Key takeaways
Around 31% of Australian households now rent, and that proportion has been rising for decades.
Three in five renters don't expect they will ever own a home, according to AHURI research.
The budget's negative gearing changes take effect from July 2027 for established properties purchased after May 12, 2026.
Treasury forecasts rents will rise by only $2 a week as a result - a figure that seems very difficult to justify given current vacancy rates.
Rents are more likely to rise 10% or more over the next couple of years, given the structural undersupply already in place.
For permanent renters, building wealth outside property is essential.
Everyone's been talking about what the federal budget means for property investors, and what it might do to house prices and affordability.
But very few people are asking what it means for the millions of Australians who rent.
Renters have been largely invisible in this conversation, and that's a problem, because they're the ones who are going to feel the real consequences of these policy changes.
For them, renting is not always a short stop before buying a home, it's a long-term reality.
Australia has become a nation of renters - and that trend is accelerating
Around 31% of Australian households are now renting, according to census data, and that proportion has been climbing steadily for decades.
The Australian Bureau of Statistics’ 2021 census recorded 2,842,378 rented dwellings – up by about 360,000 renting households from 2016.
What's changed, though, is the nature of renting itself.
It used to be a short-term stepping stone, something you did in your twenties while you saved your deposit.
Research from the Australian Housing and Urban Research Institute has found that a sizeable proportion of Australians who rent will be lifetime renters - the rental sector is no longer a simple tenure of transition.
Three in five Australian renters now say they expect they will never own their own home.
And that's not pessimism - that's people being honest about their financial reality.
Over the next 20 years, rental rates are expected to continue to grow, with overall homeownership forecast to fall from 67% to 63%.
We are heading towards a two-tier housing system, whether we acknowledge it or not.
The proportion of renters among employed Australians has risen to 36%, up from 29% in 2000, and there has been a noticeable rise in the proportion of couples with children who are renting.
This isn't a young, transient demographic anymore - these are working families, middle-aged Australians, and increasingly, older people heading towards retirement with no property beneath them.
What the Budget Actually Said About Rents
Against that backdrop, the government announced sweeping changes to negative gearing and capital gains tax treatment for established investment properties.
From July 2027, negative gearing will be limited to newly built properties, and a minimum 30% capital gains tax will apply to investment housing.
Existing investors who owned properties before 7:30pm on 12 May 2026 are grandfathered and can continue accessing negative gearing under current rules. But anyone who buys an established investment property after that date will no longer be able to offset rental losses against their salary income from July 2027.
As for the impact on rents, the government's own modelling was remarkably optimistic.
Budget papers argued these reforms will have only a minor impact on rents, estimating an average increase of less than $2 a week for a household paying the current median rent.
Two dollars a week. I genuinely don't know how anyone can take that seriously.
Why I think the real impact on rents will be far worse
With respect to Treasury's modellers, I think they've significantly underestimated what's coming for renters over the next couple of years.
My view is that rents are more likely to rise by 10% or more, and there are several concrete reasons for that.
The first is that we were already in a severely undersupplied rental market before this budget was announced.
Capital city vacancy rates sit at around 1.8% today and are forecast to fall further to 1.1% by 2030 - roughly half the 2.5% average of the previous decade.
In a market that tight, any reduction in rental supply puts immediate upward pressure on rents.
The second is that these budget changes will cause some investors to sell up.
When the after-tax economics of holding an established investment property deteriorate significantly, some landlords will exit the market.
- Also read:Latest Property Price Forecasts. Australian Property Market Outlook 2026: Where To Now After The Rate Rise & Budget Changes.
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Many of those properties will be sold to owner-occupiers, removing them from the rental pool permanently.
CBA's analysis notes the combined effect of the policy changes is likely to modestly increase rental pressure over time, reduce turnover, and provide some relative support for new construction.
"Modestly" is doing a lot of work in that sentence when you're already operating at near-record low vacancy rates.
The third issue is construction. The budget is designed to redirect investors toward new builds, which sounds logical in theory.
But Australia needs approximately 75,000 new apartments per year to keep up with population growth, and current supply is forecast to hover around 60,000 per year through to 2030.
We're building less than we need regardless of where investors are directed.
The rents have already been rising hard
This isn't a future problem - it's an existing one that the budget changes are layering onto.
Australian rents have already surged around 55% since early 2020, and the current national median rent sits at around $650 a week.
Many Australians are now spending more than 30% of their income on rent, with the national average sitting at around 32.89% of weekly income, beyond the threshold that typically indicates financial stress.
CBRE research forecasts median rents will grow by 24% between now and 2030 across Australian capital cities, with 92% of two-bedroom apartments forecast to have rents exceeding $700 per week by 2030.
Given all that, the idea that restricting the supply of rental investment will add only $2 a week to someone's rent seems very difficult to defend.
The group that needs policy help the most
What frustrates me about the political framing of these changes is the suggestion that they will help renters get into the housing market.
Some will, eventually.
But for the majority - the lifetime renters, the older couples, the working families who simply can't accumulate a deposit in the current environment - there is very little in this budget that helps their immediate situation.
Recent research found 34% of Australians who don't own a home say they have no plans to buy at all, with 44% of 18 to 34 year olds wanting to buy but not financially ready. These are people trying to navigate a rental market that was already expensive and is about to get more expensive.
The government does support over 1.4 million renters through Commonwealth Rent Assistance, and has delivered the first back-to-back increases in CRA in more than 30 years.
Now that's meaningful, but Commonwealth Rent Assistance doesn't build new homes, and it doesn't address the fundamental supply gap.
The long-term picture for renters
The reality is that Australia's rental market will remain under serious strain for years regardless of this budget.
Population growth, inadequate construction, and changing household formation patterns are all structural forces that don't respond quickly to tax policy adjustments.
For those who will be permanent renters, the most important thing they can do is ensure their other finances are in order - maximising super contributions, building investment savings outside of property, and not allowing the absence of a mortgage to become the absence of a wealth-building plan.
For those who do want to get into the market eventually, the path is still open - but it requires a clear strategy, realistic targets, and patience.
The bottom line
The political debate about negative gearing has been running for years, and reasonable people can disagree about the right policy settings.
But the one thing I'd caution against is the assumption that restricting investor activity automatically improves the lives of renters.
When you reduce the supply of rental housing in an already under-supplied market, the people who bear the cost first are the ones at the bottom of the market with the least flexibility - not investors, not politicians, and certainly not Treasury modellers working with optimistic assumptions.
If you want to secure your own financial position regardless of what happens in the rental market or the property investment landscape, it's worth having a conversation with the team at Metropole.
We help our clients build strategic property portfolios that work across different market conditions - not just when everything is going smoothly.
Click here now and organise a Wealth Discovery chat with one of our Wealth Strategists.
