Sydney remains critically unaffordable with pensioners and young hit hardest

Rental affordability across Sydney has marginally improved in the past year but the NSW capital remains the second least affordable capital city in Australia and people on low to median incomes are struggling to pay their rent.

The latest release of the Rental Affordability Index (RAI) has found Sydney remains critically unaffordable for significant proportions of renters, especially very low and low-income households. It remains the second least affordable metropolitan region in Australia, behind Hobart.

The RAI is an indicator of the price of rents relative to household incomes based on new rental agreements. It is released biannually by National Shelter, Community Sector Banking, SGS Economics & Planning and the Brotherhood of St Laurence.

The baseline of 100 indicates that households are spending 30 percent of their income on rent, which would cause low income households to be in rental stress. They may have to forgo necessities including food, power and medical care to make ends meet. A RAI of 100-120 shows that households are facing moderately unaffordable rents.

With a RAI of 113 in the June quarter of 2018, rents remain moderately unaffordable on average in Sydney. The average rental household in Greater Sydney spends about 27 per cent of its total income on rent. However, lower-income households are having to fork out a much higher proportion of their income to afford a roof over their heads. Unaffordability for very low-income households is most severe in Sydney compared to other Australia capital cities, with high median incomes pushing up rents.

While Sydney’s inner-city harbour suburbs are home to the most unaffordable rental properties, the average household generally must travel at least 15 – 40km from the CBD to areas such as Blacktown, Liverpool and Campsie to find acceptable rents.

Ultimo and Redfern are the only suburbs within a 15km radius of the CBD to offer acceptable rents. However, the RAI score for each indicates they are verging on moderately unaffordable.

The geographic spread of unaffordable rents has travelled further along the coast north and south of the Sydney CBD in the past year. Unaffordable rents now reach as far as Terrigal in the north and out to Wollongong and Gerringong in the south.

In the Hunter region, much of inner Newcastle and Fern Bay remains moderately unaffordable.

The median rental household in Greater Sydney (at June 2018) had a gross income of $98,500 per annum, significantly higher than in country NSW where the median rental household had a gross income of $66,500 per annum.

“Rents continue to be unaffordable even for working, median income households in Sydney,” said Ellen Witte, Partner at SGS Economics and Planning. “Low income households continue to be the worst off in Sydney.”

“Greater Sydney is growing fast especially in the Western Sydney City Deal area, and so is its need for social and affordable housing. Western Sydney councils face a shortfall of more than 35,000 social and affordable dwellings. This will increase to 64,000 dwellings by 2036. Growing income inequality is driving demand for social and affordable housing up even further.”

“Single parents are doing it especially tough. The majority of single parents experiencing rental stress are single mothers. The majority earn $41,600 per annum or less. In Sydney they would be paying about 70 per cent of income on rent, which is clearly unsustainable.”

“Single people in the rental market still find it hard to make ends meet. Single males especially are experiencing rental stress. More than half of single males renting earn less than $36,400 per annum. This means these households would be paying 68 per cent of their income on rent, pushing them to the outer fringes, away from jobs, education and services.”

Andrew Cairns, Chief Executive Officer at Community Sector Banking, said: “Looking beneath the headline figures, rental stress is affecting the majority of very low-income households in Australia. Pensioners and single parents are hit particularly hard.”

Adrian Pisarski, Executive Officer, National Shelter, said: “The situation facing the nation’s renters remains poor with little or no improvement for low and moderate income renters in our capitals and poor affordability in our regions.”

“It is clear to National Shelter we need a National Housing Strategy to help improve the dire situation far too many renters across Australia experience,” Mr Pisarski said.

“Compared to improvement in purchase affordability, renters are doing it tough. While we have many housing markets in Australia, none of them are positive for renters. We need a multi-party commitment to improve rental affordability over the long term.”

Conny Lenneberg, Executive Director of the Brotherhood of St Laurence, said: “There is a housing crisis in Australia and this report starkly shows those who can least afford to pay are paying the highest price.

“High rents are pushing unemployed people on very low Newstart payments into deeper poverty. Jobseekers are forced out to the urban fringes of our cities to find suitable accommodation but that places them far from jobs and public transport connections. Housing costs pressure means some renters on Centrelink are being pushed into homelessness. We need to raise Newstart and its very modest rental supplement as a priority.”

Ms Lenneberg said there was also an urgent need to increase subsidised social housing. “The cost of renting in the private market puts many low-income single parents, usually women, under extreme pressure.  Many parents forgo basics such as food and paying household bills to keep a roof over their family.

Regional NSW the second-least affordable country area in Australia

With a RAI of 122, the average household seeking to rent in regional NSW would face rent levels at 25 percent of its total income. Rents remain acceptable to affordable across regional NSW except for Bowral and Mittagong. Regional NSW remains the second least affordable non-metropolitan area, after regional Tasmania, when compared with other states.

Sydney rents extremely unaffordable for students, pensioners and young families

Students working part time and living in a share house face housing stress – paying 34 per cent of their income on rent.

For the single pensioners, Greater Sydney remains the most unaffordable city to rent of all Australian capitals. Single pensioners face a RAI of 33, indicating rents are extremely unaffordable, accounting for 91 per cent of total income. This extreme level of housing stress is exacerbated by other pressures including increased healthcare costs and reduced mobility.

Single parents and low income households are experiencing widespread rental stress, exposing children to poverty. Single income families pay 29 per cent to 30 per cent of their income for a new rental, leaving little for the cost of childcare and education.

Dual income families with children would need to look outside of the inner to middle suburbs in Sydney to find an affordable rental.

A single young person relying solely on benefits would not be able to afford to rent privately in Sydney as it would soak up more than they earn – an untenable 128 per cent of their income. This means they would have to share, live a boarding house or remain with their parents.

With a RAI of 82, even a full-time working couple household earning the minimum wage faces rents at 37 per cent of their income. This is severely unaffordable and limits the capacity of this household not only to access jobs across a significant proportion of the city, but also to meet other day-to-day living costs.

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About the Rental Affordability Index

National Shelter, Community Sector Banking, SGS Economics & Planning and the Brotherhood of St Laurence have released the Rental Affordability Index (RAI) biannually since 2015. The RAI is an easy to understand indicator of rental affordability relative to household incomes, and is intended to complement the Housing Affordability Index (HAI) which is a price index for the purchase of houses.

About Community Sector Banking

Community Sector Banking is the not-for-profit banking specialist for more than 15,000 organisations; it’s a joint venture between Bendigo Bank and the Community 21 consortium of not-for-profit organisations.

About National Shelter

National Shelter is a peak advocacy group whose mission is to create a “more just housing system, particularly for low-income Australian households”.

About SGS Economics & Planning

SGS Economics & Planning is a leading planning and economics firm whose purpose is to shape policy and investment decisions to achieve sustainable places, communities and economies.

About Brotherhood of St Laurence
The Brotherhood of St Laurence is a community organisation that works to prevent and alleviate poverty across Australia.