Rental stress has been sky-high for Australians over the past few years. The soaring cost of housing is putting pressure on low to middle-income earners, especially in major cities such as Sydney and Melbourne. The issue is particularly acute for single-parent families, low-wage workers and older Australians on fixed incomes.
Combined with the rising costs of living, job losses and financial insecurity, rental affordability remains a concern, and the crisis is only expected to worsen in 2023. In this report, we reveal the impact on Australians and trends across the country.
- More than 42% of all low-income earners are in rental stress
- Greater Hobart continues to be the least affordable capital city in Australia
- Rents are unaffordable to severely unaffordable for singles
- Greater Brisbane experienced the sharpest decline in rental affordability
- Vacant apartments are one of the drivers behind the crisis
- Affordability has not improved much for Adelaide and Perth
Rental stress is most elevated for low-income earners
As of February 2023, more than 640,000 Australian households are under housing stress or homeless. It is forecasted that this figure will grow to almost one million by 2041.
According to a recent report by SGS Economics and Planning, 42% of all low-income households are paying more than 30% of their income on housing. This rises to 47% for households in New South Wales and 58% for Australia’s private rental market.
Severe rental stress is defined as spending 38% to 60% of your income on rent, which puts low-income households at risk.
Singles receiving JobSeeker, pensioners and part-time working parents have an RAI score that ranges from Unaffordable to Extremely Unaffordable. The Rental Affordability Index (RAI) shows they spend 30% to 60% or more of their gross income on rent.
Hospitality workers are also struggling, with rental affordability Moderately Unaffordable to Severely Unaffordable.
Over the past year, rental affordability has declined across Australia for student sharehouses. It ranges from Moderately Unaffordable to Unaffordable. While the annual incomes of these households have boosted slightly, they still need up to 40% of their income for rent making it increasingly difficult to balance study and work.
Minimum-wage couples, who earn an average gross annual income of $84,510, range from Unaffordable to Acceptable. This means that minimum-wage couples are paying 20% to 38% share of their income on rent.
What factors are making rent so unaffordable?
It is clear that tenants are still grappling with unsustainable rent increases. Rental hikes are outpacing wages, leaving no realistic prospect of renting or buying for many individuals.
Unaffordable prices are driven by a combination of factors, including population growth, increased demand and a limited supply of rental housing. Additionally, rising property prices and stagnant wages have made it difficult for many people to enter the property market, leading to a growing reliance on rentals.
Compared to a decade ago, there is less social and affordable housing stock available. This is making many low-income earners very reliant on the private rental market where they are forced to pay unaffordable rents.
The cost of rent soared nationally by 10.2% in 2022
CoreLogic’s rental report for December shows the harsh reality of rent rises. Amid the tightest vacancy rates on record, rent escalated by 10.2% putting immense financial strain on an already pressure-cooker situation.
This has put 2023 on the back burner when it comes to affordability.
The current market conditions have been closely linked to demographic trends throughout the pandemic when the supply of properties was unable to keep pace with household growth. On top of this, employment changes and a strong return in overseas migrations have added to demand. More renters are also looking for a space of their own rather than share accommodation.
Housing will remain unaffordable for many Australians in 2023. With costs consuming a disproportionately high amount of renters’ income, it is important to note that the RAI only considers rent against income, meaning many households are dealing with additional financial pressures on top of the already-high rental rates..
As a result, Brisbane had the sharpest decline in rental affordability which represents a historic low point. By the end of last year, its RAI score had fallen 11%, while Adelaide and Perth fell 6%.
For pensioner couples in particular, Brisbane and Perth are the second least affordable cities ehind Sydney and Australian Capital Territory.
Single pensioners are battling Extremely Unaffordable to Severely Unaffordable rents. For the most part, they need 50-70% of their income for rent. This does not include costs associated with ageing, like healthcare and accessing nearby shops, services and transport.
Regional South Australia is the only location with acceptable rents for pensioners, but rising rates in the area prove difficult for all other low-income earners.
For the average rental household in each city, Hobart continues to be the least affordable sinking below the critical threshold. Sydney remains critically unaffordable, while Melbourne is Australia’s most affordable capital with households spending an average of 21% of their income on rent.
Perth follows as the second most affordable, despite the sharp rental increases and decline in affordability over the years. This is a different story for JobSeekers, hospitality workers and pensioners who are being negatively impacted by low vacancy rates and deteriorating affordability.
Greater Queensland is Moderately Affordable for the first time, with the largest decline in RAI score across the country.
For the full report, please visit: savvy.com.au/media-releases/rental-crisis-low-income-households-need-117-of-income-to-pay-rent/