Australia confronts its worst rental affordability crisis in 17 years
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It’s a pressing issue that affects millions across Australia: the state of rental affordability.
REA Group’s PropTrack has launched a new Rental Affordability Index, a comprehensive measure of how many rental properties are affordable to Australian households.
The report has revealed that rental affordability is at its lowest point in at least 17 years, the worst it’s been since PropTrack began recording data.
Since the pandemic, rent prices have soared, leaving many unable to afford homes they once could.
PropTrack’s senior economist, Angus Moore, says surging rents have significantly outpaced wages, a disparity growing since the pandemic hit.
“To highlight the scale of the problem that we’re facing in rental markets at the moment, a median are typical income home across Australia who’s earning about $111,000 per year can afford just 39% of rental properties that were advertised over the back half of last year.”
Households earning the median income of roughly $111,000 can afford to rent the smallest share of properties since 2008.
Only 39 per cent of properties listed for rent are considered affordable, assuming you’re spending 25 per cent of your income on housing.
The crunch is felt most in New South Wales, Tasmania, and Queensland.
A typical income household in New South Wales can afford a mere 28 per cent of rentals available.
And if you’re in the lower income bracket, earning $49,000 annually, finding an affordable rental is virtually impossible.
Mr Moore says there is a critical need for rental support, such as Commonwealth Rent Assistance, to make renting viable for low-income earners.
“The really challenging affordability conditions that we’re facing at the moment are hitting lower income households particularly hard. For a household at the 30th income percentile spending about $67,000 per year, just 3% of advertised rentals are affordable, without having to spend more than 25% of their budget. Obviously very, very challenging and I think makes the case for the importance of support policies like Commonwealth rent assistance for low income households. While it was pleasing that we did see Commonwealth rent assistance raised in the last budget, given the scale of the challenge facing lower income households. I think this scope to go further.”
But it’s clear, support alone won’t solve the underlying issue – the scarcity of rentals.
Mr Moore says low rental vacancy across the country is putting extra pressure on renters.
“The reason we are seeing such challenging conditions for affordability at the moment is that there just aren’t enough rentals for the number of people looking to rent. Rental vacancies are incredibly low across the country at the moment, and that’s putting a lot of pressure on rents. To put it in perspective relative to pre-pandemic median advertised rents on realestate.com nationally were up 38 per cent. That’s an incredible pace of growth over the span of just four years.”
Increasing the supply of rental properties is the solution, according to the PropTrack report.
It’s a long-term goal that requires building more homes where people actually want to live which can help solve the incredibly low vacancy rates being seen nationwide.
Mr Moore says the government could be doing more to to pick up the pace.
“Long term, the only way that we’re going to improve affordability is building more homes, fundamentally the problem we’re facing at the moment is not having enough rental properties, and so the only way we can solve that is building more. Similarly, we are seeing government’s focus on that national cabinet has a target to build 1.2 million homes over five years but the moment and at the current pace of building, we’re just not on track to reach that, and so more probably needs to be done.”
Affordability in Victoria, though having worsened recently, remains the highest.
More than half of the rentals are within reach for median-income households.
With national median household incomes up by 19 per cent since 2018-19, but median rental prices skyrocketing by 38 per cent post-pandemic, the gap between earnings and housing costs is widening.
Michael Fotheringham from the Australian Housing and Urban Research Institute has previously told SBS News that no single proposal can untangle the mess overnight – but action is urgently required.
“The best time to have addressed this was 20 years ago, the next best time is today. It’s absolutely time, we can’t keep pushing this down the road because it just continues to get more serious. We have significant issues around homelessness and housing un-affordability in this country, and we need to take them very very seriously.”
