Australian rental crisis: Why affordability is no easy fix

Desperate renters dealing with rising costs will have to continue to battle until a number of substantial problems change. Jonathan Chancellor explains why there is only one sustainable solution.

Rental markets are set to remain tight for some time, and rents will continue to rise because we simply don’t have enough rentals. The only long-term sustainable solution is building more homes for lease by the private mum and dad housing sector, the emerging build-to-rent industry and by the government.

The Greens demanded a two-year rent freeze then rent caps when the national cabinet recently met.

Instead the state leaders signalled a move towards a national standard of no more than one rent increase a year for a tenant.

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Greens spokesman Max Chandler-Mather says it is “a smoke-and-mirrors announcement designed to make it look like Labor has done something meaningful for renters, when in fact they have basically enshrined the status quo, leaving renters exposed to astronomical rent increases once a year.”

The Greens Housing spokesman Max Chandler-Mather during a rally outside Labor's 49th National Conference in Brisbane. Picture: Dan Peled / NCA NewsWire

Capping rental increases to once a year will do little to improve rental affordability. And the new regimen could contribute to further stress for renters. Currently many landlords seek annual increases rather than the six-month option, which is possible in most rental agreements.

Historically the most significant upward change in rents comes in between tenancies.

But the Property Council of Australia has warned that under the new regulations, tenant tenure security could be reduced as six-month turnover is likely to increase “as landlords are motivated to force tenants out to relist at higher rates”.

That’s a disturbing prospect, but one that accords with recent research showing landlords are increasingly keen to get the highest rents possible given the cost of purchase and rising costs of ownership like land tax, insurance, levies and rates.

A study by the Australian Bureau of Statistics found rental increases have become more common regardless of whether tenants are new or existing. Rents have increased at three-quarters of surveyed properties in recent times, up from one-quarter pre pandemic.

Capping rental increases to once a year will do little to improve rental affordability. Picture: NCA NewsWire / Luis Ascui

There is still a gap between new and existing – with 94 per cent of the vacated tenancies securing rent increases and 74 per cent of existing tenants who’ve faced increases.

Over 60 per cent of the properties with new tenants saw rents 10 per cent or higher. Some 25 per cent of existing tenants faced 10 per cent or higher rents.

Our rental system dates to an era when it was predominantly a transitional occurrence for younger households aspiring to, then achieving home ownership.

Now many households need long-term accommodation. At the same time investors have been tempted by the yields of short-term tourism stays.

The many complex converging issues come at a time when NSW has appointed a NSW Rental Commissioner. While Trina Jones’s role rightfully acknowledges renters have not always been well served by state government policy, she will need to ensure civil minded investors don’t sell up as the market gets modern day regulations.

Meanwhile, 60 per cent of tenants look past lack of amenities, size and mould for fear of missing out, according to a Finder.com.au survey.

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Originally published as Australian rental crisis: Why affordability is no easy fix