Hospitality workers, pensioners, minimum wage earners struggle with rental stress in Australian cities

Hospitality workers, pensioners and minimum wage earners are being crippled by rental stress in metropolitan areas across Australia, according to the May Rental Affordability Index (RAI).

The RAI is a price index for housing rental markets released biannually by National Shelter, Community Sector Banking and SGS Economics & Planning. It's an indicator of rental affordability relative to household incomes. The latest RAI found Hobart has overtaken Sydney to become the least affordable capital city in Australia, followed by Adelaide, Brisbane, Melbourne, Canberra and Perth.

Unaffordability for very low-income households is most severe in Sydney and Canberra, where median incomes are well above the national average. "The latest Rental Affordability Index shows the rental crisis continues. Financial stress, overcrowding and insecurity are the everyday reality of working families," Ellen Witte, Partner at SGS Economics and Planning said.

Adrian Pisarski, Executive Officer at National Shelter said that while there has been some slight improvement in some capitals, the situation has not improved at all for low-income households. "For households below the median income rental affordability remains a real problem while for households on moderate and low wages and benefits we have a genuine crisis in rental affordability," Mr Pisarski said.

"The latest RAI shows the serious need for a national housing plan – without action, lower-income earners will be forced from our cities and capitals like Sydney will lose vital workers, like those in hospitality," said Andrew Cairns, CEO of Community Sector Banking.

Conny Lenneberg, Executive Director of the Brotherhood of St Laurence, said the data reflected the struggles of low-income renters the Brotherhood worked within outer suburbs of major cities and regional areas. This is the first release of the Rental Affordability Index since the Brotherhood of St. Laurence joined SGS Economics & Planning, National Shelter and Community Sector Banking as a sponsor.

"This study shows the depths of the housing crisis facing Australian renters on low incomes," Ms Lenneberg said. "People are facing deep challenges securing affordable housing in the private rental market, pushed further and further away from the areas from where the jobs are located."

"For some vulnerable people who are unemployed, the combination of very low rates of Newstart – as little as $38.98 a day for a single unemployed person – and rising rents for even modest accommodation, is proving unbearable. The consequence is that people are being pushed into homelessness."

Speaking on what could be done to address the crisis, Witte said, "there are opportunities to further streamline development planning processes, but more importantly to invest in social and affordable housing for workers. The use of instruments like the density bonus and inclusionary zoning needs to be maximised." National Shelter is also calling for change.

"The data demonstrates the need for national leadership and a national housing strategy. We need to bring the threads of tax reform, incentives to encourage greater investment by institutional finance and states, planning reforms and urban and regional development together to tackle this problem," Mr Pisarski said.

Tasmania

With an RAI of 102 in the December quarter, greater Hobart is now the least affordable capital city in Australia. Rents in Hobart are now unaffordable to even average-income households. The average household in Hobart faces rents at 29 per cent of total income, putting it on the verge of housing stress – when it becomes difficult to afford essentials, like food and healthcare. And the problem is spreading – areas such as Margate and Sorell are also now unaffordable to median households.

The situation is most dire for those on lower incomes. A single pensioner faces severely unaffordable rents at 44 per cent of income, while pensioner couples face rents at 32 per cent of income, which is deemed unaffordable. With an RAI of 121, the average household in regional Tasmania faces rent at around 25 per cent of income.

New South Wales

With an RAI of 113 in the December quarter of 2017, rents remain moderately unaffordable on average in Sydney. It's performing marginally better than estimated, thanks to increased income levels from Census data. A single pensioner household faces spending 94 per cent of income on rent. This extreme level of housing stress is exacerbated by other pressures such as increased healthcare costs and reduced mobility. Regional NSW remains the least affordable regional area studied in Australia, with an RAI of 112 median households face rents at 27 per cent of income.

Victoria

With an RAI of 126 in the December quarter of 2017, the median household in Greater Melbourne faces rents at around 24 per cent of total income, which is considered acceptable. However, unaffordable rents are spreading from the city centre. Areas in the west, north, east and south of Melbourne, such as Altona, Coburg, Heidelberg, and Oakleigh, became moderately unaffordable in the last quarter. They previously had acceptable rents.

"Australia's food capital is unaffordable for hospitality workers and minimum wage households," Witte said. "Full-time hospitality workers may pay 34% of their income on rent, forcing them into housing stress. With an RAI of 123, regional Victoria is the only regional area studied in Australia, alongside regional NSW, that is even less affordable than its metropolitan counterpart.

Queensland

With an RAI of 121 in the December quarter, the average household in Brisbane faces rents at 25 per cent of total income – rents are considered acceptable for the first time since the inception of the Index in 2012. However, rents remain unaffordable to lower-income households. A single pensioner faces severely unaffordable rents at 65% of income. It's just as dire for pensioner couples, who face rents at 41% of income, also deemed severely unaffordable. Regional Queensland recorded an RAI of 122, with the average household facing rents at 25 per cent of total income.

Australian Capital Territory

The ACT recorded an RAI of 128 in the December quarter of 2017, with median households facing rents at 23 per cent of income, which is deemed acceptable. With the level of affordability driven by relatively high incomes in the ACT, those on lower incomes face particularly unaffordable rents. A single person on benefits faces extremely unaffordable rents at 109 per cent of income, while a single part-time worker parent on benefits faces rents at 58 per cent of income, which is severely unaffordable.

South Australia

With an RAI of 117 in the December quarter, there has been very little fluctuation in rental affordability in Adelaide in recent months – the score has not changed for six quarters. However, unaffordable rents have spread to more suburbs north of the city – Wingfield, Parafield Gardens and Para Hills declined from acceptable to moderately unaffordable. Across the Adelaide foothills, rents range from moderately unaffordable to unaffordable.

A single person on benefits faces rents at 70 per cent of income, which are extremely unaffordable, while a single part-time worker parent on benefits faces severely unaffordable rents at 40 per cent of income. Regional South Australia continues to see improving rental affordability. With an RAI of 137, regional SA is at its most affordable since at least mid-2012 when the Index began.

Western Australia

With an RAI of 145 in the December quarter, the latest report shows a continued record improving trend in rental affordability in Perth - the median household faces rents at 21 per cent of total income, which is considered acceptable. Despite the continued improvement, rents remain unaffordable for lower-income households.

A single part-time worker parent on benefits faces rents at 46 per cent of income, which is severely unaffordable. Rental affordability has declined in regional Western Australia, which recorded an RAI of 153 in the December quarter of 2017.

An interactive map of the RAI at the small geographical area level can be found at the following website: http://www.sgsep.com.au/maps/thirdspace/australia-rental-affordability-index/

About Community Sector Banking

Community Sector Banking is the not-for-profit banking specialist for more than 13,000 organisations; it's a joint venture between Bendigo Bank and the Community 21 consortium of not-for-profit organisations, established 15 years ago.

About National Shelter

National Shelter is a peak advocacy group whose mission is to create a "more just housing system, particularly for low-income Australian households." About SGS Economics & Planning SGS Economics & Planning is a leading planning and economics firm whose purpose is to shape policy and investment decisions to achieve sustainable places, communities and economies.

About Brotherhood of St. Laurence (BSL): BSL is a social jusice organisation that works to prevent and alleviate poverty across Australia.