Why rental affordability has fallen to a record low

Rents have surged immensely in the past few years making the situation for renters the most difficult it has been in almost two decades.

PropTrack’s new Rental Affordability report shows renters are facing the toughest conditions in at least 17 years.

Previously, conditions were the toughest for renters in 2009-10 following the Global Financial Crisis (GFC) but they improved as income growth outpaced rent growth.

The data shows properties were most affordable during the pandemic as demand for inner city rentals fell due to border closures and remote working arrangements.

Rental affordability has worsened considerably since then.

The report found a median household earning $110,000 a year could afford just 39% of advertised rentals in the past year, based on that household spending 25% of their pre-tax income on rent.

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Lower income households could afford almost no rentals in the past year.

What’s driving the decline in affordability

Surging rental costs are the main factor behind the decline in affordability.

More specifically, rents have been rising by a larger percentage than incomes since the start of the pandemic.

Nationally, rents grew by 38% from the March quarter in 2020 to the December quarter in 2023.

In Perth and Brisbane, the growth was even greater, with increases of 67% and 50% respectively. Regional Perth also experienced immense growth with rents up 68% over the same period.

Comparatively, median household incomes have only increased by 19%. The disparity between rent and income growth is resulting in a smaller share of households being able to afford rentals.

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Not only have prices grown overall but they have also grown fastest for more affordable properties which is also contributing to the deterioration of rental affordability.

Cost-of-living pressures have driven renters to seek out cheaper properties which is driving up their prices more than other rental properties. Those in the lowest decile have increased 41% more than those in the highest decile since mid 2018.

This is further impacting renters who are already struggling most – low-income households.

The rental crisis continues to be challenging issue. While increasing Commonwealth Rent Assistance can be used as short-term method to offset rent increases, improving rental availability is key to solving the issue long-term.

The government has a goal to build 1.2 million homes over the next five years but delays in construction are resulting in a shortfall of what’s required. A lot more has to be done to ensure that all households can afford a home.