Rental stress levels remain high across Australia. Picture: Gaye Gerard
Australia’s renters have hit a tipping point — and critics say the federal government’s housing priorities are making things worse, accusing it of fuelling the crisis with expanded first-home buyer schemes that could deepen the struggle for tenants.
A confronting report shows three in four renting households nationwide are now in “rental stress”, spending an unsustainable share of their income just to stay housed.
That equates to almost 2.32 million renting households across the country, according to new data from financial research firm Digital Finance Analytics.
The situation is particularly dire in Sydney’s outer suburbs, including Campbelltown and The Central Coast hub of Gosford, where more than 90 per cent of renting households are under financial pressure. In Mount Druitt, it was close to 100 per cent of households.
Tenants in parts of outer Melbourne were also straining under the weight of high rents, including in western suburb Tarneit, where over 90 per cent of renting households were under stress.
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The Melbourne CBD had the highest volume of struggling renters, with nearly 15,700 households enduring rental stress, or about 86 per cent.
Brisbane suburbs where more than 80 per cent of renting households couldn’t afford their rents were Ipswich, Fortitude Valley and Redbank.
Digital Finance Analytics director Martin North said these families were increasingly forced to juggle bills or slide into debt just to make ends meet.
“Stress shows households have cash flow pressure, so they cut back on spending, and hunker down, leading to lower economic activity,” Mr North said.
“Rental stress is way worse than mortgage stress. This is the bigger immediate issue given low rental supply and rising rents.”
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Digital Finance Analytics director Martin North said rental stress had become a bigger issue than mortgage stress. Picture: Hollie Adams
Mr North added that rent rises were likely to be larger than those reported in official inflation measures as that research typically measured advertised rents and did not measure the rent rises that existing tenants were paying.
NSW Tenants Union CEO Leo Patterson Ross warned that the Albanese government’s October expansion of the First Home Guarantee Scheme had unintended consequences for renters.
The program, which allows eligible first-home buyers to enter the market with a 5 per cent deposit, might sound beneficial, but in reality it risked worsening affordability, he said.
Mr Patterson Ross explained the scheme could push up prices by encouraging more buyers to take on larger mortgages — squeezing out the next wave of would-be buyers. This would trap some tenants in the rental market for longer.
“It’s harder for the people coming behind the first buyers to get properties,” he said.
“The scheme does encourage people to take on more debt and that’s the root problem with the housing market in general.
“People have to borrow more and more to get into the market and that just keeps pushing up the prices.”
CEO of the Tenant’s Union Leo Patterson Ross said the government’s First Home Guarantee Scheme could make it harder for later tenants to become home buyers. Picture: Richard Dobson
He added that the policy mainly benefited higher-income tenants who could afford to service big loans. Their move into home ownership would do little to ease rental demand, Mr Patterson Ross explained.
“A lot of the properties first-home buyers purchase were owned by investors,” he said.
“If a renter buys a property that was a rental, they are out the rental market but so is that former rental, so the supply and demand dynamic doesn’t change.”
REA Group economist Eleanor Creagh said rent growth had eased somewhat this year but households remained “stretched” after years of “significant” increases.
“Without a bigger supply response, it’s not likely that we’ll see rents moving backwards,” she said.
Mr North said rental stress continued to rise as families faced mounting living costs on top of already high rents.
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Tenants are often relocating to outer suburbs to save, but continue to struggle.
He pointed to surging migration and weak construction activity as key factors making the problem worse.
“Too high migration is the cherry on the cake, once again adding to the stress, and note that the most highly stressed rental cohorts are first generation migrations to Australia,” Mr North said.
“So as well as taking property from existing Australians directly, they have become part of the stress story in their own right.”
AMP chief economist Shane Oliver said there was already evidence the First Home Guarantee scheme was pushing up prices and the rises were indicative of a “flaw” in the policy.
“Demand-side schemes put upwards pressure on prices. It was to be expected. History tells us first-home buyer schemes result in higher prices,” he said.
Prime Minister Anthony Albanese has been criticised for the expansion of the First Home Guarantee scheme. Picture: Hilary Wardhaugh/Getty Images
Mr Oliver noted Australia, especially NSW, was still building well below levels needed to meet targets in the National Housing Accord. “We missed targets in the last financial year by a country mile,” Mr Oliver said.
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