Rents in Australia’s cities are either “severely unaffordable” or “extremely unaffordable” for lower-income renters in all states, a new report has found, with some renters having to pay 65 per cent of their income towards the cost of their accommodation.

Australia’s first Rental Affordability Index, released by National Shelter, Community Sector Banking and SGS Economics & Planning, looks at median rental prices and average weekly household earnings for areas across Australia (excepting ACT and NT due to “inappropriate data sources”) to understand rental affordability across the country.

Although average rental affordability remains below the 30 per cent threshold (before “housing stress” occurs and rents become “unaffordable”) across all states, households falling into the lowest 40 per cent of income in each state consistently face “severely unaffordable” rents (spending 38 per cent or more of their income on it) and “extremely unaffordable” (spending 60 per cent or more of their income on it) rental prices.

The report found that this was the case in all regions of Australia – including all cities and all regional areas – with non-family households suffering the most.

Melbourne and Sydney are least affordable

In the worst cases, such as in Sydney and Melbourne, low-income non-family households (for example, those earning $252 a week in Sydney) are spending more than 65 per cent of their income on housing.

In South Australia, lower-income householders spend 59 per cent of their earnings on rent, in Western Australia it is 57 per cent, Queensland it is 54 per cent, and in Tasmania, 54 per cent.

However, the problem of rental affordability is not only confined to those on lower incomes, with those classed as average-income householders (for example, those earning around $1474 a week in Sydney) also “suffering poverty due to high rental costs” and becoming “locked out” of inner cities.

This, the authors argue, is shifting the cause of homelessness from “traditional” factors, such as escaping abuse, substance misuse, mental health issues and overcrowded housing, to “economic factors”, such as being pushed out of the housing market by those with higher incomes.

Adrian Pisarski, executive officer at National Shelter, said: “Rental unaffordability is dividing Australia in a big way. Working families – according to this report – are experiencing severe housing stress. Australia’s rental market is growing and, where once Australia had an owner-occupation rate of 70 per cent, it is now closer to 65 per cent and declining.

“This report shows housing affordability is a much bigger problem for renters than owner occupiers… It shows what we have known anecdotally for far too long. Low-income households are being hammered beyond belief.

“Moderate-income working households are very hard up and have little disposable income [and] many middle-income households are finding it hard to make ends meet. These households then ultimately don’t have disposable income to spend on key life items like health, transport, education and food.”

Inadequate policy and market failure are to blame

Mr Pisarski said that the deterioration in rental affordability was “a result of 25 years of policy inadequacy and market failure”, and highlighted that there is no national strategy to address deterioration of rental stress or homelessness, and a “clear lack of investment” both from government and through institutions.

He highlighted that government had been actively “disinvesting” from this area, for example, by cutting the National Rental Affordability Scheme and disrupting reforms.


Stating that the report is “designed to fill a gap in available data on rental affordability and focus attention on the need to reform our rental system”, Mr Pisarski noted several “key steps” government could take to improve rental affordability.

These include: creating a national strategy that uses all available tools (tax reform, investment, planning, best use of states and local government and the community sector); and reforming the National Affordable Housing Agreement to improve the numbers of affordable houses.

“We must be able to achieve multi-party support on such a critical issue,” Mr Pisarski said.

Speaking on behalf of Community Banking, Joe Sheehan, head of business & product development, said: “Australia now needs to build 180,000 new affordable houses every year simply to keep up. That is not happening.”

He added that $10 billion in institutional funding could deliver a further 30,000 to 40,000 houses, while transferring housing stock from state governments to community housing organisations could allow them to maximise their capacity to borrow funds.

“There is now every chance your children may never own their own home,” Mr Sheehan said. “It is a dismal outlook.

“All we are hearing from the housing not-for-profit sector is that there is a real urgency to act now. We cannot afford to end up like the UK where they seem to have almost given up dealing with the scale of their crisis.

“There has been a massive jump in the number of Australians experiencing housing stress. It is time for serious action.”

The RAI is intended to complement the Housing Affordability Index (HAI) developed by the Commonwealth Bank of Australia and Housing Industry Association (HIA).

A general RIA on rental affordability across Australia will henceforth be released each quarter, complemented by indices on rental affordability for very low- and low-income family and non-family households, available at state and local levels.

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