High rent hikes create long-term renters. Most renters aspire to own homes, but less than half believe they will ever be able to afford one.
Recent data shows rents have increased at the slowest pace in three years, though they remain unaffordable.
During this time, tenants faced rent hikes that impacted their ability to save money, buy food, or access healthcare.
The Australian Housing and Research Institute’s study, published on Tuesday, explored this trend and its effects on renters.
According to the report, 78% of renters desire homeownership, yet 59% feel it’s unattainable due to rising prices.
The study was based on data from 22,550 households and a survey of 965 people conducted last September and October.
Emma Baker, lead researcher at the University of Adelaide, explained that uncertainty in the rental market weighs heavily on tenants.
Many renters view homeownership as the only way to achieve housing stability in today’s tight rental market.
Professor Baker noted that renters are less concerned about housing affordability than expected but seek more security and better quality.
Renters are willing to pay more for homes that meet higher standards or offer longer lease terms.
For example, renters would pay an extra $127 weekly for homes with better insulation and upgraded heating or cooling systems.
Additionally, they’d pay $77 more if rents were capped at a 5% increase every year, and $72 for indefinite leases.
Baker highlighted that Australians of all ages are increasingly likely to rent, which could lead to financial hardship in retirement.
“It’s not only a problem for young people,” she explained. “There are more older renters than ever before.”
In Sydney, this includes people over 80 years old, who are still renting instead of owning their homes.
“It’s a double burden for those in this generation,” she continued. “They fail to transition to homeownership while facing expectations.”
Furthermore, Australia’s system assumes that people will eventually transition to owning homes, adding pressure for older renters.
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CoreLogic research director Tim Lawless explained that rapid rent increases have made homeownership even more difficult to achieve.
“When tenants allocate more of their income to rent instead of saving for a deposit, it becomes harder to buy.”
Lawless added, “I believe the surge in rents has significantly impacted people’s ability to enter the housing market.”
CoreLogic’s data shows that annual rent growth slowed to 5.8% in October, providing some relief to renters.
“We are beginning to see some relief for renters who have faced major rent hikes over the past five years,” he said.
Before the pandemic, the 10-year average for rental growth was just 2%, Lawless noted.
Although the growth rates have halved from their peak, they remain higher than the historical average, he pointed out.
Lawless emphasized that, despite the slowdown, rents are still unaffordable, and low vacancy rates mean landlords retain significant market power.
Affordability might improve as incomes rise, but he did not expect rents to decrease substantially in the near future.
Tenant advocacy group Better Renting released a report showing 89% of renters were paying higher rent than last year.
The report’s sample of 1,466 tenants revealed a median rent increase of 10%, highlighting the widespread impact of rising costs.
Better Renting’s executive director, Joel Dignam, explained that tight vacancy rates leave tenants with little bargaining power in the market.
As a result, many tenants are unable to find more affordable options when facing rent increases.
The survey found that tenants were struggling to save money and had to cut back on essential spending to pay rent.
“People are saying they can’t afford their medication, and they’re buying less healthy food to make ends meet,” he said.
“Some have said that there’s no joy left in their lives, and they’ve had to give up things they enjoy.”
“Tenants simply don’t have the option to save,” he explained. “They have no choice but to spend just to survive.”
He also noted that the psychological toll is significant, as people are unable to plan for their future.
Research revealed that many Australians now expect to rent for their entire lives, prompting Baker to call for more action.
She argued that governments need to improve rental conditions, as renting is likely to be the long-term reality for many people.
“Australia has changed as a nation,” she said. “Renting will be the permanent living situation for many young people.”
Baker urged policymakers to focus on improving rental conditions, ensuring that renting is a place people want to live in.
Dignam agreed, emphasizing that the unaffordable housing market should push governments to make renting more secure and affordable.
He suggested policies like capping rent increases and making it harder to evict tenants without just cause to improve conditions.
“People shouldn’t have to leave renting just to get a decent home,” he said. “However, many simply can’t escape renting.”
“Governments are not taking action to provide people with a way out of this situation,” he concluded.
