Australia’s superannuation system faces a catastrophic failure, as workers still renting in their retirement are left behind.
In a grim prediction, about 750,000 Australians approaching retirement will be left renting and without enough superannuation to cover their costs, effectively leaving them in severe financial hardship.
According to survey data from not-for-profit housing provider Home in Place, 772 renters aged 55-69 have a bleak outlook in retirement, as a third predict they will run out of superannuation in just five years if they need to rely on it for rent.
Four in 10 say they “definitely can’t” afford to rent privately on the aged pension, while six in 10 say they spend more than 30 per cent of their income on rent, meaning they are technically in housing stress.
Home in Place group executive manager Martin Kennedy told NewsWire the superannuation system was not set up for Australians renting in retirement.
“These people are very unlikely to become homeowners, as if you are deep in the second half of your career, the chances of getting a home loan are very slim for obvious reasons,” he said.
“What that means is this group of people are likely to be stuck renting forever and that is a problem because our whole retirement system is predicated on people in their later years will have very few housing costs because they will have paid off a home.”
Mr Kennedy said a secondary assumption is that Australians who were renting would be able to get by on their superannuation and government payments.
“Neither of those assumptions hold up, so we are talking about 750,000 Australians heading into retirement without homes that they own, not enough super and in a rental market that makes the aged pension look like pocket money,” he said.
This number is predicted to jump over the next generation, as less Australians are able to afford to buy a house.
According to Australian parliament figures, 61 per cent of Australians aged between 25-34 owned a home in 1981, but that number plunged to 43 per cent by 2021.
Mr Kennedy said 20 per cent of these Australians believed they would have to work forever, while just 8 per cent said they would have a comfortable retirement.
“The best-case scenario is some people stay in their current roles longer than they would’ve chosen to do otherwise,” he said.
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“The logic underpinning the pension and super system is that by the time they are dependent on these (pension and super) they will have no housing costs.
“If you haven’t got a house, neither of these are going to go very far.
Superannuation targets out of reach for renters
Australians stuck in the rental market are being warned they will need to save twice as much as those who own their own home in retirement.
According to Super Consumers Australia (SCA), a single person who is still renting needs a super balance of $659,000 to meet basic needs when they retire, more than double what a person who owns their own home needs at $322,000.
Meanwhile, a couple who rents needs $786,000 combined in super compared with $432,000 combined in super for a couple who own their home.
The SCA said this would cover a modest retirement, with the retiree in part relying on the aged pension.
It said this spending rate had a 90 per cent chance of lasting until the retiree reached 90.
According to the tax office, the median superannuation balance for Australians aged 55-69 is between $170,000 and $210,000.
SCA deputy chief executive Katrina Ellis told NewsWire that it was “pretty grim” for Australians approaching their retirement if they didn’t own their own home.
“By doing these numbers we are quantifying the gap.” she said.
“Renters are exposed to the whims of the rental market and whatever landlords want to charge. They have that as an ongoing, relentless cost throughout their retirement.
“Meanwhile, people who own their home have very low housing costs once they’ve paid off their mortgage and that is the real gap between renters who face higher costs and homeowners who have stable payments in retirement.”
Ms Ellis said the retirement system, including superannuation and pension payments, was based on a retiree owning their own home.
“When the system was designed it wasn’t contemplated that so many people would be retiring with a mortgage or expecting to rent for their entire life,” she said.
Ms Ellis called on the Australian government to do more to help older Australians, particularly those who are still renting.
“The big thing that is not keeping pace is the government’s commonwealth assistance payment which they pay to pensioners who are renting a property,” she said.
“The government did two adjustment payments in 2023 and 2024 because they realised it was falling behind, but now it is just going up with CPI.”
This led to rental assistance briefly catching up in 2024 before sliding in 2025, she said.
The Australian Bureau of Statistics said rental prices rose by 3.9 per cent in 2025, although this figure is closer to 4.3 per cent when excluding the government assistance.
Overall, the CPI closed the year up 3.8 per cent.
“Automatically there’s a gap and that payment really needs to keep up with rent,” Ms Ellis said.
Build out of an impending disaster
Mr Kennedy said Australia faced a housing crisis for older Australians that was not being addressed.
“The numbers are right there for anyone that cares to look at them, (this housing crisis) is coming and it is entirely predictable, so why aren’t we preparing for it?” he said.
Mr Kennedy warns failing to address the issue now will create a bigger disaster in a generation’s time, as home ownership rates continue to fall.
He said 10 per cent of all new houses constructed in Australia should be social or affordable homes.
“There isn’t a quick thing but there are things that definitely should happen,” Mr Kennedy said.
“There needs to be a substantial increase in the level of social and affordable housing.”
The Australian government has a plan to build 1.2 million new homes in well-located areas over five years starting from mid-2024 in a bid to bring down house prices.
Part of this is a one‑off $2bn payment to states and territories to deliver a permanent increase in social housing stock.
Mr Kennedy said the government’s plans did not go far enough.
“For around 750,000 Australians, the retirement system is simply not fit for purpose,” he said. “We need more social and affordable housing to avoid disaster.”