Access to good quality, affordable housing is fundamental to wellbeing. It can help reduce poverty and enhance equality of opportunity, social inclusion and mobility (OECD 2018). Affordability is important for Australians wanting to buy a home and for those renting. Many factors impact the supply, demand and cost of housing across the country, including Australia’s growing and ageing population and government policies (AIHW 2019).

Housing affordability typically refers to the relationship between expenditure on housing (prices, mortgage payments or rents) and household incomes (Thomas & Hall 2016). Home ownership and housing tenure and Housing assistance are related to housing affordability.

How is housing affordability measured?

Measuring housing affordability is not straightforward. A household’s financial situation, the overall demand in the housing market and housing tenure type (whether a household is seeking to rent, is renting, is looking to buy or is a home owner with or without a mortgage) all influence individual housing affordability (Senate Economics References Committee 2015). The simplest measure of housing affordability compares housing costs to gross household income.

Measures relating to housing affordability

Housing affordability can be expressed as the ratio of housing costs to gross household income (ABS 2017).

Housing costs are defined as the sum of rent payments, rate payments (water and general), and housing–related mortgage payments (ABS 2019).

Housing stress is typically described as lower-income households that spend more than 30% of gross income on housing costs (ABS 2019).

How much do we spend on housing?

In 2017–18, 11.5% of households spent 30% to 50% of gross income on housing costs with another 5.5% spending 50% or more (ABS 2019). These proportions have increased from 9.2% and 4.6% respectively since 1994–95 (Table 1).

Table 1: Housing costs as a proportion of household income, 1994–95, 2005–06 and 2017–18

Per cent of income spent on housing costs

1994–95

%

2005–06

%

2017–18

%

50 or more (more likely to be in financial stress)

4.6

5.1

5.5

30–50

9.2

11.4

11.5

25–30

5.8

7.0

7.6

25 or less (less likely to be in financial stress)

80.3

76.5

75.3

Notes:

  1. Excludes households with nil or negative income.

  2. Estimates presented from 2007–08 onwards are not directly comparable with estimates for previous cycles due to the treatment of incomes. See ABS 2019 for more details. 

Source: ABS 2019.

The proportion of household income spent on housing costs in Table 1 does not consider that high-income households may choose to spend more than 30% of their household income on housing. Their higher income means they have sufficient income after housing costs to avoid financial stress (AHURI 2018).

By contrast, low-income households (lowest 40% of household income distribution) are more likely to lack the resources to deal with financial impacts arising from critical life events and/or housing market factors, often leading them to need additional housing assistance (AIHW 2019).

Housing stress among low-income households—the 30/40 rule

The 30/40 housing stress rule focuses on low-income households. These are defined as lower-income households (lowest 40% of income; see glossary) that spend more than 30% of gross household income on housing costs. They are considered to be in financial housing stress (Yates 2007).

Over 1.0 million low-income households were in financial housing stress in 2017–18, based on the 30/40 rule (ABS 2019). Households with low income in the private rental market were more likely to be in housing stress, spending on average 32% of income on housing costs, compared with home owners with a mortgage (29%) or home owners without a mortgage (6.0%) (Table 2). Of household compositions, lone person households on average spent the highest proportion of income on housing costs.

Table 2: Proportion of household income spent on housing costs (lower-income households only), by household composition and housing tenure type, 2017–18

Household composition

Housing costs as a proportion of gross household income

 

Owner without a mortgage

Owner with a mortgage

Private renter

Family households

Couple family with dependent children

4.1

 28.5 26.9

One parent family with dependent children

 4.5 29.7* 33.8*

Couple only family

 5.6 31.8 33.9

Couple family with non–dependent children

 4.4 23.9 25.7

Multiple family households

 3.5 19.2 20.7*

Non-family households

Group households

 6.7* 33.5* 38.1*

Lone person households

 8.4 38.6 44.4

All households

 6.0 28.6 31.9

* Estimate has a high margin of error and should be used with caution.

Notes

  1. Due to limitations of housing costs information, care should be taken when comparing costs of different tenure and landlord types.

  2. Housing costs as a proportion of gross household income is the sum of housing costs of a group divided by the summed gross weekly income of that group in households.

Source: ABS 2019.

Geographic variation

Housing costs and incomes vary across Australia, meaning housing affordability differs within and between states and territories and among housing tenure types (for example, home owners with a mortgage or renters).

Housing costs

In 2017–18 (Figure 1):

  • housing costs as a proportion of income for all households were highest in Queensland (14.8%) and lowest in Tasmania (11.7%)
  • for homeowners with a mortgage, housing costs were highest in Victoria (16.7% each) and lowest in the Australian Capital Territory (14.3%)
  • for all renters, the highest housing costs were in New South Wales (21.4%). The lowest costs were in the Northern Territory at 15.7% (ABS 2019).
     

This column graph shows the housing costs as a proportion of gross income for owners without a mortgage, owners with a mortgage, renters from state/territory housing authorities, renters private landlords and total.

This column graph shows that housing costs as a proportion of gross household income are highest in Queensland at 14.8%. Housing costs as a proportion of gross household income are 13.7% for New South Wales, 14.0% for Victoria, 13.6% for Western Australia, 13.2% for Northern Territory, and 13.9% for the total of Australia. The Australian Capital Territory (12.5%), South Australia (12.4%), and Tasmania (11.7%) are lowest.

Figure 1 data table (120KB XLSX)

Rental stress among low-income households

For low-income households in the private rental market, the proportion in rental stress (based on the 30/40 rule) varies between the capital cities and the rest of the states and territories. The gap between these areas has increased over time (ABS 2019) (Figure 2):

  • In 2007–08, 38.5% of low-income households in greater capital city areas and 29.5% of low-income households in the rest of the states and territories were considered to be in rental stress.
  • In 2017–18, 47.8% of low-income households in greater capital city areas and 35.6% of low-income households in the rest of the states and territories were considered to be in rental stress.
     

This column graph shows the proportion of low income households in greater capital cities, the balance of the states and territories and all households spending more than 30% of their gross income on housing cost for the years 2007–2008, 2009–2010, 2011–2012, 2013–2014 and 2015–2016.

This column graph shows that the proportion of low income households in greater capital city areas spending more than 30% of their gross income on housing costs increased between 2007–08 and 2017–18 from 38.5% to 47.8%. The proportion of low income households in rest of state areas spending more than 30% of their gross income on housing costs also increased between 2007–08 and 2017–18 from 29.5% to 35.6%. The proportion of all low income households spending more than 30% of their gross income on housing costs increased between 2007–08 and 2017–18 from 35.0% to 43.1%.

Figure 2 data table (120KB XLSX)

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.

Where do I go 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.