Are skyrocketing rent costs a manifestation of a broken rental system?

Is private renting a broken system?

A whitepaper from PEXA and LongView argued that the private renting system in Australia is “broken”. Here are some of the whitepaper’s key findings:

• One in four households are renting, indicating an increase in the number of renters across all socio-economic groups and household types.
• There is an increasing number of households remaining in rental properties on permanent basis due to deteriorating purchase affordability.
• Around 36.5% of renters moved three or more times in the past five years, with 21% of all tenancies terminated by the landlord.
• Rent costs have growth at one third of the rate of house prices but have matched median incomes. They outpaced pension and other welfare benefits.
• Half of all investment properties exit the rental market within five years.

LongView executive chairperson Evan Thornley said the system is structured in a way that resulted in even worse renter experiences through increased tenancy insecurity and poorer housing stock.

“There is a misplaced idea that a battle between landlords and tenants exists – in actual fact, the Australian rental framework has been broken for decades, and is not working for either party,” he said.

“Secure shelter provides people with the feeling of dignity and security, enabling us to build relationships and feel part of a community — so the fact that we are facing the biggest rental crisis in a generation should be of concern to all of us.”

Ms Evan said for many landlords, investing in property has turned to be much more time-consuming and costly than expected.

“And 60% of landlords get returns lower than if they had put their money into superannuation. In most cases, this is because they bought poor-performing properties,” he said, adding that this has led many investors to exit the rental market.

“With rising interest rates, this figure could become much worse. With sale the most common reason for landlord-initiated lease terminations, the poor experience of landlords is closely related to the insecurity that underpins poor rental experiences for renters in Australia.”

PEXA CEO Glenn King said the rental market system, as a whole, is plagued by a number of issues that made Australia one of the hardest places in the developed world to be a renter.

“The biggest problem is insecurity – long term leases are rare, and renters live with constant uncertainty about whether they will have to move,” he said.

“For renters who are constantly required to move, this impacts their ability to feel part of a community, it affects continuity of schooling for children, and renters often face unexpected moving costs – often thousands of dollars per move – which could push many on low incomes into greater levels of financial stress.”

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Photo by 89Stocker on Canva.