Addressing Australia’s rental crisis

In order to alleviate rental stress, more affordable houses need to be built in well-connected areas, suggests AHURI.

The challenges facing the affordability of Australian housing also extends to the rental market, with the combination of low vacancy rates and high rental prices creating the perfect storm for a rental crisis.

The nation is experiencing a 0.9 per cent national rental vacancy rate, the lowest since 2006, and the pressure of such limited supply is pushing the prices for renting a property to record highs, according to the Australian Housing and Urban Research Institute (AHURI). 

See more: Affordable housing crisis forcing older renters into aged care

The latest briefing paper from the institute, released today, suggests the unaffordability and unavailability of rental housing is the consequence of a number of key causes – and will require diverse solutions to address.

What is causing the rental crisis?

Firstly, the supply of residential dwellings is not keeping pace with household growth. Between the 2016 and 2021 Census, nearly one million new households formed, in part due to COVID-19 causing relationships to break down and share houses to dissolve. 

See more: “Sorry, Your Rental Application Has Been Unsuccessful”

In addition, pandemic-induced supply chain challenges and worker shortages have delayed new homes being built, with a 2.7 per cent reduction in the number of constructed new residences in June 2022 compared to the previous quarter, further increasing demand.

The ‘tree change’ mentality of many Australians, who migrated from capital cities to regional and rural areas post-lockdown has strained local vacancy rates, while the re-opening of international borders has generated an influx of students seeking accommodation.

Holidaying platforms such as AirBnB and Stayz also have a role to play in limiting the capacity to rent long-term, however AHURI notes this impact is limited to inner-city, coastal and regional areas with significant tourism appeal. 

What are the solutions?

Much like Australia’s housing crisis, AHURI suggests the best approach to coping with Australia’s growing population is to build more affordable dwellings in suitable locations for low-income earners.

See more: Private sector interested in social housing, but there are risks involved

“Across Australia, there is a shortage of 173,000 affordable dwellings in the private rental sector available for [low-income] households, and 71 per cent pay an unaffordable rent that is greater than 30 per cent of household income,” reads the report.

“The result is that working low income households are either enduring affordability stress, commuting burdens, or both in order to access employment opportunities.

“At its simplest, to reduce the rental crisis Australia needs to build more well-located rental dwellings that are affordable to people on low incomes.

“Strategies to make this happen can include targeting Commonwealth Rent Assistance (CRA) more effectively; increasing CRA to better align with rents in local areas; and improving connectivity between outer suburban and satellite city housing markets and job-rich areas.”

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