to concerns about the tax burden of an ageing population, the cost of NZ Superannuation and the impact on the job market.
One, by Nick Wilson is entitled – Fixing the housing crisis: the role of inter-generational policy design in addressing the issues and the other Downsizing property among the older generation: a means to free up New Zealand’s housing stock is by Richard Mclaughlan.
Both set out the causes of the housing crisis as they see it, discussing the effect of inconsistencies in capital taxation; they give property a relative tax advantage which homeowners have benefited from, but which raise house prices for younger people.
Among other causes are barriers to development –“ The Resource Management Act is widely considered to be a central issue restricting housing development;” and the fact that urban infrastructure is not able to support new residential developments in some areas.
But Mclaughlan expands on how contrasts between generations have resulted in inequities. Decreases in home ownership among the 30-49 age groups have resulted in “increased periods of renting and financial insecurity among this cohort”. On the other hand, baby boomers have largely benefited from secure home ownership. Despite higher interests rates in the 1970s and 1980s, inflation rates quickly eroded away mortgage debt and made it much easier to enter the property market. “Subsequently, this generation has realised disproportionate financial gain from property,” as well as being lightly taxed.
Mclaughlan suggests that this has resulted in an “over-consumption of large dwellings by retirees which adversely affects first home buyers.” Rather than downsizing to a more suited property, couples or single individuals “continue to enjoy large dwellings late into retirement.” And this “inefficient use of housing stock … will only get worse as retirement periods increase”.
Just as taxation settings have contribute to the housing crisis, they could also be part of the solution. Dixon suggests a centrally levied land tax or a capital gains tax (despite the latter’s current political unpopularity). A tax burden on older homeowners could be countered by reverse mortgages. However, he also calls for “constructive inter-generational conversations about public policy” which could “help reduce inter-generational tensions that could otherwise prevent the development of enduring beneficial policies.”
Mclaughlan also feels that a capital gains tax is required to “mitigate the benefits enjoyed by older property owners”, and to discourage the over-investment in property. But his emphasis is on downsizing, which he asserts “has the capacity to provide a better quality of life to vulnerable elderly who struggle with day-to-day tasks.”
While he acknowledges that it is “not the place of public policy to dictate the actions of this cohort” he insists that policy must be used “to remove distortions which incentivise retirees to remain in artificially large houses.” And that “Older generations can save by reducing their dwelling size, while at the same time increasing the ease of access to amenities that are in the neighbourhood of their property.”
To achieve the required scale of downsizing will need financial incentives and the increased provision of one- and two-bedroom houses. This could be achieved, suggests Mclaughlan, by reducing council rates for the elderly in areas with high density one–two bedroom households and cash incentives to facilitate the move.
Mclaughlan concludes –“If more appropriate housing options were made available for retirees, a significant proportion of large dwellings would be made accessible to young and expanding families. “While increasing the supply of housing should remain the focal concern for the government, resources should be devoted to freeing up existing stock to mitigate the housing crisis.”
Wilson also concludes – “It is clear that New Zealand faces a large housing issue, one that is inter-generational in cause and can also be inter-generational in solution.”
I have always maintained that no single type of housing is appropriate for all older people and that there should be wider choice of housing options for this age group. So, while I sympathise with the housing problems of young people, especially families, I am cautious about anything which might smack of coercion applied to older people in their housing choices and preferences.
An option which I find attractive is the construction of several small units, designed for later life living, on large sections scattered around urban areas. In this way smaller houses, appropriately designed and not requiring large-scale gardening, could allow older people to remain in their familiar neighbourhoods, with social contacts not just with their own age group (as in retirement villages) but also with neighbours of other generations. How could this be achieved? There are already examples in areas where local authorities are forward-looking in their regulatory processes.