Hobart Australia’s most unaffordable city for renters: across the nation singles, pensioners and families on low incomes are struggling

29 November 2018

Hobart has jumped further ahead of Sydney as the least affordable city to rent in Australia, the latest release of the Rental Affordability Index (RAI) has found.

Even households on average incomes in Hobart are now at risk of rental stress.

“Tasmania’s capital city is in a housing gridlock,” Ellen Witte, Partner at SGS Economics and Planning said. “Rental affordability in Hobart dived even lower during winter. Working families are now facing rental stress with the average income household now paying 30 per cent of income on rent. This means these households are unable to save sufficiently for a deposit on a mortgage.”

Rental affordability in some other Australian cities, including Sydney, has improved marginally. In many cases, however, the gains have not flowed through to low-income households for whom affordability remains severe.

Andrew Cairns, Chief Executive Officer at Community Sector Banking, said: “Looking beneath the headline figures, rental stress is affecting the majority of very low-income households in Australia. Pensioners and single parents are hit particularly hard.”

The RAI is an indicator of the price of rents relative to household incomes based on new rental agreements. It is released biannually by National Shelter, Community Sector Banking, SGS Economics & Planning and the Brotherhood of St Laurence.

A RAI of 100 and below shows that households would be required to spend at least 30 per cent of their income on rent. A RAI of 100-120 indicates households are facing moderately unaffordable rents.

Greater Hobart reached a RAI of 101 in June 2018, meaning median rents in metropolitan Hobart are now unaffordable, even to median income rental households. Greater Sydney has a RAI of 113, which is also considered moderately unaffordable. 

The least affordable suburbs in Sydney include Milsons Point, Kirribilli, St Ives Chase, St Ives, Pyrmont, Point Piper, Edgecliff, Darling Point and Rozelle.

In Melbourne, suburbs further from the centre that previously had acceptable rents have become unaffordable in the past 12 months, including Keilor in the north-west, Gisborne in the Macedon Ranges and Diamond Creek and Warrandyte in the north-east. The least affordable suburbs in Melbourne include Brighton East, Albert Park, Middle Park, Port Melbourne, Beaumaris and Cromer where an average income household would expect to pay 30-38 per cent of their income on rent.

Adrian Pisarski, Executive Officer, National Shelter, said: “The situation facing the nation’s renters remains poor with little or no improvement for low and moderate income renters in our capitals and poor affordability in our regions.”

“It is clear to National Shelter we need a National Housing Strategy to help improve the dire situation far too many renters across Australia experience,” Mr Pisarski said.

“Compared to improvement in purchase affordability, renters are doing it tough. While we have many housing markets in Australia, none of them are positive for renters. We need a multi-party commitment to improve rental affordability over the long term.”

Conny Lenneberg, Executive Director of the Brotherhood of St Laurence, said: “There is a housing crisis in Australia and this report starkly shows those who can least afford to pay are paying the highest price.

“High rents are pushing unemployed people on very low Newstart payments into deeper poverty. Jobseekers are forced out to the urban fringes of our cities to find suitable accommodation but that places them far from jobs and public transport connections. Housing cost pressures mean some renters on Centrelink are being pushed into homelessness. We need to raise Newstart and its very modest rental supplement as a priority.”

Ms Lenneberg said there was also an urgent need to increase subsidised social housing. “The cost of renting in the private market puts many low-income single parents, usually women, under extreme pressure. Many parents forgo basics such as food and paying household bills to keep a roof over their family.”

Pensioners struggling

Rental affordability for single pensioners is alarmingly poor across the nation. Single pensioners are facing severely unaffordable and extremely unaffordable rents in all Australian capitals and almost every regional area. Single pensioners would have to move to regional South Australia to find accommodation that would not force them into rental stress.

Pensioner couples would also struggle to make ends meet in all Australia capitals, and every regional area except NSW, Victoria, SA, and Tasmania.

No relief for low-income households

Rental stress has become so entrenched and severe for low income households that the recent improved affordability in some cities has not brought relief.

More than a million households need some form of housing assistance, while 45 per cent of low-income households experience rental stress.

“We are particularly worried about single parents with children,” Ms Witte said.  “There are 110,000 single-parent, low-income households out there living in rental stress and 82 per cent of those households are single mothers. The majority earn $41,600 per annum or less. In Sydney they would be paying about 70 per cent of income on rent, which is clearly unsustainable.”

There are about 244,000 low income, single-person households experiencing rental stress in Australia. The majority – 57 per cent – are single men. More than half of single males renting earn less than $36,400 a year. They would be paying 68 per cent of their income on rent if they wanted to live in Greater Sydney.

“No matter how efficient a housing market operates, there is always a need for social and affordable housing, like there is a need for investment in roads, public transport, education and health. Over the last few decades we have seen a consistently deteriorating level of government investment in social and affordable housing. While new national policy has a focus on providing affordable finance there remains a gap between the cost of providing housing and the returns of social rents.

“The Government needs to bridge the financial gap and grow social housing supply. Inclusionary zoning is particularly well suited to grow the social and affordable housing stock close to jobs and opportunities.”

Ms Witte called for a a tax regime that treats housing as place of residence first and as investment objective second.

“The current tax system does the opposite, driving people out of home ownership,” she said. “While more households than ever rent, the rental market still relies on the inefficient and ineffective delivery of rental housing through mum and dad investors. We need large-scale institutional investment in the rental sector providing secure and quality housing for the long term.”

Sydney still unaffordable to many

Rents continue to be unaffordable even for working, median income households in Sydney and low-income households continue to be the worst off in Sydney.

“Greater Sydney is growing fast – especially in the Western Sydney City Deal area – and so is its need for social and affordable housing,” said Ms Witte.

Growing income inequality is driving demand for social and affordable housing. Western Sydney councils face a shortfall of more than 35,000 social and affordable dwellings. This will increase to 64,000 dwellings by 2036.

A vision needed for Hobart

Even households on moderate incomes households would now be paying 30 per cent of their income to access a rental in Hobart.

Rental stress is the everyday reality for the majority of single parents and single person households on low incomes. A single part-time working mother would have to pay 42 per cent of her income on rent. On top of that come costs for child care and education.

“While the government has implemented some initiatives, no comprehensive vision or structural change has been announced,” Ms Witte said.

“The city needs a comprehensive housing strategy with commitment and initiatives from both state and local government to address the issue,” she said. “These initiatives should include the release of more Government-owned land for housing, substantial inclusion of affordable housing in new development, the trial of new planning measures to boost affordable housing and capacity building in the construction industry.”

“Short-term rental accommodation needs to be curbed until the rental affordability situation improves.”

View the Rental Affordability Index report and interactive map:

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