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Renters are being driven out of our major city centres, with students, pensioners and low-income workers especially suffering in the current affordability crisis, according to the annual National Shelter-SGS Economics and Planning Rental Affordability Index.
Sydney is now equal with Hobart as the least affordable rental housing market in the nation, posting its worst result since 2017, according to the landmark study that cross-references average incomes against median rents.
Meanwhile affordability in Melbourne has dropped by 10 percent in the past year while only three local government areas outside of Greater Melbourne have affordable rents. And low-income households in Adelaide and Canberra are also bearing the brunt of these cities’ lack of affordable homes to rent.
The Shelter-SGS Index shows rents in Greater Sydney are significantly higher than any other region in Australia. While the median rental price in Greater Sydney in June 2023 of $650 had increased $100, or 18.2% in the year prior, average rental household income in Greater Sydney only increased by 2.4%.
This represents a 13 percent deterioration in rental affordability in the last year. This comes as the NSW Government plans to announce the rezoning of land around seven Metro stations in its bid to spur on a significant increase to Sydney’s housing supply.
“We are past the point of ringing alarm bells about Sydney’s rental affordability,” said John Engeler, CEO Shelter NSW. “This deep and entrenched crisis demands a significant expansion of social and affordable housing, stronger renters’ rights and a realistic level of Commonwealth Rent Assistance.
“Truly affordable rental housing needs to be secured for these households. It can’t be left to the private market. The NSW Government has the power and means to provide it, or require it.”
If Sydney’s current trend continues, it will soon be the only capital city in Australia with a Rental Affordability Index below the critical threshold of 100.
The problem is especially pronounced among very low-income households whose share of household income going to rent is significantly higher. For people on low incomes such as single people on Jobseeker, single or coupled pensioners, and single part-time worker parents on benefits, rents were classed as either extremely unaffordable or severely unaffordable.
No suburbs with coastline have acceptable rental affordability and inner areas are also either unaffordable or extremely unaffordable. The average rental household generally must travel 15-20km from the CBD to areas such as Campsie and Lakemba in the south, or Rosehill and Parramatta to the west, to find acceptable rents, meaning key workers on modest incomes in industries such as health, aged care, retail or hospitality, are suffering longer commute times across Sydney.
Many inner suburban locations such as Waterloo, Camperdown, and Erskineville declined sharply in affordability, falling into a lower affordability bracket (90 to 74, 109 to 90 and 92 to 81 respectively).
Western and Southwest Sydney (from Camden, through Liverpool, to Parramatta) were previously among the most affordable regions of the city, with RAI scores ranging from acceptable to affordable in 2021. These have now deteriorated, becoming moderately unaffordable or unaffordable.
The Bankstown to Campsie corridor has shifted from affordable to acceptable in 2023. This corridor sits within the longer Sydenham to Bankstown Metro corridor, likely to be targeted for a big population increase. Without significant stocks of social and affordable housing low-income renters, including essential workers, will be driven from the area.
“This is a social calamity but also a deep economic problem,” said SGS Economics & Planning Principal, Ellen Witte. “Key workers in critical industries are traveling further and further and being priced out of their city. We need a serious plan to provide the right housing at the right price to people who really need it. And we need to back that up, by supporting and empowering renters,” Ellen Witte said.
Greater Sydney affordability
|Household type||Indicative gross annual income||RAI score||Rent as a share of income||Relative unaffordability category|
|Single person on Jobseeker||$22,100||22||137%||Extremely unaffordable|
|Single pensioner||$36,700||37||82%||Extremely unaffordable|
|Single part-time worker parent on benefits||$44,800||40||76%||Extremely unaffordable|
|Pensioner couple||$54,300||52||58%||Severely unaffordable|
|Hospitality worker||$62,800||70||43%||Severely unaffordable|
|Student sharehouse||$84,800||72||42%||Severely unaffordable|
|Minimum wage couple||$91,800||81||37%||Unaffordable|
|Single income couple with children||$104,500||90||33%||Unaffordable|
|Single full-time working parent||$104,500||95||32%||Unaffordable|
|Dual income couple with children||$209,000||181||17%||Affordable|
The Shelter-SGS Rental Affordability Index for greater Melbourne shows rental affordability plummeting 10 percent in just 12 months, with an average rental property costing 24 percent of the average household’s income of $108,955.
For people on low incomes such as single people on Jobseeker, single or coupled pensioners, and single part-time worker parents on benefits, rents were classed as either extremely unaffordable or severely unaffordable.
“In Melbourne, students and people on lower incomes are priced out of entire swathes of the city. The rental market is fundamentally broken,” Emma Greenhalgh, CEO National Shelter, said.
“Melbourne’s rental market is in a crisis and it’s only getting worse. This disproportionately punishes people with the least while also pricing full-time and essential workers out of their own city.
Chief of Services at Brotherhood of St Laurence, Julie Ware, said: “The private rental market is failing people on low incomes and we cannot afford to simply tinker around the edges of reform.
“A major overhaul of how we treat housing is crucial to ensuring people can afford to live in communities with adequate infrastructure and essential services such as healthcare, schools and transport.”
Principal at SGS Economics & Planning, Ellen Witte, said: “An entire corridor, stretching from Footscray in the inner west north to Meadow Heights, was considered ‘affordable’ to the average rental household just last year. As of the June 2023 quarter, those options that cost less than 15 percent of a household’s gross income had all but vanished.”
The rental index gives Australia’s second-largest city an overall affordability rating of 126, which is rapidly approaching what the analysis considers moderately unaffordable. While Melbourne remains the country’s most affordable capital for renters, rental affordability has continued to decline from its pandemic downturn-induced high of mid-2021 (when the RAI was 151).
Rents have risen 16 percent over the past year, driven mainly by rapid price rebounds in one and two-bedroom apartments that now exceed pre-pandemic levels.
Acceptable rents (requiring less than 25 percent of gross income) in areas like Docklands and Southbank have also disappeared. Now, the average rental household needs to look as far out as Sunshine (15km from the CBD) to find affordable rentals at the median rate.
“Unaffordability has spread from the cities to well into the regions. Households will have to live further away from where the jobs are to access affordable rents, and businesses are struggling to find workers.”, Ms Witte said, adding that strong reform was needed.
” We need to attack this problem from multiple angles. This means expanding social and affordable housing, rethinking how we use tax subsidies and strengthening renters’ rights.”
|Household||Affordability||% of Rent||RAI Score|
|Single people on Jobseeker||Extremely unaffordable||100 per cent||30|
|Single part time worker parent on benefits||Extremely unaffordable||60 per cent||50|
|Single pensioner||Extremely unaffordable||60 per cent||50|
|Hospitality worker||Unaffordable||36 per cent||85|
|Student sharehouse (renting three bedroom home)||Unaffordable||31 per cent||98|
The latest Shelter-SGS Rental Affordability Index shows only three Victorian postcodes outside of Greater Melbourne have affordable rentals in 2023.
These are Kerang in the state’s north (3579), Nhil in the northwest (3418) and Numurkah north of Shepparton (3636). An affordable rental, with a rental affordability index (RAI) score of between 151 and 200 is when rent comprises up to 15 percent of household income.
The Surf Coast is the most expensive area for renters, with Torquay (3228), Barwon Heads and Ocean Grove (3227), requiring the average rental household to spend more than 38 percent of income on rent.
Since 2019, affordability in Apollo Bay (3233) has declined from acceptable to severely unaffordable. Rental affordability in Bendigo and Shepparton has also declined from moderately unaffordable to unaffordable since 2022.
“These stark figures show Victoria’s housing and rental affordability crisis continuing to plumb new depths and everybody – families, workers and the broader economy – is losing out,” Emma Greenhalgh CEO National Shelter said.
“People who are priced out of metropolitan Melbourne would usually look to regional areas. But now only three very small areas of Victoria are considered affordable. Put another way, there are only three postcodes where the average household can get a rental that costs less than 15 percent of total income, and these are not areas with significant job opportunities or other supports to lift people out of poverty.”
Chief of Services at Brotherhood of St Laurence, Julie Ware, said: “The rental crisis means there is virtually nowhere in regional Victoria that is genuinely affordable for people on low incomes and income support payments.
“It is wrong that those who are already facing significant poverty and barriers to work are left to pay the price for this unacceptable market failure.”
For people on low incomes such as single people on Jobseeker, single or coupled pensioners, and single part-time worker parents on benefits, rents were classed as either unaffordable, severely unaffordable or extremely unaffordable.
For those on an average annual household income in regional Victoria of $81,566, rental affordability has slipped to a moderately unaffordable score of 112. This means the average rental household is spending 27% of its income on rent. Unaffordability is hurting the economy too.
“Nursing homes are struggling to find nurses, schools to find teachers and the building sector to find builders to build houses”, according to Ellen Witte, Principal at SGS Economics & Planning.
“Regional Victoria’s rental affordability will continue to deteriorate from crisis to catastrophe without urgent intervention from state and federal governments.”
The latest National Shelter and SGS Economics and Planning analysis shows low-income renters are bearing the brunt of Adelaide’s rental affordability crisis, which is at its worst point since 2013.
Low-income households are bearing the brunt of the decreases to affordability and for people who are single and on Jobseeker, the Age Pension or even working as a single parent, rents are classed as ‘unaffordable’ or ‘severely unaffordable’. People simply cannot afford to rent any more on these inadequate income support payments.
The average metropolitan rental household, earning $87,000 a year, would struggle to find an affordable rental in the private market, and faces paying 27 percent of their income if renting at the median rate. What was previously deemed ‘affordable’ in the corridor from the southern suburb of Bellevue Heights to Gillman in the north has completely disappeared since 2022. Renters now have to look at least 30km from the CBD to find something more affordable.
“What’s happening in Adelaide shows that Australia’s rental market is being pushed to the brink of disaster through a combination of soaring prices and low supply,” Dr Alice Clark, CEO Shelter SA said.
“Even moving to the regions does not provide affordability relief anymore. Outside of Adelaide, rents have risen 12.9% in the last year while affordability has declined by 8%, adding even more pressure to rental households, who have even lower average incomes of $76,000 a year in the regions.
“The 2023 Index scores for South Australia provide an evidence base that supports bringing in legislation to limit rent increases to the consumer price index as well as how often rents may be increased.”
People on low incomes and income support have been priced out of Canberra as prohibitive housing costs punish the city’s most vulnerable, the latest National Shelter-SGS Economics and Planning Rental Affordability Index (RAI) shows.
Overall June quarter 2023 rents remain on the border of the acceptable affordability threshold for the average Canberra household on a yearly gross income of $126,248, the highest in the country. But this leaves every ACT suburb either unaffordable or severely unaffordable for students in share houses. The entire territory is also severely to extremely unaffordable for single and coupled pensioners.
It is even worse for people on JobSeeker. A one-bedroom apartment is extremely unaffordable for a single person relying on income support, who would need to spend 112% of income to rent, as well as a single parent on benefits who works part-time and faces paying 66% of income on a two-bedroom property.
The ACT’s rental affordability rose marginally (3%) between the June quarters of 2022 and 2023, putting it on par with 2019 affordability levels. It is now Australia’s second-most affordable capital, driven mainly by the sharp decline in other cities, with an RAI of 125. This is up from 121 last year when rental affordability fell to its lowest level since 2013.
Every suburb in central Canberra is moderately unaffordable to the average household, while areas near Tuggeranong in the south and Gungahlin in the north have returned to acceptable levels.
“While the Index has consistently shown people on JobSeeker have been pushed to the margins and into poverty in the ACT since its first release, the brutal home truth this RAI tells us is every Canberran household with an income of less than $1000 a week has been priced out of the option of a second bedroom by our private rental market,” Travis Gilbert, CEO ACT Shelter said.
“There is an urgent need for public investment to remedy market failure.”