The Reserve Bank held rates this week, offering respite for mortgage holders. However, relief is nowhere in sight for the 30% of us who rent, especially in the cities. Harry Chemay outlines the challenge for policymakers.

If ever there’s an image no Australian politician would wish to see beamed around the globe, it must surely be that of exasperated young renters queuing down a city street, desperate for a shot at an inner-city apartment in what is supposedly one of the world’s ‘most liveable cities’.

That, however, is exactly how 2024 has started for the nation’s renters who make up some 30% of Australian households.

Theirs is now a Hunger Games-like existence; these are the ‘Katniss Everdeens’ of this tale, trapped in a dystopian private rental market, pawns in a much larger $10 trillion dollar game.

… with rents rising in the past two and a half years by as much as they did in the previous 13-odd years …

The malevolent ‘President Snow’ in this storyline appears to collectively be represented by residential property investors, developers, local councils (and the NIMBYs who pressure them), housing authorities and last but by no means least, governments, both state and federal, seemingly tinkering at the edges with little political will to make genuine inroads into Australia’s cratering housing affordability.

Squeezed renters turning on each other

The news for renters has only deteriorated since those January images.

February brought a report from the Australian Housing and Urban Research Institute (AHURI), showing that with home ownership becoming ever more tenuous, a larger proportion of higher income households are renting for longer.

The report highlighted that while households with incomes above $140,000 (in 2021 dollars) accounted for only 8% of private renters in 1996, by 2021, they made up 24% of the rental market.

With this extra purchasing power, and with median rents rising in the past two and a half years by as much as they did in the previous 13-odd years to now surpass $600 per week, it’s little wonder that higher-income renters are squeezing out those of more modest means.

The AHURI report confirms this, noting that in 2021 low-rent dwellings (with rents of $226 per week or less) comprised only 13% of private rental stock, compared to 50% in 2001 and 60% in 1996.

In short, to survive our housing Hunger Games, today’s rental Katniss must be an elite-level competitor, seeing off less financially capable participants along the way.

The run of bad news continued into March, with more recent analysis from PropTrack, a data firm owned by property platform REA Group, showing that affordability is now the worst it has ever been in its rental database extending back to 2008.

Vacancy rates sit around 1% nationally, with cities like Adelaide and Perth around half that at present.

According to PropTrack, almost no private rental properties are now considered affordable for the lowest income 30% of households.

Kohler’s lament

Australia’s escalating housing squeeze is cause for serious concern.

Alarm bells are being rung by some of Australia’s sharpest economic commentators, the most recent being veteran journalist, and evening news finance chart whisperer, Alan Kohler.

In a recent Quarterly Essay titled ‘The Great Divide – Australia’s Housing Mess and How to Fix It’, Kohler undertakes a forensic examination of this nation’s love-affair-cum-speculative-addiction with property, starting with the very first land sale in 1826.

The nub of Kohler’s argument is that house prices have now so thoroughly detached themselves from economic reality that it’s creating a nation of ‘haves’ and ‘have nots’, based purely on who can gain a foothold on the property ladder in good time (ideally before turning 40).

Kohler wistfully recalls that when he entered the property market, median house prices were roughly 3.5 times average weekly incomes, a ratio not too different from the experience of his parent’s generation, some 30 years prior.  

This ratio, he states, now sits closer to 7.4 times (based on the current average full-time wage of around $100,000).

Housing affordability picked off

The divergence between house prices and household incomes started accelerating markedly around the year 2000, as the below AHURI chart depicts.

Source: AHURI – ‘Australian home ownership: past reflections, future directions’ (2020)

Except it’s even worse than Kohler’s grim assessment.

According to property market data house CoreLogic, the national median dwelling value stood at $765,762 at the end of February.

Wages, however, are not quite $100,000 on average across all workers. Looking at the more representative median wages, the current full-time male annual income is around $93,000, while the female equivalent is around $83,000 (for details, read this).

Comparing apples-with-apples, the ratios of national median dwelling price to median incomes are currently 8.3 for males and 9.2 for females.

And what of Sydney, with its current median dwelling price of $1,128,155? Well, the ratios sit at 12.2 (males) and 13.6 (females) respectively.

Katniss truly does need to be bolder, more highly driven and courageous than her male counterparts to overcome the twin obstacles of a runaway housing market and a persistent gender pay gap.

May the odds be ever in your favour indeed.

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Editors note: This article is the first in a series on the housing crisis.