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By Leanne Jopson

Low-Income households require 117% of their income to afford rent

key takeaways

Key takeaways

More than 42% of all low-income earners are under rental stress.

Greater Hobart continues to be the least affordable capital city in Australia.

Rents are unaffordable to severely unaffordable for singles.

Greater Brisbane experienced the sharpest decline in rental affordability.

Vacant apartments are one of the drivers behind the crisis.

Affordability has not improved much for Adelaide and Perth.

Over the past few years, Australians have been experiencing extreme rental stress as rents continue to skyrocket, especially in major cities like Sydney and Melbourne, placing immense pressure on low to middle-income earners.

Single-parent families, low-wage workers, and older Australians on fixed incomes are particularly vulnerable to this issue.

As the cost of living rises, job losses and financial insecurity persist, the problem of rental affordability remains a pressing concern.

Rental Report

Unfortunately, the crisis is expected to exacerbate further in 2023.

In fact, a Rental Affordability Report from Savvy reveals the impacts of this crisis and trends on Australians.

Rental stress is most elevated for low-income earners

According to the report, as of February 2023, more than 640,000 Australian households are under housing stress or homeless.

This figure is forecasted to grow to almost one million by 2041.

Furthermore, as per a recent report by SGS Economics and Planning, a substantial 42% of low-income households in Australia are currently spending over 30% of their income on housing.

This figure rises to 47% for households in New South Wales and a staggering 58% for the country's private rental market.

The concept of severe rental stress, which occurs when households spend between 38% to 60% of their income on rent, is a significant concern for low-income households.

Unfortunately, this is the reality for many.

The Rental Affordability Index (RAI) indicates that individuals receiving JobSeeker, pensioners, and part-time working parents face a range of unaffordable to extremely unaffordable scores, spending 30% to 60% or more of their gross income on rent.

Similarly, hospitality workers are also struggling, with a moderately unaffordable to severely unaffordable rating.

In the past year, rental affordability has also worsened across Australia for student sharehouses, with a range of moderately unaffordable to unaffordable scores.

While their annual incomes have seen a slight increase, students still need to allocate up to 40% of their income for rent, which makes it increasingly challenging to balance their studies and work.

On the other hand, minimum-wage couples, with an average gross annual income of $84,510, receive ratings ranging from unaffordable to acceptable, meaning they pay a share of 20% to 38% of their income on rent.

Max Share Of Income

What factors are making rent so unaffordable?

The reality is that tenants are still struggling with unsustainable rental increases, and the situation has become increasingly dire.

Rental prices are rising faster than wages, making it impossible for many individuals to afford to rent or buy a home.

The issue of unaffordable prices is driven by a combination of factors, including population growth, increased demand, and a limited supply of rental housing.

Rising property prices and stagnant wages have made it even more difficult for people to enter the property market, leading to a growing reliance on rentals.

In comparison to a decade ago, there is now a smaller supply of social and affordable housing available.

This has made low-income earners more reliant on the private rental market, where they are forced to pay exorbitant rents that they cannot afford.

The cost of rent soared nationally by 10.2% in 2022

The harsh reality of rising rent prices is laid bare in CoreLogic's rental report for December.

With vacancy rates at their tightest on record, rents have skyrocketed by 10.2%, putting immense financial strain on an already pressure-filled situation.

Unfortunately, it seems that 2023 will bring no relief in terms of affordability.

The current market conditions are strongly influenced by demographic trends during the pandemic, where household growth outpaced the supply of available properties.

Rent Growth

This, coupled with employment changes and the return of overseas migration, has only added to the demand for rental properties.

Furthermore, many renters are now looking for their own space instead of sharing accommodation.

The reality is that housing will remain unaffordable for many Australians in 2023.

The Rental Affordability Index (RAI) only takes into account rent against income, ignoring the many additional financial pressures faced by households, such as utilities, everyday living expenses, childcare, and healthcare.

This situation is especially challenging for single-working parents and dual-income families who are already facing significant financial stress.

Lack of rental stock and vacant apartments impacting rental affordability

The rental market in Australia is expected to face increasing pressure over the next year as rental properties remain unaffordable and hard to find.

The lack of available rentals is due in part to investors holding onto their properties for long-term capital gains, which reduces the supply of rental housing.

This, along with a lack of new developments, increasing immigration, and population growth, is contributing to a rental crisis in the country.

Homeowners are also competing with investors for available properties, including overseas investors who are purchasing more properties in Australia.

As a result, more middle to higher-income households is renting for longer, pushing out would-be homeowners and causing higher rent increases for low-income renters.

Additionally, regional areas are experiencing a shortage of rental stock due to natural disasters and an influx of regional migration, further exacerbating the crisis.

Improved affordability leaves a negligible improvement for low-income households

While rental rates for one and two-bedroom apartments are returning to pre-pandemic levels in some cities, this may not have a significant impact on improving affordability for low-income tenants who continue to face severely unaffordable rents in most metropolitan areas.

Although there has been some minor improvement in rental affordability for renters in Brisbane, Adelaide, and Perth, it is not as significant as in other cities, given that these areas were not as heavily impacted by pandemic-related restrictions.

Furthermore, rental affordability in these cities has still declined significantly over the past two years, compared to pre-pandemic levels.

State-by-state guide

As a result of the recent developments, rental affordability in some cities is showing slight improvements, particularly for one and two-bedroom units.

However, for low-income households, the cost of rent remains severely unaffordable across most metropolitan areas.

Brisbane, Adelaide and Perth have been hit hard in terms of rental affordability, with the sharpest decline seen in Brisbane, which reached a historic low point.

By the end of last year, Brisbane's Rental Affordability Index (RAI) score had dropped by 11%, while Adelaide and Perth fell by 6%.

For pensioner couples, Brisbane and Perth are the second least affordable cities in the country, after Sydney and the Australian Capital Territory.


Single pensioners face Extremely Unaffordable to Severely Unaffordable rents, with rent costs taking up 50-70% of their income.

Additionally, costs associated with ageing, such as healthcare and accessing nearby shops, services, and transport, are not included in these figures.

Regional South Australia is the only location where rents are deemed acceptable for pensioners, but rising rates in the area make it difficult for other low-income earners.

For the average rental household in each city, Hobart remains the least affordable, dropping below the critical threshold.

Sydney is still considered critically unaffordable, while Melbourne is the most affordable capital, with households spending an average of 21% of their income on rent.

Despite experiencing sharp rental increases and declines in affordability, Perth is ranked as the second most affordable city.

However, JobSeekers, hospitality workers, and pensioners are still feeling the negative impact of low vacancy rates and deteriorating affordability.

For the first time, Greater Queensland is considered Moderately Affordable, with the largest decline in RAI score across the country.

Share Of Income Spent On Rent

Singles on JobSeeker struggling with severe unaffordability across Australia

Despite the recent increase in welfare payments, job seekers continue to struggle with rental affordability, as they have to pay 60% or more of their income on rent.

In certain regions such as Perth, Sydney, and ACT, the rent can even exceed 100%, which makes it severely unaffordable for them.

Single part-time working parents on benefits face similar challenges, as the costs of healthcare and childcare have compounded their financial stress.

Do I Stress About Money

ACT has the least affordable rentals, with renters spending 69% of their income on rent.

In contrast, Victoria and Tasmania offer the most affordable options, with renters spending 40-41% of their income on rent.

Dual-income parents spend up to 15% of their income on rent

Parents with dual incomes can find affordable or better housing options in all regions, as their annual household income increases by almost $4,500. In Sydney and ACT, households pay the highest share of rent at 15%, while South Australia has the lowest at 8%.

For single-income couples with children, the situation is not as favourable, as they typically face moderately unaffordable rental prices.

However, they may still be able to find affordable rentals in South Australia.

Government support is not enough to ensure safe, secure and affordable housing

Despite efforts to tackle the rental crisis, the gap between housing costs and income continues to widen rapidly.

The most apparent solution is to construct additional affordable, well-located housing options for low-income renters.

Achieving this may involve expediting the supply and resolving conflicts among landlords, tenants, and agents to foster a stronger sense of community.

About Leanne Jopson Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years' experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients.

One of these statements doesn't make sense. Not knit picking just an observation. Other than that a very comprehensive and sobering look at the near term future of housing due to overall higher interest rates and the implications for all concern ...Read full version

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I guess when the Government jacks up interest rates with the hope that the banks pass it on, Landlords will need to ask for rent increases to help them maintain their properties. I didn't want to, but I had to. It's important to understand that in or ...Read full version

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