Some of Australia’s leading minds on housing affordability say there are practical solutions within reach to rein in sky-rocketing rent prices and record-low vacancy rates.
The 10th annual SGS Economics Rental Affordability Index found last year tenants in Sydney and Perth were paying more than one-third of their income towards their rent, and affordability had continued to deteriorate in other parts of the country.
[house price chart]Housing affordability is also shaping up as a key issue in the upcoming federal election, with each major party offering their policies in recent weeks.
Opposition Leader Peter Dutton said a Liberal government would look to address the country’s supply issue by "introducing 500,000 additional blocks of land into the market".
"If you listen to every credible commentator in the building space, they all talk about increasing supply, and that's exactly what this program is targeted at," he said.
Prime Minister Anthony Albanese has offered his own plan.
"The Albanese government has an ambitious goal of building 1.2 million homes by the end of the decade," he said.
"Whether you're renting, buying or building, more homes will mean more security for everyone."
Australian Housing and Urban Research Institute’s executive director Dr Michael Fotheringham, Everybody’s Home policy expert and campaigner Maiy Azize and the National Housing Supply and Affordability Council chair Susan Lloyd-Hurwitz have weighed in on what would help ease the strain.
The state of play
The current rental vacancy rate Australia wide is an average of 1.4 per cent, according to CoreLogic.
The average rental price is about $650 a week.
CoreLogic also found rents have increased by 36.1 per cent nationally since the height of the COVID-19 pandemic, equivalent to a rise of $171 per week.
[rental growth]Economists say while the figures still show a dire situation for Australian tenants, it could be a sign the rental market is beginning to lose momentum.
"The national rental index increased by 4.8 per cent in the year to December, a notable decrease from the 8.1 per cent rise observed in 2023 and the 9.5 per cent growth recorded in 2022," CoreLogic economist Kaytlin Ezzy said.
However, Dr Fotheringham said he was more cautious about predicting any potential plateau.
"Rumours of the death of the rental crisis have been greatly exaggerated," he said.
“The most recent data point was a vacancy rate of about 1 per cent — that's now three years of the rental vacancy rate hovering around the 1 per cent mark when with the previous 20 years that have been hovering more like the 2.5 to 3.5 per cent vacancy mark.
“That means there's lots of competition for every rental property that's advertised.
“That makes it very hard for prices to start to decline, and it continues to put upward pressure on bed prices now.
“The rapid increases that we saw, perhaps have started to cool, I'll give you that, but they are still up there.
“It means the wages need to catch up, and that's a 20 or 30-year pattern for that to happen.”
It was a point echoed by Maiz Azize, a spokesperson and policy advocate for Everybody's Home; a not-for-profit coalition of housing, homelessness and welfare organisations aimed at tackling Australia’s housing insecurity.
“I can tell you from people who we talk to with, [they say] it's not their experience that things are getting better,” she said.
“One of the problems with interpreting everything through kind of the prism of statistics, is that you can really easily lose sight of the fact that we've had rent increases for asking rents of between five and 10 per cent every year for the past two decades.
“And then you have three months where it doesn't grow and everybody goes ‘it's flatlined’.
“However, it’s actually stopped growing at a point where it's already extremely high.”
Susan Lloyd-Hurwitz, from the National Housing Supply and Affordability Council, said the current state of the rental market was particularly hard for sections of Australian society.
"These pressures are more acute for vulnerable households, such as lower-income households and First Nations," she said.
"Levels of rental stress among lower-income rental households has increased and is becoming more persistent, adversely impacting on the wellbeing of these households and increased reporting of material deprivation."
She said it would be some time before Australians noticed any change in their rental payments.
"In the near term, rents are expected to slow and the vacancy rates rise ... but conditions will remain challenging for the foreseeable future."
Short-term solutions
Ms Azize said there was one obvious short-term solution on the table for the federal government.
"If you're on Youth Allowance, or on JobSeeker, it's virtually impossible to afford a house or even a share house," she said.
"It doesn't take a rocket scientist to work out that these payments just need to go up.
"The other thing that federal and state governments can do really quickly to offer immediate relief to renters on all income levels is to limit rent increases.
"We're one of the only countries in the world that has no limits on rent increases.
"You should not just be able to raise the rent in a completely unjustified way without attracting any scrutiny, there should be limits on these things."
In all the states and the ACT, rent increases are limited to once a year, up from every six months.
Landlords do not have to offer reasoning or market evaluations for raising the rent.
Ms Lloyd-Hurwitz said rental affordability would not improve without 'significant' change in policies to bolster housing stock.
"In the rental market, there are several ways this needs to happen," she said.
"[We need to] supporting greater institutional investment in Australia’s housing market, which will add to new quality supply but also innovative approaches to helping address housing affordability, such as build to rent."
She said it was also important to implement the recommendations in the National Housing Supply and Affordability Council’s Barriers to Institutional Investment, Finance and Innovation in Housing report, which was released two years ago.
These include setting housing targets, addressing the lack of suitable land for potential investors and amending 'outdated and inconsistent' regulatory regimes.
Dr Fotheringham said it was difficult to nail down on short term solutions to rental affordability because of the compounding nature of the problem.
"I think the challenge in housing is: nothing is quick," he said.
"Building new housing takes time, getting construction pipelines flowing properly, making the workforce available and so on — these are the big challenges.
"You hear a lot from politicians saying the solution is all about supply.
"That is an oversimplified response."
Long-term solutions
Both parties have put forward their plans for increasing supply in Australia's rental market, something Ms Lloyd-Hurwitz said was an important first step.
"Many of the actions required to ease rental conditions take time to flow through to households," she said.
"Increasing the supply of housing stock has many complexities which the council is focused on; including improving the productivity of the housing system and improving planning systems so that developable land is available."
Ms Lloyd-Hurwitz said while the federal government had done good work around increasing affordable housing stock, more work was needed to be done to ensure rental affordability stress softens.
Dr Fotheringham said one key ingredient in solving the rental crisis was often overlooked.
He said it was about the behaviour and relationship between Australian tenants and landlords.
"About 70 per cent of rental supply in Australia is owned by an investor who owns one investment property," Dr Fotheringham said.
"Another 20 per cent own two; so that's 90 per cent of the market.
"The dominance of small investor landlords and how they behave becomes really important.
[yields graph]"Instead of being thinking about stable rental yield, they're focused on capital gain.
"It creates behaviour patterns that are different than institutional investors."
Dr Fortheringham said some schemes already encouraged landlords to offer affordable rentals but few people knew about them.
"Tax rulings have allowed individual landlords to rent their property through a for-purpose social enterprise real estate company and to do so at a discounted level — more like a social housing rent level — and to claim the lost rent as a tax write off," he said.
"What I'd love to see is a national campaign ... promoting those models and letting people know who are the providers in your area that can manage the property for you in a way that is socially beneficial, and that's attractive to landlords.
"We actually need [tenants and landlords] to work in partnership, because actually, for the most part, outcomes that are good for tenants are also good for landlords."
Ms Azize said it was important to consider more taxpayer-funded housing.
"When you look at the countries that have either avoided a housing crisis altogether or managed to turn them around, they have one thing in common: their governments are delivering a lot of housing themselves," she said.
"We used to have very affordable housing in Australia, and when you look at what we were doing back then, between World War II right up until the early 80s, the government was building a lot of houses.
"Nowadays, six per cent of people live in social housing and it's very expensive to deliver a small number of housing to people who don't pay rent.
"A better solution is just to subsidise people to live in private rentals as we don't want to crowd out the private sector.
"But I think if that solution were working, it would be working by now."
