Our housing system is broken and the poorest Australians are being hardest hit

Just when we think the price of rentals could not get any worse, this week’s Rental Affordability Snapshot by Anglicare has revealed low-income Australians are facing a housing crisis like never before. In fact, if you rely on the Youth Allowance, there is not a single rental property across Australia you can afford this week.

How did rental affordability get this bad?

Several post-COVID factors have been blamed, including our preference for more space, the return of international migrants, and rising interest rates. However, the rental affordability crisis pre-dates COVID. Affordability has been steadily declining for decades, as successive governments have failed to make shelter more affordable for low-to-moderate income Australians.

The market is getting squeezed at both ends

• This has forced growing numbers of low-income Australians to seek shelter in the private rental sector, where they face intense competition from higher-income renters.
• At the upper end, more and more aspiring home buyers are getting locked out of home ownership.
• Households earning $140,000 a year or more (in 2021 dollars) accounted for just 8% of private renters in 1996.

Why current policies are not working

Worsening affordability in the private rental sector highlights a housing system that is broken. Current policies just aren’t working. While current policies focus on supply, more work is needed including fixing labour shortages and providing greater stock diversity. The planning system plays a critical role and zoning rules can be reformed to support the supply of more affordable options.

• There is also a need to respond to the super-charged demand in the property market.
• Yet, governments continue to resist calls for winding back the generous tax concessions enjoyed by multi-property owners.

Can affordable housing occur naturally?

• Proponents of filtering argue building more housing anywhere - even in wealthier ends of the property market - will eventually improve affordability across the board because lower priced housing will trickle down to the poorest households.
• However, the persistent affordability crisis low-income households face and the rise in homelessness are crucial signs filtering does not work well and cannot be relied upon to produce lower cost housing.

Location, location, location

Location does matter, if we expect building new housing to work for low-income individuals. What is needed is a steady increase of affordable, quality housing in areas offering low-income renters the same access to jobs and amenities as higher-income households.
The National Housing Accord aims to deliver 1.2 million new dwellings over five years from mid-2024. But it must ensure these are “well-located” for people who need affordable housing, as suggested in the accord. Recent modelling shows unaffordable housing and poor neighbourhoods both negatively affect mental health, reinforcing the need to provide both affordable and well-located housing.

The upcoming budget

• While the 15% increase in the maximum rent assistance rate was welcomed in the last budget, the program is long overdue for a major restructure to target those in rental stress.
• Also, tax concessions on second properties should be wound back to reduce competition for those struggling to buy their first home.

Rachel Ong ViforJ receives funding from the Australian Research Council (ARC) and Australian Housing and Urban Research Institute (AHURI).