Older Australians are falling off the housing ladder and face spending their retirement as renters, with the situation expected to worsen for coming generations.

Senior Australians in the private rental market are “at much greater risk of financial stress than home owners, or those in public housing”, according to the Grattan Institute’s recently launched Grattan Retirement Incomes Model.

“Falling home ownership rates among younger generations means many more retirees in future won’t own their homes,” GRIM states.

Older Australians are one of the fastest-growing groups of renters in Australia, and in 2015-16 there were 102,600 lower-income households aged 65 or over in the private rental market, according to ABS estimates.

An aged pension system not designed to cover mortgage payments or rent, coupled with falling home ownership rates, is behind the growing housing crisis for older Australians.

While home ownership rates are falling fastest among the young and the poor, we’re also seeing a “tsunami of falling home ownership” among those in their late 40s to early 60s, according to the Grattan Institute senior policy adviser Brendan Coates.

“Our current retirement system is predicated on the assumption that most people will own their own homes. That assumption is running headlong into the falling rates of home ownership,” Mr Coates said.

Many Australians are also retiring with large mortgages left to pay off, according to National Shelter executive officer Adrian Pisarski.

“More and more older Australians are retiring without owning a home, or with a substantial mortgage that will eat into their retirement savings,” he said.

Tenancy advocates around the nation are seeing an increase in the number of pensioners who were once home owners, but are now finding themselves struggling to afford a private rental.

“We’ve set up retirement system based on property ownership, not renting, so we’re going to be leaving people in really sub-standard  accommodation and paying a bomb for it,” Tenants’ Union of NSW senior policy officer Leo Patterson-Ross said.

According to Tenants Victoria, older renters are burdened not only by financial concerns, but “also face other significant health and wellbeing concerns in the rental market, including rental properties of a poor standard and the risk of unfair eviction”.

Older, single women most vulnerable

Older women are most vulnerable to falling out of home ownership and into the cut-throat rental market, or homelessness, experts say.

A recent survey of more than 4000 Australian workers conducted by the Australian Services Union found that the median superannuation balance for women immediately before retirement was less than $80,000, which is estimated to fund less than three years of retirement.

Men fared slightly better, with an average superannuation balance estimated to fund five and a half years of retirement.

There are a number of “key life triggers” such as job loss, divorce, and illness that cause older Australians to “tumble out of home ownership”, according to Curtin University housing and population ageing expert Rachel Ong.

Unlike younger people who are better able to bounce back from “adverse life events”, older people “find it very difficult to make their way back into home ownership”, Professor Ong said.

‘Fairer’ retirement income system needed

“We need to adapt our retirement income system to acknowledge the reality of falling home ownership,” Mr Coates said.

“Even if politicians do everything in their power, falling home ownership is baked in, so we need to make a retirement income system that treats people more fairly whether they’re a home owner or a renter.”

Commonwealth Rent Assistance will need to be boosted by up to 30 per cent in order to ensure retirees who rent have an “adequate or comfortable retirement”, Mr Coates said.

Changing tenancy laws to improve renters’ rights is also key to ensuring Australians of all ages can afford a home.

Landlords can currently evict renters for no specified reason, creating a situation where renters may have to bear the brunt of moving costs at short notice.

“Renters need to make their house a home,” Mr Coates said.

However, for pensioners and many others on fixed incomes “the private rental market is just inappropriate”, Mr Patterson-Ross said.

Instead, such demographics require “market-proof housing”, such as social and public housing “to ensure people can be protected from the market where they’re not able to compete”.