Where even a modest home costs 99 per cent of incomes

Rental affordability is the worst on record in several capital cities, pushing welfare recipients, minimum-wage workers and single-income households to the fringes of Australian communities.

The National Shelter-SGS Planning and Economics Rental Affordability Index released on Friday shows it is unaffordable for the average household to rent in every city aside from the ACT, the one jurisdiction in Australia where a rent cap has been implemented.

Affordability was much worse for low-income households; in some cases the poorest of the poor would need to spend more than their entire income to rent in the most expensive cities.

Rental affordability was at its worst on record in Sydney and Perth, and although Melbourne improved slightly, it was still trending down.

SGS principal and partner Ellen Witte said that in the index’s 10 years, affordability had almost uniformly worsened.

“We have seen quite a bit of change over time,” she said. “When we started, we already saw there was a rental crisis in the inner cities … what we’ve seen since is it’s expanded like an oil stain across metro areas.”

National Shelter spokesperson John Engeler said the report showed governments needed to do more to alleviate the rental crisis.

“Housing [is] a critical issue,” he said. “No point on the housing continuum is without a need for more scrutiny. There’s stress and there’s pressure.”

Rents were 30 per cent of a tenant’s income in Sydney and 31 per cent in Perth. The index scores are based on the income of each city’s residents, therefore lower incomes in Perth made its market less affordable despite rents being cheaper overall.

It was followed by Adelaide (30 per cent of incomes) and Brisbane (29 per cent). Melbourne and the ACT fared better; rents there were 25 per cent and 23 per cent of incomes, respectively, and had improved slightly over the April quarter. However, Melbourne’s affordability was still trending down.

“Every year, I think surely it can’t get worse,” Witte said. “It’s a bit sad.”

The figures were worse for low-income renters. A Jobseeker recipient would need to spend 137 per cent of their income to afford a one-bedroom rental in Sydney, 99 per cent in Melbourne, 107 per cent in Brisbane and 133 per cent in Perth.

Minimum-wage couples looking to rent a two-bedroom home would need to spend 37 per cent of their income in Sydney, 30 per cent in Melbourne, 31 per cent in Brisbane and 30 per cent in Perth.

A hospitality worker looking to rent a one-bedroom unit would also struggle. They would have to pay 46 per cent of their income in Sydney, 38 per cent in Melbourne, 42 per cent in Brisbane and 51 per cent in Perth.

Witte said unaffordable rental markets were affecting the wider economy.

“People need to move out further, and you see that in inner-city areas but also tourism areas, where a lot of stock has been converted to short-stay accommodation,” Witte said.

“They can’t even find hospo workers to work in the tourism industry – it’s really biting its own tail. In aged care, they can’t find nurses, teachers can’t live where the school is – it’s really hurting the economy.”

National Association of Renters’ Organisations spokesperson Leo Patterson Ross said low-income workers needed to be able to access the city to provide services many made use of – such as baristas making coffees.

“Even if you’re being a bit selfish about it, you should want the city to be accessible for everyone,” he said. “You can’t have a well-functioning city and well-functioning community if people have to travel hours and hours to get there.

“The impacts of long travel times are pretty well researched. It takes a physical toll, but it also takes a mental health toll. All of that has a real negative impact.”

Witte said a raft of measures should be considered, such as reforming negative gearing and capital gains tax concessions, but she said governments shouldn’t shy away from implementing rent caps.

“We see a lot of other industries where there’s some rules around price settings. We don’t need to stop price increases – they need to be reasonable,” she said. “The early evidence from the ACT really seems to suggest it’s an effective measure. It hasn’t destroyed the housing markets there, and they still can increase rents.”

Patterson Ross agreed the ACT example suggested rent caps would work in Australia, and added increasing income support and building public housing would also alleviate unaffordability.

“The federal government should be making sure people have income that raises them above the poverty line, but we can make sure people have homes they can afford on the incomes they have. And either way, the government is going to have to put their hand in their pocket,” he said.