Rental affordability has become a pressing issue in Australia, with skyrocketing rent prices and record-low vacancy rates. Leading experts in housing affordability believe there are practical solutions within reach to address this crisis, both in the short and long term.
The Current Rental Landscape
The latest SGS Economics Rental Affordability Index revealed that tenants in Sydney and Perth are paying more than one-third of their income towards rent, with affordability deteriorating across the country.
The issue is also taking center stage in the upcoming federal election, with major political parties unveiling their housing policies. Opposition Leader Peter Dutton has proposed releasing 500,000 additional land blocks to increase housing supply. Meanwhile, Prime Minister Anthony Albanese aims to build 1.2 million homes by the end of the decade, emphasizing that more housing will create stability for renters, buyers, and builders alike.
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CoreLogic data shows that the national rental vacancy rate sits at just 1.4%, with average weekly rent now around $650. Rents have increased by 36.1% since the COVID-19 pandemic, adding $171 per week to tenants’ financial burden. While economists suggest rental growth may be slowing, many experts warn against premature optimism.
Dr. Michael Fotheringham, executive director of the Australian Housing and Urban Research Institute, cautions against assuming the crisis is easing. “The rental vacancy rate has hovered around 1% for three years, compared to the previous 20 years where it was typically between 2.5% and 3.5%. This competition keeps prices high,” he explained.
Short-Term Solutions
Housing advocates suggest immediate measures to ease rental stress, including increasing government support for low-income renters.
“If you’re on Youth Allowance or JobSeeker, affording even a share house is virtually impossible,” said Maiy Azize, a campaigner for Everybody’s Home, a coalition focused on housing affordability. “These payments need to rise, and rent increases must be limited.”
Australia is one of the few developed countries without strict limits on rent hikes. Currently, landlords can increase rent once a year without justification. Advocates argue that stronger regulations could offer immediate relief.
Susan Lloyd-Hurwitz, chair of the National Housing Supply and Affordability Council, highlights another potential solution: incentivizing institutional investment in rental housing. “Build-to-rent developments could increase rental supply and affordability,” she said, referencing a model that has worked in other countries.
Long-Term Solutions
Both political parties are focusing on increasing supply, but experts emphasize that addressing the crisis requires structural changes.
“Housing takes time to build. Construction pipelines, workforce availability, and planning systems all need reform,” said Dr. Fotheringham. “Politicians often point to supply as the answer, but it’s more complex than that.”
One often-overlooked factor is the dominance of small landlords. Around 70% of Australia’s rental market is owned by investors with just one property, with another 20% owning two. “These landlords prioritize capital gains over stable rental yields, creating instability in the market,” he said.
Encouraging landlords to offer affordable rentals through tax incentives is one potential strategy. “Some schemes allow landlords to rent their property through social housing initiatives at a discount while claiming the lost rent as a tax write-off. We need a national campaign promoting these models,” Dr. Fotheringham suggested.
Ms. Azize also believes in the role of public housing. “Countries that have avoided or reversed housing crises all have one thing in common: their governments build a lot of homes,” she said. “Australia used to invest heavily in public housing, and we need to return to that model.”
Conclusion
While immediate measures like increasing income support and limiting rent hikes can provide short-term relief, long-term solutions require systemic change. Experts agree that a combination of increased supply, regulatory reforms, and innovative investment strategies is needed to ensure Australia’s rental market becomes more affordable and sustainable.
