Rental affordability plunges to worst level on record
Melissa Iaria, Property and Finance Reporter
First published 09 March 2024, 06:00 AM
Low and middle-income households are worst affected by the crisis, which is driven by soaring rents since the pandemic started, and a failure of wages to keep pace according to PropTrack's new Rental Affordability Report.
The typical, or median-income household earning $111,000 a year, can now afford to rent the smallest share of properties since records began in 2008.
Across the country, just 39% of rentals advertised on realestate.com.au over July to December 2023 were affordable for a typical-income household spending 25% of their income on rent.
"This is, by a reasonable margin, the lowest share since records began in 2008," PropTrack senior economist and report co-author, Angus Moore, said.
At the lower end, a household earning $49,000 per year – the 20th percentile of income – is priced out of the market altogether.
“At the lower end of the income distribution, renting is extremely challenging,” Mr Moore said.
“This highlights the importance of rental support for low-income renters, such as Commonwealth Rent Assistance.
“Without support, renting would be effectively impossible for many of these households.”
Median rental prices have surged nationally by 38% over the past five years, while vacancy rates have fallen to near record lows in most parts of Australia.
PropTrack's new Rental Affordability Index shows Renters in NSW, Tasmania and Queensland face the worst affordability. Picture: Getty
The report found rental affordability is toughest in NSW, followed by Tasmania, then Queensland.
With Sydney’s median house rent at $700 per week, NSW remains the dearest state to rent.
A typical-income household can afford just 28% of rentals advertised in NSW.
Tim McKibbin, chief executive of the Real Estate Institute of NSW, described the situation as “critical”.
“If you’re fortunate enough to be able to find a property, the next question is can you afford it?” he said.
But he describes government efforts to push homes in the short term and holiday rental market into the residential market to solve the problem as a “bit of embroidery around the edges of the bigger problem”.
Mr McKibbin called for more properties to be built, a faster approvals process and less taxes slugging new homeowners.
In the current climate, he said it would be “almost impossible” for renters aspiring to homeownership to save a deposit.
“My heart goes out to those people trying to do that. The Great Australian Dream I think is slipping through our fingers.”
John Maugeri, head of property management at Ray White Parramatta, said his figures show many people are splashing more than 31% of their gross household income in Parramatta on rent.
“I've been in this industry for over 37 years and have come across all sorts of markets, but it’s getting harder for a lot of people and getting to a stage where people are spending more than 50% of their income sometimes even, to just find housing.”
As the crisis has deepened, calls to the Tenants' Union of NSW network of advice services tripled to 2500 calls annually, compared to 700 pre-Covid.
CEO Leo Patterson Ross said renters remain under significant pressure to compete for properties, and are increasingly experiencing rental stress.
NSW Tenants Union CEO Leo Patterson Ross. Picture: Jonathan Ng
Many are also facing substantial rent hikes in one go, putting low income renters especially at risk of eviction and homelessness.
“We’ve heard from people sleeping in cars and tents as they were forced out of their previous home without grounds so the rent could be increased, even where they would have been willing to pay the increase,” he said.
Mr Patterson Ross said tenants shouldn’t be forced to spend large portions of their income on a roof over their heads, with little left for other basic necessities.
He called for regulation to prevent rapid rent rises in response to rental property shortages, and an end to “no grounds” evictions at the end of fixed terms and during periodic agreements, to give renters stability.
While Victoria is the cheapest state to rent, with a median-income household able to afford more than half of advertised rentals, affordability has dramatically worsened over the past 12 to 18 months following rapid rent rises.
Suzannah Espie, her partner and two children endured the stress of Melbourne’s tight and increasingly expensive rental market last year when their inner north landlord wanted to move back in.
The family searched persistently for four months and made 10 unsuccessful rental applications before finally landing a new place.
“It was really stressful and confusing,” Ms Espie told realestate.com.au.
When Ms Espie and her partner, who are self-employed, questioned why they were unsuccessful, they were told their application was fine, it was just competitive.
“Going to inspections after a while, I’d just feel so dark, and just be looking at everyone like they were the enemy. The inspections would just be full of so many people, every week for four months," she said.
Suzannah Espie (middle) and her family struggled to find an affordable rental for months. Picture: Supplied
In the end, their landlord granted them an extra six weeks to stay and they found a similar property in time, at $650 per week compared to the $585 they were paying.
“That was one of the cheapest places we looked at,” Ms Espie added.
“There was lots of bidding for rents going on. It's illegal, but still happens a lot.
“We were getting so desperate, we'd offer three months rent upfront, and we'd say, ‘we’ll pay an extra $20 or $30 a week’.”
An undersupply of rental accommodation is driving prices higher. Picture: Getty
Longer term, PropTrack’s Mr Moore said boosting rental supply is critical to improving affordability.
“Rents are growing quickly because rentals are extremely scarce at the moment, with incredibly low rental vacancy rates around the country,” he said.
“The only way to solve that sustainably over the long term, is to have more rentals where people want to live. And that means building more homes.”
Last year, National Cabinet agreed to build 1.2 million new well located homes over 5 years, from July.
