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Median household incomes can only afford 39 per cent of rental properties

Rental affordability is at its worst level in almost two decades, with households earning a median income of about $111,000 able to afford to rent the smallest share of properties since 2008.

According to a new analysis from PropTrack, the Rental Affordability Index, rental affordability is at its worst level in at least 17 years, when the REA Group data business began keeping records.

The index analyses rental affordability across different household income brackets and locations. 

As an example, a ‘typical’ or median-income household, earning $111,000 a year, could spend up to $532 per week on rent and fall under the threshold of spending 25 per cent of their pre-tax income on rent.

Highlighting the alarming state of rental affordability at present, a household earning that amount can now afford just 39 per cent of rentals advertised over July-December 2023. 

This is, by a reasonable margin, the lowest share since records began in 2008, according to the report. 

Even relatively high-income households earning about $170,000 a year, which is more than 70 per cent of Australians, are facing more challenging rental conditions than they have in some time. 

These households could afford 85 per cent of advertised rentals in 2023-24, which is down from a high of 91 per cent in 2020-2021.

Many, though not all, of these higher-income households would be homeowners and so not directly affected by rental affordability.

PropTrack senior economist and report co-author, Angus Moore, said surging rents over the past few years had seen rental affordability drop to at least a 17-year low.

“Over the six months to December 2023, households across the income distribution could afford to rent the smallest share of advertised rentals since at least 2008, when our records began,” he said.

“That is a substantial change from conditions before and during the pandemic.

“The deterioration in affordability has been driven by the significant increase in rents that we’ve seen since the pandemic, which wages have not kept pace with. 

“Rents nationally are up 38 per cent since the start of the pandemic.”

Renters in NSW, Tasmania and Queensland face the worst rental affordability. 

A household earning a typical income in NSW can afford just 28 per cent of rentals advertised in that state.

Victoria is the most affordable state to rent in, with a median-income household able to afford more than half of advertised rentals, though affordability has worsened markedly over the past 12 to 18 months.

The index also showed that low and middle income households faced the toughest conditions. 

A household earning $49,000 per year – the 20th percentile of income – can afford essentially no rental properties across the country.

Even for a household at the 30th income percentile – earning $67,000 per year – just 3 per cent of rentals advertised in 2023-24 were affordable. 

To be able to afford even one-in-five advertised rentals, this household would need to spend 35 per cent of their income on rent.

“At the lower end of the income distribution, renting is extremely challenging,” Mr Moore said.

“This highlights the importance of rental support for low-income renters, such as Commonwealth Rent Assistance.

“Without support, renting would be effectively impossible for many of these households.

“Longer term, increasing the availability and supply of rentals is critical to improving affordability. 

“Rents are growing quickly because rentals are extremely scarce at the moment, with incredibly low rental vacancy rates around the country. 

“The only way to solve that, sustainably over the long term, is to have more rentals where people want to live. 

“And that means building more homes.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.