Rental affordability index
The rental affordability index (see glossary) is a price index for housing rental markets across geographical areas of Australia, calculated using median incomes. A rental affordability index score of 80–100 represents unaffordable rent (that households spend 30 percent or more of their income on rent), a score between 100 and 120 represents moderately unaffordable rent, a score between 120 and 150 represents acceptable rent and a score greater than 150 represents affordable rents (National Shelter et al. 2019).
In general, rental affordability index scores are worse for metropolitan areas compared with the rest of the state or territory. As at June 2019:
- Hobart was the least affordable metropolitan area in Australia
- Greater Perth was the most affordable metropolitan area in Australia
- regional Tasmania was the least affordable of the rest of states and territories
- regional Western Australia was the most affordable of the rest of state areas (Table 3).
Table 3: National rental affordability index summary by metropolitan areas and rest of states and territories, June 2019
Region
|
Rent affordability index
|
Proportion of household income spent on rent
|
Relative unaffordability
|
Greater Sydney
|
119
|
25
|
Moderately unaffordable rents
|
Rest of New South Wales
|
122
|
25
|
Acceptable rents
|
Greater Melbourne
|
128
|
23
|
Acceptable rents
|
Rest of Victoria
|
120
|
25
|
Moderately unaffordable rents
|
Greater Brisbane
|
127
|
24
|
Acceptable rents
|
Rest of Queensland
|
120
|
25
|
Moderately unaffordable rents
|
Greater Perth
|
143
|
21
|
Acceptable rents
|
Rest of Western Australia
|
157
|
19
|
Affordable rents
|
Greater Adelaide
|
112
|
27
|
Moderately unaffordable rents
|
Rest of South Australia
|
134
|
22
|
Acceptable rents
|
Greater Hobart
|
93
|
32
|
Unaffordable rents
|
Rest of Tasmania
|
116
|
26
|
Moderately unaffordable rents
|
Australian Capital Territory
|
129
|
23
|
Acceptable rents
|
Note: Data for the Northern Territory are not available.
Source: National Shelter et al. 2019.
Experience of renting in the private rental market
The experience of tenants in the private rental market is increasing in importance as more households are renting, and for longer periods. The proportion of Australian households renting has increased, from 22% (1.5 million households) in 2006 to 27% (2.1 million households) in 2016 (ABS 2017, 2019). Some household demographic, household composition and personal factors that affect the demand for private rental housing include:
- households renting longer before having children (Hulse et al. 2012)
- growth in international students and migrants (Hulse et al. 2012)
- decreasing transition from renting to home ownership, particularly among younger age groups (Wilkins et al. 2018).
Many renters find their housing to be insecure, of poor quality and unaffordable. In 2018, 44% of renters were concerned that a request for repairs could result in an eviction and 68% were worried they would face rent increases if they complained about the low quality of their housing or asked for repairs (CHOICE et al. 2018).
Many leases in Australia last for one year and some for just six months or less. This results in tenants moving more frequently than home owners. By contrast, Denmark, Germany, and the Netherlands have indefinite and fixed-term leases where it is difficult to terminate the fixed-term lease without the tenant’s permission (CHOICE et al. 2017). In Australia in 2018:
- 29% of renters were living on a periodic agreement (an agreement where the fixed-term has expired or no fixed term is specified) or rolling lease
- 51% of renters were living in a home that is in need of repair
- 43% of all renters were finding it difficult to get by on their current income
- 28% of renters have previously owned property and moved back into the private rental market (CHOICE et al. 2018, Consumers Affairs Victoria 2020).
Households experiencing rental stress and/or unable to access the private rental sector may be at risk of homelessness (AIHW 2018). Further, households with low income may find it difficult to compete with higher-income households in the private rental market and may therefore seek assistance with housing costs or to rent a social housing property. See Housing assistance for more information.
See Housing assistance for more information on this topic. Also see:
References
ABS (Australian Bureau of Statistics) 2017. Census of population and housing: community profile, DataPack and TableBuilder Templates, Australia, 2016. ABS cat. no. 2079.0. Findings based on TableBuilder analysis. Canberra: ABS.
ABS 2019. Housing occupancy and costs, 2017–18. ABS cat no. 4130.0 Canberra: ABS.
AHURI (Australian Housing and Urban Research Institute) 2018. Mortgage stress, rental stress, housing affordability stress: what’s the difference? AHURI. Viewed 22 November 2018.
AIHW (Australian Institute of Health and Welfare) 2018. Specialist homelessness services annual report 2017–18. Cat. no. HOU 299. Canberra: AIHW.
AIHW 2019. Housing assistance in Australia 2019. Cat. no. HOU 315. Canberra: AIHW.
CHOICE, National Shelter and NATO (National Association of Tenant Organisations) 2017. Unsettled: life in Australia’s private rental market. CHOICE, National Shelter and NATO.
CHOICE, National Shelter and NATO (National Association of Tenant Organisations) 2018. Disrupted: The consumer experience of renting in Australia. CHOICE, National Shelter and NATO.
Consumers Affairs Victoria 2020. Tenancy agreement for rented premises. Consumers Affairs Victoria. Viewed 8 July 2020
Hulse K et al. 2012. The Australian private rental sector: changes and challenges. Australian Housing and Urban Research Institute (AHURI) positioning paper no. 149. Melbourne: AHURI.
National Shelter, Brotherhood of St Laurence, Community Sector Banking, & SGS Economics & Planning 2019. Rental affordability index. November 2019 release. Canberra, Hobart, Melbourne and Sydney: SGS Economics & Planning.
OECD 2018. Affordability Housing Dataset. Paris: OECD Publishing. Viewed 22 November 2018.
Thomas M & Hall A 2016. Housing affordability in Australia. Parliament of Australia. Viewed 23 January 2019.
Senate Economics References Committee 2015. Out of reach? The Australian housing affordability challenge. Senate Economics References Committee.
Wilkins R & Lass I 2018. The household, income and labour dynamics in Australia survey: selected findings from waves 1 to 16. Melbourne Institute: Applied Economic & Social Research, University of Melbourne.
Yates J 2007, Housing affordability and financial stress, NRV3 Research paper 6, Melbourne: AHURI.