Downsizing homes and taxpayer hit

The Productivity Commission (PC) released an excellent report this week on Housing Decisions of Older Australians. In it the PC argued that the exemption of the family home from the pension means test creates an incentive for over-investment in housing and is inequitable because it favours home owners over non home owners – despite the latter typically needing greater assistance.

The PC goes on to conclude that removing the family home exemption from the pensions assets test would be the most efficient and equitable outcome.

If those arguments sound familiar, it’s because they echo the conclusions of the CIS flagship report on this topic, The Age Old Problem of Old Age: Fixing the Pension.

There is, as always, strong opposition to these ideas. Sinclair Davidson, in a post titled Driving the elderly out of their homes, called it classic nirvana fallacy policy. National Seniors chief executive Michael O’Neill said ‘the family home is sacrosanct’.

Leaving aside the PC finding that many retirees would be better off in every sense of the word if they moved to smaller, more age appropriate housing, the big issue with the opposition is that they ignore the massive impact of the $44 billion a year age pension.

It is particularly galling for young people, who already feel locked out of the housing market because of taxes and government restrictions that boost prices for current homeowners, to be asked to fund welfare for pensioners refusing to touch the $700 billion they have in housing wealth.

You are perfectly entitled to do whatever you want with your assets, be they superannuation or the family home, right up to the point where you stick your hand in my pocket to pay for your savings choices.

How can we possibly cut government spending when even those with more than a million dollars of net worth aren’t expected to look after themselves?