STATES and territories should drop stamp duty on homes to encourage older Australians to downsize as a housing crisis fed by an ageing population looms, a report says.

The report, to be released today, shows the number of 85-year-olds will increase five-fold by 2020 and 50,000 Australians will turn 100 by 2050.

The report says seniors are being locked into staying in the family home because expensive stamp duty can double the cost of moving to more appropriate housing.

Encouraging them to move would unlock larger homes for families.

The report notes government regulations favour the development of large, detached houses at the edge of towns and cities.

But it says easy-to-maintain housing in established neighbourhoods is crucial for an ageing population.

"There needs to be a greater acceptance that higher densities are part of the solution to improving housing affordability," it says.

Treasurer Wayne Swan said he would consider the proposal, but wants to focus on encouraging more older Australians to stay at work.

"There are still some who speak of our ageing population as a burden we have to shoulder; fewer workers to support each pensioner and so on," he said.

"We need to think about this scenario not as a problem we can't afford to ignore, but as an opportunity we can't afford to waste."

Not using the skills and experience of older Australians cost the economy $10.8 billion a year, he said.