Insights

Rental affordability crisis requires urgent intervention

Posted November 28, 2022

Author(s):

Ellen Witte, Kishan Ratnam

Sectors:

Housing

SGS Economics and planning 2022 rental affordability index cover image

Australians are being hit with unsustainable rent increases according to the latest release of the Rental Affordability Index, with every capital city nationwide experiencing a decline in rental affordability in 2022. Low-income renters such as single parents, pensioners, and job seekers are most vulnerable and require more active and immediate support.

The Rental Affordability Index (RAI) is a clear and concise indicator of rental affordability by comparing rents to household incomes. This year’s findings show rents are escalating faster than incomes across the country, with low vacancy rates, interstate migration and global supply chain issues contributing to increased rents said the report's lead author, SGS Economics and Planning Partner, Ellen Witte.

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.
The pandemic also saw the existing rental crisis spread to the region, 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, NSW and Western Australia.
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 per cent between 2021 and 2022. Bellingen was similarly affected, with affordability declining by 14 per cent.
— Ellen Witte

The RAI uses the 30 per cent of income rule. Whenever individuals, couples or families pay 30 per cent of income or more on rent, they are in a situation of rental stress. This means they have insufficient funds to pay for other primary needs such as food, medicine, transport and heating.

Rental increases also mean individuals and families are forced to move away and disconnect from family and friends while struggling to find money to pay for essentials like food, utilities, and healthcare. Key workers such as nurses and teachers often can’t afford to live in the communities they serve, threatening the viability of essential public services across Australia’s cities.

Major impacts in capital cities include:

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 (15 per cent). 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).

The data from this year’s report assesses the affordability impacts of the COVID-19 pandemic, as well as the 2022 eastern Australian floods. The report includes 2021 ABS Census data to inform the household incomes available to rental households.