Melbourne housing crisis deepens as rental vacancy hits 1.19 per cent and homelessness increases

Melbourne’s rental vacancy rate dipped to less than one per cent in some suburbs, as new PropTrack figures show the “dire” situation is worsening and more people become homeless.

Alesha Capone

2 min read

September 9, 2023 - 12:00PM

A man begs in Melbourne’s CBD. Advocacy groups have attributed worsening housing affordability and low rental vacancy rates to increasing homelessness across Victoria. Picture NCA NewsWire/Ian Currie.

Melbourne’s rental vacancy rate is falling faster than anywhere else in the country, hitting 1.19 per cent in August.

The figure is the city’s second lowest vacancy rate on record, with the lowest – 1.13 per cent – coming in March this year.

PropTrack have also revealed a 0.74 percentage point fall in the number of Melbourne homes for lease compared to last year, the biggest drop nationally.

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Across Australia, Victoria’s capital was only the fourth-worst capital — but economists generally consider a 3 per cent vacancy rate to be tight.

There are some pockets of Melbourne where even less than one in 100 rental homes are available today, including the outer east, south east and northwest suburbs.

Citywide there are now 50 per cent less homes available than there were before the pandemic.

Things are even worse in regional Victoria where the vacancy rate fell to just 1.07 per cent.

PropTrack economist and report author Anne Flaherty said there were several reasons behind the low vacancy rates including population growth and rising immigration levels since Covid-19 restrictions were relaxed.

Homeless people and their belongings near Melbourne’s Queen Victoria market. The Council to Homeless Persons chief executive Deborah Di Natale said the lack of affordable housing was increasing homelessness. Picture: NCA NewsWire/Luis Ascui.

PropTrack economist Anne Flaherty said there was a host of reasons why rental vacancy rates were so low, including rising population levels and housing development projects slowing down.

Ms Flaherty said rising building costs and materials shortages were slowing residential developments like apartment buildings, at the same time as many Victorian landlords were selling up due to increasing regulations and costs associated with investment properties.

These include the state government’s plan to slash the tax-free threshold for land tax on secondary homes from $300,000 to $50,000 next year.

Worsening housing affordability was also driving many would-be first-home buyers to rent instead, she added.

“The average Australian’s borrowing capacity has fallen 30 per cent from when the RBA started increasing interest rates last year,” Ms Flaherty said.

Tenants protest against rent increases outside the Property Council of Australia’s Sydney building in March 2023. Picture: Lisa Maree Williams/Getty Images.

The Real Estate Institute of Australia’s June quarter Housing Affordability Report, released Friday, revealed housing affordability declined 13.6 per cent over a 20-year period.

Council to Homeless Persons (CHP) chief executive Deborah Di Natale described the PropTrack figures as “shocking but not surprising”.

“The situation for renters in Melbourne is dire,” Ms Di Natale said.

“A rock bottom vacancy rate combined with soaring rents are fuelling this perfect storm which is piling pressure on some of the most vulnerable people in society.

“Unfortunately, we’ve detected an increase in people working full-time not being able to find affordable housing and falling into homelessness.”

Ms Di Natale said at least 60,000 new public and community housing dwellings needed to be built in the state across the next decade.

The vacancy rate in Melbourne’s outer east was 0.65 per cent in August, according to PropTrack.

Tenants Victoria’s community engagement director Farah Farouque said in addition to growing housing supply, measures such as introducing caps on rent increases, regulating short-stay accommodation and more frontline tenancy services to help renters were required.

“We continue to face a chronic shortage of affordable rental homes and people on low, and increasingly, middle incomes are facing the brunt of it,” Ms Farouque said.