HOUSING AFFORDABILITY SERIES: The cost of housing is top of mind due to Australia’s skyrocketing house prices but for pockets of the country, the regions in particular, the private rental market is where the housing affordability crisis is coming to a head.

Parts of Australia face a spike in rental stress and homelessness as the last of government Covid protections taper off, rental markets tighten and landlords look to recoup deferred rent debts.

Recent data from CoreLogic found that national rental rates have surged by 3.2 per cent, the largest quarterly increase in the national rental index since May 2007, with the regions, Darwin and Perth responsible for most of this growth. The report found that rents in the regions had risen by 4.8 per cent compared to the 2.0 per cent rise in capital city units.

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The severity of rental pressures varies across the country but attractive regional locations such as the Sunshine Coast have fallen victim to the dangerous mix of rising rents, low rental vacancies and the influx of interstate arrivals looking for a sea change.

The rental situation is so dire in pockets of the Sunshine Coast that John Harrison from the St Vincent de Paul Society Queensland told the ABC last week that struggling residents have no choice but to move out of the area, away from family and friends, in order to find affordable housing. The organisation is also considering securing vacant land for people to live in tents.

In the Gold Coast, which is also experiencing a rental shortage, landlords are retaliating against renters who “did wrong by owners” and stopped paying rent or paid less, by not renewing leases.

Australian Housing and Urban Research Institute managing director Dr Michael Fotheringham says that rental markets are tightening across the country, with the exception of small inner-city dwellings usually occupied by international students.

He says rent increases have been common and vacancy rates are low, down to 1 per cent or even less in the regions. This has shifted the landlord-tenant dynamic, with landlords no longer concerned that they’ll get stuck with an empty rental when tenants vacate.

Fotheringham warns that a tight rental market puts pressure on vulnerable households, such as those with low incomes or those experiencing family breakdown. “It’s really challenging”.

“And if you’re not within cooee of where you are looking to work and study, then time and transit costs can blow out.”

Founder of Better Renting, Joel Dignam, told The Fifth Estate that the renters outside of capital cities are struggling from low vacancy rates and landlords increasing rents as eviction moratoriums ended.

“What’s clear as moratoriums have lifted is that some landlords have taken the opportunity to raise rents, and the combination of the rent increases, the rental market going gangbusters at the same time as cuts to JobKeeper and JobSeeker, that’s affecting people.” 

Before Covid, regional towns offered more affordable housing than the capital cities, so the rental price hike is felt hard by households on tight budgets.

He adds that the prospect of rental increases causes renters to “keep their heads below the parapet” and not contact their landlord for repairs or upgrades.

“They end up in a place that not in a good state of repair.”

Tight household budgets also lead people to avoid using heating of cooling, risking their health and making homes uncomfortable.

Few rent reductions, mostly rental deferrals

So far, Australia has avoided a surge of homelessness caused by the pandemic due to combination of eviction moratoriums, income support and other assistance.

Research by the UNSW City Futures Research Centre found that during the worst of the pandemic, more than a quarter of tenants lost their income and a smaller minority, 8-16 per cent, of renters got a rent variation.

And while the eviction moratoriums coupled with income support was effective at stopping the surge of homelessness, most people got a deferral on rent, not a permanent reduction. The university’s February research into homelessness and housing during the pandemic found that at least 75,000 households across Australia had mounting deferred rent debts.

The looming question is what will happen as the termination of income protections collides with the end of eviction moratoriums and landlords look to recover rent debts.

Was it a rent deferral or rent reduction

Fotheringham is particularly concerned about the potential for miscommunication between landlord and tenants about whether the rental alteration was a deferral or a reduction. “It could all come to a head.”

For the regions in particular, it’s been challenging to bring in new housing stock suitable for the rental market, especially with stimulus packages aimed at owner-occupiers driving up construction costs and causing supply chain issues.

Government support can help

Each state and territory has responded to housing and rental pressures differently, and some have handled the problem better than others.

In Tasmania, which ended its moratorium on evictions in January, the state has avoided a spike in rental stress and evictions through a tenant and landlord relief fund.

According to the Tenants’ Union of Tasmania principal solicitor Ben Bartl, these payments were given to people who could show that they had been affected by Covid and were in rental arrears. He says that thanks to this financial assistance, the state was seeing no more evictions than before Covid. 

The financial support package, which as of March provided more than $3.65 million in financial support to Tasmanian residential tenants and landlords, was recently extended until the end of June.

The return of holiday rentals

A more pressing threat for Hobart in particular, according to Bartl, is the return of rental properties to Airbnb, pushing up rents, ending a reprieve on pressures during Covid.

Rapid increase in demand for holiday accommodation as borders reopen could see dwellings returned to the platform en masse, once again displacing renters.   

“I think returning properties to Airbnb could be a disaster for long term renters and residents, there’s already have a significant undersupply,” Bartl says.

He says rental vacancies are hovering around 0.6 per cent and rents have gone up by 37 per cent in the last five years, far outstripping wage increases in the city.

This article is part of a series on Indigenous businesses and was produced with the support of the City of Sydney.