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High-income households rent more, low-income renters face greater stress

The number of high-income households who choose to rent is on the rise, while lower-income renters are under more financial stress than ever before.

According to research from the Australian Housing and Urban Research Institute (AHURI) in 2021, nearly one-quarter of all renting households were in the top income segments – up from only 8 per cent in 1996.

At the same time, 82 per cent of very low income renting households are in housing affordability stress.

In 2021, the proportion of low rent dwellings comprised only 13 per cent of private rental stock, shrinking from nearly 60 per cent of stock in 1996.

The research found there was a shortage of 348,000 affordable and available private rental homes for households with the lowest 20 per cent of incomes in 2021 ($39,000 or less per year), compared to a shortage of 211,000 dwellings 15 years ago. 

As a result, 82 per cent of very low income renting households were in housing affordability stress when the Census was taken in 2021, at a time when COVID-19 conditions were temporarily relieving pressure on the rental market.

Research author, Margaret Reynolds of Swinburne University said nearly a quarter of high-income households are renting.

“The 2021 Census highlights the long-term change in the national distribution of renting household incomes,’ Ms Reynolds said.  

“There has been a significant growth of renting households with high incomes of around $140,000 per year and above (in $2021) – these households accounted for only 8 per cent of private renters in 1996, ballooning to 24 per cent in 2021.”

“Lower priced rentals now only 13 per cent of private rental stock – down from 60 per cent 25 years ago

In 2021, lowest rent dwellings (with rents up to $266/week) comprised only 13 per cent of private rental stock in 2021 – a segment of the market that made up nearly 60 per cent of private stock in 1996 and half of the stock in 2001. 

Ms Reynolds said the 2016–21 period saw a small increase in the number of more affordable dwellings priced at the lowest end of the market. 

“This is the first time in the last 25 years there has been an increase in the number of low rent dwellings, however this is very likely a short-term anomaly shaped by COVID-19 conditions at the time of the Census, which saw a dramatic fall in demand for private rental, falls in rents and increases in vacancy rates,” she said.

According to the research, there is a shortage of nearly 350,000 homes affordable and available for households with the lowest incomes

Of a total 425,000 renting households in the lowest income quintile, only 77,000 were able to find an affordable home. 

The other 348,000 households (or 82%) were in housing affordability stress (where they pay more than 30% of their income in rent). 

“This is because not all the lowest price rentals are available to be rented by households on the lowest incomes – many of these dwellings are occupied by households on higher incomes, making the shortage of lower priced homes even more acute,” Ms Reynolds said.

“Unfortunately, the situation has not improved for lower income renters since the Census was taken.

“In 2022 rents began to increase substantially, leading to what many have termed a ‘rent crisis,’ as migration and mobility returned to pre-COVID levels placing additional demand pressure on the private rental market.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.