The " Family Home " Question !

It was inevitable that the question of pensions and the family home would collide with explosive force when balancing the budget became an issue.  The meteoric rise in house prices has seen the median Sydney price approach the million dollar mark and all homes are exempt from the means test when pension eligibility is assessed.  Pensions cost a $44 billion impact on the Federal budget.

A Productivity report has suggested that if home ownership was included in the means test and just fifteen percent of pensioners sold their home they would not need a government pension - and the Treasury would gain a saving of $6 billion annually.  The Treasurer was quick to respond that this was not on his agenda.

Home ownership has long been the crux between socialism and capitalism. Socialist dogma insists that the state should house it's poorest citizens.  Capitalism insists that the common good is served when people strive to gain assets by ingenuity and sheer hard work.  In Australia, this is probably the most visible class divide.  Families sacrifice a portion of their income to pay off a mortgage and own their home while another big section of the population pays rent for their entire lives.

In many countries - including America and Britain - the interest paid on a home mortgage is a tax deduction against income earned, but that does not apply in Australia. Ideally, thirty percent of a breadwinners income should serve as the mortgage payment, but we are now seeing more than double that committed in the race to get on the ownership ladder.   When the mortgage is finally settled, most people look at their home asset as the dividend they will bequeath to their children when they die.   Even a suggestion of interfering with that notion will bring a massive backlash.

As usual, this debate is skewed by extremes.  There are instances where people are drawing the full pension because they have carefully arranged their other assets to comply with the means test - and they are living in a multi-million mansion in one of the best suburbs.   On the other end of the scale, perhaps a person who has had life long low paid employment and now exists on the pension and relies for shelter on public housing accommodation.

The forgotten factor seems to be "median " when house prices get a mention.  That is when the highest and the lowest sale prices are lumped together and then divided by the numbers applicable. Many houses in the less salubrious suburbs of Sydney sell for far less that that magic "medium " price quoted and the price in most country towns is ever more way short of that figure, and yet these homes are the prime asset of families who have struggled and sacrificed to gain ownership.   The thought of forcing a sale to get the pension is abhorrent to most people.

It also ignores the question of where are these owners expected to live - if they sell and fund their own pension ?   We are making strenuous efforts to help the elderly stay in their own homes to avoid the costs of subsidized retirement villages and nursing homes.   Aged accommodation is in short supply and the very people in the cross hairs of this "family home " debate are the very people who would be vulnerable if their living arrangements were disrupted.

There are certainly gains to be made by an intelligent approach to downsizing - to allow the elderly to make full size family homes available for young families by way of relief from stamp duty at such changeovers, and allowing any profit balance accrued to be quarantined in the pension means test.  Whether this can be accomplished will depend on whether it can be made available on a voluntary basis with measurable benefits retained for those making the change.  Any attempt to force it on people by diktat will be bitterly resisted !