Rental stress is at its worst level since the start of the pandemic – and it’s made one Australian capital city the most unaffordable it has ever been

Rental stress is at its worst level since the start of the pandemic – and it’s made one Australian capital city the most unaffordable it has ever been
Suburban roof tops with beach
  • A new rental affordability index shows rental stress has risen in almost every part of Australia, except Sydney and Melbourne.
  • A combination of factors including migration to regional Australia have served to push up prices and reduce affordability.
  • Regional Australia recorded an annual rate of rental growth of 12.5% in September 2021.
  • Visit Business Insider Australia’s homepage for more stories.

Housing affordability has plummeted since the start of the pandemic in most parts of Australia, with the gap between incomes and average rent widening. 

The Rental Affordability Index (RAI), released on Wednesday, found that for low-income Australians in particular almost all metropolitan and regional areas are now considered unaffordable. 

It follows a period of regional migration sparked by the pandemic that has seen a transformation in the cost and availability of rental properties, with prices skyrocketing in coastal regions and levelling off in the inner cities of Sydney and Melbourne. 

Regional Australia recorded an annual rate of rental growth of 12.5% in September 2021, the highest rate on record since CoreLogic began its index in 2005. 

The RAI, which examines national rental bond data against the average incomes of different types of renting households, defines rental stress as household costs exceeding 30% of a household’s gross income. 

According to these metrics, an output of 38%-60% of income on rent represents severe unaffordability, with 60% or more extreme unaffordability.

A single person solely reliant on JobSeeker payments and rental assistance would require an income nearly triple the current level of about $19,802 per annum to move into the “acceptable” affordability category, in which only 20%-25% of household income went on rent.

Rent stress worst in Tasmania 

Rapid rises in rent since 2020 have in the last financial year made Hobart the most unaffordable it has ever been, the report found. 

While household incomes in Tasmania are significantly lower than the national average, rents are only marginally lower than on the mainland and the gap has been widening over the past four years.

Rents in Sydney and Melbourne have shifted unevenly, with the inner city becoming more affordable while the outer suburbs have become more expensive.

This change has come as a result of the loss of international students due to Australia’s closed borders, a factor that increased housing supply during the city’s extended lockdowns.

Stay-at-home orders similarly encouraged renters to look at larger properties outside the CBD.

CoreLogic data showed that capital city rental prices fell 6% from pre-pandemic levels in December, but are now just 0.3% underneath.

Adrian Pisarski, executive officer of advocacy organisation National Shelter, said the relatively stable situation for renters with average incomes masked “a really nasty and growing problem for people on low incomes”. 

“Homeowners have had relief through low interest rates which have made repayments sustainable for those that have mortgages, but renters never get any relief at all,” Pisarski said.

“Rents keep going up and unaffordability gets worse.”

Regional migration driving up prices 

Pisarski said the lack of affordable housing in regional areas was concerning.

“There’s effectively nothing available right up and down the east coast of Australia for people even on an average income in those regions,” said Pisarski, whose organisation produced the RAI report with SGS Economics and Planning, the Brotherhood of St Laurence and Beyond Bank Australia.

Regional areas in NSW are battling some of the most severe housing shortages since the start of the pandemic, with vacancy rates of less than 1% in some areas, according to data from the Real Estate Institute of NSW (REINSW).

The south coast has the lowest vacancy rate in NSW at 0.2%.

The Byron Shire is one of a swathe of regional areas that have seen a shortage of housing available, as an onslaught of new arrivals from Sydney and Melbourne pushed rental prices up and displaced long-term residents.

The area is now the fastest growing regional market in NSW and the country, replacing Sydney as the priciest major market to buy with the median price of a house ballooning from $1.42 million last year to $2.7 million. 

Tim McKibbin, chief executive of REINSW, said the country was seeing “unprecedented” rental activity in the regional areas, with immediate and long-term action required to manage the situation. 

“Even if the people in those locations are going to stay there, it’s pretty clear that we don’t have enough property to satisfy demand,” McKibbin said. 

“There is only one solution and if you strip away all the discussion, that is supply.”

Michael Lyon, Mayor of Byron Shire, told Business Insider Australia his council was currently accelerating several measures to address the shortage of affordable rental properties, including legislation to place a 90-day cap on holiday letting in residential areas.

Lyon said he hoped the initiatives, many of which are being implemented with the state government, could be a template for other regional councils facing similar challenges. 

“It’s clear the crisis is growing. Trends aren’t good,” he said.

“We think they [the initiatives] will work. They just need to be enacted by the state government.”