Australian renters are battling an unholy trinity of soaring prices, increased competition for places and a broken housing market that limits supply and prioritises investor landlords.
So just how did the situation deteriorate so badly, and what can be done to ensure the growing number of renters are treated fairly?
More than three in 10 Australian households now rent from private landlords and the fastest growth is at the top end of the market, including luxury apartments and detached homes.
But renters are an increasingly diverse mix of older people, families with children, and those on much higher, and lower, incomes than in decades past. Increasingly people on higher incomes can’t afford to buy homes while long-term declines in social housing and rising property prices force lower-income earners into rentals.
Horrific living conditions including festering mould, faulty appliances and repair requests going unanswered are not uncommon at the lower end of the market.
People aged 25-34 are the largest and fastest-growing group of renters at 1.6 million in 2021, up about 635,000 since 2006. But they’re increasingly competing with older groups, such as those aged 45-54, with 756,000 of them – or about one in four people in this age bracket – leasing a home in 2021. Renters in that age bracket have increased by 262,000 since 2006.
Managing director of the Australian Housing and Urban Research Institute Dr Michael Fotheringham says most developed countries’ rental markets are dominated by institutional investors with thousands of properties in their portfolio, “broadly” running on rental yield to support “stable happy tenants long-term”.
“Our model is based on small investors, people owning one or occasionally more than one property and capital gain is where it’s at, so flipping tenants and flipping properties is incentivised,” Fotheringham says.
‘Broadly we treat the needs of the investor above the needs of the occupant of the house. That’s a problem.’
Michael Fotheringham
“We make it easier to have an investment property than it is to owner occupy.”
The big picture
Since 1996, the number of households with mortgages has doubled, renters have increased by about 65 per cent, while outright property owners have grown by just 10 per cent.
The National Housing Finance and Investment Corporation estimates, conservatively, there are 331,000 households in rental stress and 46,500 households experiencing homelessness this year.
Meanwhile, real estate agent leased properties are booming, up 49 per cent, or 619,570, in the decade to 2021. The biggest jumps for total renters were in Melbourne, up 115 per cent or 21,461, Sydney, up 62 per cent or 19,056 people and Wyndham, on the outskirts of Melbourne, up 134 per cent from 10,218 to 23,922.
Sydney has the most renters in Australia, both as a proportion of residents (51 per cent) and as a raw number (65,000 people). Darwin and Brisbane also had a 51 per cent share of resident renters, but their total populations are smaller (13,687 and 50,490 respectively).
The suburban fringes of Melbourne (Manningham - East, Nillumbik - Kinglake) and Sydney (Hawkesbury) as well as more regional areas such as Barwon (NSW), and Loddon - Elmore (Vic) had the lowest numbers of renters (10 per cent or fewer) in 2021.
Housing supply crunch
In April, the National Housing Finance and Investment Corporation (NHFIC) forecast a housing shortage of up to 175,000 dwellings over the next five years. But in May, updated migration forecasts added more people, pushing the likely shortfall past 250,000 homes by 2028.
New housing continues to be impeded by the availability of serviced land, high construction costs, and local communities opposed to development.
Pressure on the housing market has come from shrinking household size, partly due to the working-from-home trend, more people living alone and delayed family formation. Since mid-2021 this trend has added demand for an additional 103,000 places to live.
Short-term rentals have also taken properties out of the long-term rental market.
Fiona Martin, a Victorian real estate vendor advocate who sits on the Australian Landlords Association committee, says Airbnb can be financially more rewarding for landlords than having a tenant. She said real estate agents are actively managing short-term rentals now for landlords who have switched their property’s use.
In areas where tourism is a significant part of the economy, such as coastal communities like Bondi, Byron Bay, and St Kilda, plus the whole of Hobart and south-east Queensland, short-term rentals are an issue, Fotheringham says.
“Residential property converted into tourist accommodation continues to pay rates as though it was residential property but these rates are very discounted relative to commercial rates,” he says.
Rising property prices are locking more and more people into long-term renting (defined as 10 years or more), with data from 2017 indicating at least 43 per cent of renters were in this category.
Living in ‘unrentable’ homes
Marni Newman, 36, has rented in Sydney and Melbourne for almost 20 years. She needs to find a new roommate to cover the rent rise for a house she says is “unrentable” due to a host of issues that have plagued the property in outer Melbourne for a decade.
“The landlord likes to do things himself and that means things often don’t get done. Or if they get done, they don’t get done properly,” Newman says.
Marni Newman has been renting since 2007, first in Sydney, then in Melbourne where she’s been in the same house for a decade. But now a large rent rise is forcing her to consider other options. Credit: Justin McManus
“There’s just so much wrong with the house. The relationship with the landlord was pretty good when I wasn’t hassling him about anything but when my roommate moved in with me (her) NDIS team started saying, ‘no, this isn’t OK’.”
Broken tiles, appliances that don’t work, and leaking pipes in walls were some of the issues Newman faced, but with recent repairs came a rent rise that she can’t afford.
“We have to try and find someone to rent the place with us but, we don’t think it’s of a rentable standard, so to try and convince someone to pay the rent to help us out, it’s going to be tough,” she says.
NSW Tenant Union spokesman Leo Patterson-Ross says there’s a “misalignment of priorities” that stems from years of framing rental property as an investment despite housing being an essential service and may mean landlords don’t have the capital to meet their obligations for repairs.
“If you’re looking to grow wealth, it conflicts with providing stable, affordable housing,” Ross says.
“We’ve set up this [housing] system that’s debt-based, meaning you have to rely on prices increasing for it to make sense as an investment strategy, [which] has also changed the way people approach homeownership where they’re now looking at the potential capital growth on their own home because they have to justify spending so much money.”
Renters generally look at the utility of a property and when it is no longer suitable to their needs they move, while owner-occupiers have to think about the investment return, Patterson-Ross says.
He is calling for a “different way of approaching rental investing that’s more conducive to community” with incentives for landlords to provide stable housing.
Public housing programs run by the federal government under former prime minister Robert Menzies, and by state governments in the 1940s and 1950s, made Australia one of the great home-owning democracies.
While the Albanese government has committed to invest $500 million per year to build 30,000 social and affordable housing properties over five years, it has been labelled an inadequate response by experts and their political rivals.
Between 1996 and 2019 the deficit of affordable rental properties for people in the lowest 20 per cent of the income distribution has grown from 48,000 to 212,000.
Concurrently, the waiting lists for social housing have more than 220,000 people on them and are critically stressed.
Social housing across the OECD averages 7.1 per cent of total stock, but is higher in France (14 per cent), Britain (17 per cent), and the Netherlands (34 per cent). Australia sits at 4.4 per cent, just above Canada, New Zealand and the US on 4 per cent.
So how do we fix the rental crisis?
“There’s not one thing you need to do and as long as we continue to frame the conversation around what’s the one thing we should do, we’re just chipping at the edges”, Fotheringham says.
“It requires a complex, co-ordinated approach involving multiple players. The national Housing Accord is the right concept – it’s not going to be simple to put together but they’re working on it actively right now.”
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