By Jim Malo
The majority of renters want to be home owners, new research shows, but less than half of them think they’ll ever be able to buy a property.
It comes as new figures show rents have grown at their slowest rate in three years, though they remained unaffordable, and that during the period examined, tenants had been subjected to rent rises that affected their ability to save money, feed themselves and seek medical help.
Unaffordable rents make tenants feel like homeownership is their only way out of a tough rental market, but big rent increases have made it harder for them to buy housing. Credit: Graham Tidy
The Australian Housing and Research Institute’s research paper Planning for a two-tenure Australia, published on Tuesday, found that while 78 per cent of renters wanted to buy a home, 59 per cent didn’t think they could.
The former figure was based on the Australian Housing Conditions dataset, which surveyed 22,550 households; the latter was based on a representative sample of 965 people in September and October last year.
University of Adelaide lead researcher Emma Baker said the uncertainty that came with trying to navigate a tight rental market weighed heavily on tenants, and many saw home ownership as their only option for a stable home.
“People aren’t as concerned about housing affordability as we expected them to be,” Professor Baker said. “They are more concerned about getting a bit more tenure security or better quality of housing, and they’re prepared to pay extra for it.”
The research found renters would pay $127 extra rent a week to live in a home above minimum standards (for example, well insulated, heaters/coolers upgraded regularly), $77 extra if the rent could not be increased by more than 5 per cent every 12 months, and $72 if they could extend the lease indefinitely, subject to paying rent on time.
Baker said Australians of every age were now more likely to be renters, which could lead to poverty in retirement.
“It’s not just a young person’s problem,” she said. “There’s more older renters than ever before, and in Sydney, it goes into the very old, so there are 80-plus people still renting.
“It’s the double bunger in being that generation that fails to transition to home ownership, but also being in a nation that’s set up on the assumption they’re going to transition.”
CoreLogic research director Tim Lawless said rapid rental growth had made the dream of home ownership harder to attain.
“If they’re contributing more of their income to rent, rather than saving for a deposit, it would make it harder to get into a home,” Lawless said. “I do think the surge we’ve seen has had an impact on people’s ability to get into the marketplace.”
CoreLogic figures show annual rental growth slowed to 5.8 per cent in October. “We’re seeing some signs of relief for renters who have gone through a significant rise in rents over the past five years,” Lawless said. “Pre-pandemic, the 10-year average for rental growth was 2 per cent.
“We’ve pretty much seen those peak growth rates halve, but they are still more than what you’d consider average.”
Lawless said even if rental growth slowed, rents were far from affordable, and vacancy rates were still low, which meant landlords still held market power.
Affordability was likely to improve through income growth. “I wouldn’t expect rents to come down materially,” he said.
Tenant advocacy group Better Renting published the Cost of Renting report on Tuesday, and it found that 89 per cent of surveyed tenants were paying more rent than the previous year, and their median increase was 10 per cent. The sample size was 1466 people.
Better Renting executive director Joel Dignam said the tight vacancy rate meant tenants felt they had no bargaining power and were mostly unable to find a cheaper rental when facing an increase.
The survey found that tenants were unable to save and were cutting back on essentials to pay their rent.
“People are saying I’m not buying my medication, and I’m buying less healthy food,” he said. “People have said there’s no more joy in my life … everything that gives me pleasure, I’ve had to give up for now.
“People don’t have that option [to save]. They have to spend that money to get by, and psychologically they can’t live in the future.”
Given the research showed more Australians expected to be renting their entire lives, Baker said governments should do more to improve renters’ living conditions.
“Australia has shifted as a nation,” she said. “[Renting] really is going to be a place that young people will spend their whole lives, and they need to do policy-capture to make sure it’s a place people want to live.”
Dignam agreed the unaffordable housing market should prompt governments to make renting more secure and affordable, particularly by capping rent increases and making it harder to evict tenants without cause.
“People shouldn’t have to leave renting to get a decent home, but whether they want to or not they can’t leave renting,” he said. “Governments are not acting to give people a way out.”