Rental affordability decreases in all major cities except Perth

The latest Rental Affordability Index, released by National Shelter, Community Sector Banking and SGS, aims to show rental affordability relative to household income. 

According to the researchers, "affordable rent" is said to be when a renter is paying 15 per cent or less of their income on rent, while an "acceptable rent" is 20-25 per cent of a person’s income. 

Rent is classed as being "moderately unaffordable" when between 25 and 30 per cent of income is spent on rent, while the top end ("extremely unaffordable rents") is when renters spend 60 per cent or more of their income on housing. 

According to the research, rental affordability has gotten worse in all major cities except Perth since the last release of the report. 

Greater Sydney remains as the least affordable of all the metropolitan areas, with 29 per cent of income spent on rent, and is at its lowest level since the report was first released (2012). 

While households in Sydney face a median rent of $500 per week (a $20 increase since the last report), rents are “severely unaffordable” within a 10-kilometre radius from the central business district. 

The least affordable places to live in Sydney as at December quarter 2016 were Elizabeth Bay, Rushcutters Bay, Potts Point and Woolloomooloo, were renters pay up to 86 per cent of their income on rent.

Greater Hobart was the second most expensive in terms of proportion of income spent on rent, with 28 per cent of income spent on housing. This was followed by Greater Brisbane and Adelaide (both 25 per cent) and then Greater Melbourne (24 per cent). 

Greater Perth was found to be the most affordable major city, with the share of income spent on rent hovering at around 21 per cent. However, some areas north of the river remain unaffordable or even "severely unaffordable". 

Pensioners and working parents most affected

According to the researchers, the findings of the report are troubling, and the rising rents are “pricing out” some renters from the market, particularly “pensioners and working parents” trying to rent housing in Sydney. 

Ellen Witte, partner at SGS Economics and Planning, commented: “Rental affordability in Sydney is at a record low. A full-time teacher who is a single parent would be paying 43 to 55 per cent of the family's income on rent in Greater Sydney. On top of rents, these families would be carrying high costs for childcare, education and after school care.” 

She continued: “We conclude that now even the average income household in Sydney is facing housing stress — this means families are struggling to make ends meet and pay for other primary living needs such as food, energy, water, education, healthcare and transport.” 

Ms Witte added that a single pensioner renting a one-bedroom unit anywhere in Sydney needs to pay 60 per cent or more of their pension on rent. 

Adrian Pisarski, executive officer of National Shelter said that this was “especially concerning” for older working women who are reaching retirement and have not been able to build up their superannuation. 

“[T]hese people have nowhere to go,” he said. “On top of that, living further out of the city poses extra challenges such as poorer access to transport, services and healthcare.” 

Mr Pisarski welcomed the recent budget, which aimed to address some housing issues, but said more was still to do. 

“While the budget introduced some welcome measures house price inflation is locking people out of ownership and putting much greater pressure on rental markets which remain unaffordable and displaces low income households into the margins,” he explained. 

Andrew Cairns, CEO of Community Sector Banking, said that the latest Rental Affordability Index is therefore a “wake-up call”. 

“Without swift co-ordinated action to tackle housing affordability, Australia will become a divided country, with pensioners, working parents and low income groups locked out of living in metropolitan areas,” he said.

[Related: Housing risks not addressed in budget: Moody’s]