Rent increases in Australia are becoming unsustainable, with every capital city experiencing a decline in rental affordability over the year, according to the latest Rental Affordability Index (RAI).

The RAI, released by the National Shelter, SGS Economics & Planning, the Brotherhood of St. Laurence and Beyond Bank Australia, found that the proportion of households renting is on the rise, having increased from 26% to 31% between 1995 and 2020.

Renters, on average, spend 20% of their income on housing costs, higher than the proportion of income owners set aside for mortgage at 15.5%.

Meanwhile, the proportion of public housing tenants almost halved from 5.5% to 2.9%.

Furthermore, around 1.3 million households were in need additional housing assistance.

Given the less social and affordable housing stock available that there was a decade ago, more low-income Australians rely on the private rental market and are forced to pay unaffordable rents.

In fact, 42% of all low-income renter households are in rental stress, compared to 35% in 2008. This rises to 47% for households in New South Wales.

National Shelter CEO Emma Greenhalgh says the nation’s social and economic wellbeing is at risk, with housing stress and homelessness increasing as the nation experiences a lack of affordable housing options.

“Rental increases mean individuals and families are forced to move away from family and friends driving disconnection at the same time they are struggling to find money to pay for essentials like food, utilities, and healthcare,” she said.

“Key workers, including nurses and teachers often can’t afford to live in the communities they serve,” she said.

The RAI found that in some inner-city areas, there are many apartments sitting vacant as an investment, which could contribute to the worsening of affordability.

Investors usually hold on to these vacant properties for long-term capital gains, which reduces the overall properties available to would-be renters.

SGS Economics and Planning partner Ellen White said several natural disasters from the widespread bushfires in 2020 to the flooding in 2022 affected both existing rental stock and new development.

“This year’s severe floods also significantly impacted affordability in the Northern Rivers of NSW — Lismore is one of the worst affected towns, where affordability declined by 10% between 2021 and 2022,” she said.

“Bellingen was similarly affected, with affordability declining by 14%,” she said.

Meanwhile, the influx of regional migration driven by COVID-19 restrictions in capital cities also compounded the rental crisis.

“We found that the static or slightly falling rents of the early pandemic were short-lived, with rents now being equal or higher than pre-pandemic, and Hobart still the least affordable city,” Ms White said.

“The pandemic also saw the existing rental crisis spread to the regions when many households left capital cities — more and more regional households are struggling to pay their rent and key workers are unable to access housing, especially in the regional areas of Queensland, Tasmania, New South Wales, and Western Australia.”

Here are the other key findings of the RAI report:

  • Greater Hobart continues to be the least affordable capital city in Australia for the average rental households of each city, and has been since 2019, with high rents relative to household incomes.
  • Greater Brisbane has hit a historic low point for affordability. The city is considered moderately unaffordable for the first time, with an 11% decrease in RAI score over the past year — the largest decline of any capital city.
  • Greater Perth is at its lowest rental affordability since 2016, declining considerably over the past two years at 15%. This reflects a sharp increase in rents since the onset of the pandemic, which incomes, while high, have not offset.
  • Greater Sydney, Greater Melbourne, Greater Adelaide, and the ACT all declined in affordability this year, following slight improvements during the pandemic.

Everybody’s Home national spokesperson Maiy Azize said the housing crisis has reached fever pitch.

“It’s clear that the chronic underinvestment in social and affordable housing over the past decade has created a domino effect of housing stress in all corners of the country,” she said.

“Stagnant wages, low rental vacancy rates and rising interest rates all add to rental stress but the huge shortfall in social and affordable housing is one of the biggest drivers.”

Ms Azize said one solution is for the government to build at least 25,000 social and affordable houses each year to keep up with the demand.

“We also need to expand and raise Commonwealth Rent Assistance to ensure people struggling to make ends meet aren’t forced to choose between paying rent or putting food on the table,” she said.

Photo by 89Stocker on Canva.