A review of housing rental affordability released on Thursday shows that for most people on low incomes, finding an affordable place to rent is impossible.
Anglicare Australia’s annual snapshot of rental affordability shows that while there has been a slight increase in affordability for low-income households, for the vast majority of those living on benefits – such as Newstart or on the minimum wage – the cost of renting causes significant financial hardship.
When we talk about housing affordability the most common discussion is about the cost of buying a house. And yet for 30% of people, while buying a house may be an ambition, the more immediate housing affordability issue is affording to pay rent rather than the mortgage.
For the past five years Anglicare Australia has conducted a national survey of properties to provide a “snapshot of rental affordability”. Rather than survey households, the snapshot looks at the marketplace by examining the cost of renting properties nationwide. This year it involved a survey of some 65,614 properties.
The report considers the affordability of these properties for households on different government benefits such as a single people on Newstart, those on the single parenting payment, the disability support pension, as well as those on the minimum wage.
It considers an affordable property one in which the rent takes up “less than 30% of the household’s income”. This accords with the general view of a household being in “housing stress” if “housing costs are greater than 30% of disposable income and that household’s income is in the bottom 40% of the income distribution”.
The review also considers the size of the property to ensure it is “appropriate” – while a one-bedroom apartment may be affordable, it is not appropriate for a family of four living on the minimum wage.
And while most studies consider a range of housing costs, only rent is considered in the report. And rents have risen significantly over the past decade:
Whereas wages have risen 41% in the past 10 years, rents have risen nationally by 54%, and for a good deal of the past decade they were rising even faster than residential housing prices.
So renting costs more in real terms for the average wage earner, but it is even worse for those on the minimum wage, which has risen just 3% over the past year.
For the minimum wage to have kept pace with the rise in rents over the past 10 years, it would need to be $80 a week more than the current amount of $640.90.
The situation, however, is worst of all for those on Newstart. It only increases in line with inflation, and the consumer price index in the past 10 years has risen just 31%.
The Anglicare Australia snapshot shows some very slight affordability improvement in 2014, but the situation remains incredibly damming.
It found, for example, no improvement for those on Newstart. In 2014 only 0.04% of the listed properties were within the affordability range for a single person on Newstart – this year the level is just 0.02%.
Most improvement came for those on the minimum wage. Last year only 1.6% of rental properties would have been affordable for a single person on minimum wage – this year 2.3% of all properties meet that criteria.
An increase – yes – but hardly one to suggest life on the minimum wage has improved considerably.
Anglicare Australia notes this small shift is mostly due to an increase in properties available in the private rental market this year. Rents across the country rose by just 2.4% in 2014 – less than the 3% increase in the minimum wage.
But of course the increases vary across the states. In the 12 months up to March 2015, the biggest rise in rents has been in Sydney, which saw a 2.9% increase – whereas in Canberra rents actually fell 2.5%:
Noting the difference in affordability across the nation, the report found there was great variance of affordability not just between states but regions within states.
As a general rule regional areas had better affordability than capital cities. For example, in Adelaide only 2.2% of properties were both affordable and appropriate for a couple on the age pension, compared with 8.8% in the southern country regions of South Australia.
Similarly, while only 0.4% of properties in the greater Sydney and Illawarra areas are affordable for a couple on the aged pension, in the NSW Riverina area 23.6% of properties were affordable for a couple, and 11.8% in NSW’s central west:
The report also found that when it comes to being able to have an affordable rental property, it is much better to be a couple than single. As Stephen Stills would say, it pays to love the one you’re with. Nationally, 23.8% of properties were found to be affordable for a couple on minimum wage with two children, compared with just 2.3% for a single person on the minimum wage.
There is also a difference for those on the aged pension: 3.4% of properties are affordable for a couple on the aged pension compared with just 0.9% for a single aged pensioner.
But above all, having a job is the biggest factor for being able to afford appropriate rental accommodation.
Only 0.9% of properties nationwide are affordable for a family of two with both adults on Newstart, compared with 6.9% for a similar family where one adult is on the minimum wage and the other is on the parenting payment.
The report argues that these very low levels of affordability for those on low incomes highlights the need to change the taxation system away from current policies which “help individuals with high wealth profit from the housing market” – especially if such policies don’t lead to any significant increase in housing stock, and if they also increase house prices.
Negative gearing is thus squarely in their sights, but the report argues that rather than remove it completely, perhaps it could be altered such that “negative gearing might only be claimed on new homes or existing properties that are identified affordable housing for low-income households”.
The report also argues for an increase in Newstart payments, and at the very least for it to be indexed in line with cost of living rather than inflation.
The reality is those on lower incomes spend more of their weekly expenditure on rent than wealthier households. The CPI estimates that on average 6.7% of households’ weekly budget is spent on rent, whereas the cost of living index for households on government benefits estimates that 14.8% of such households’ weekly expenditure goes on rent:
The rental affordability snapshot is a sobering read. While the affordability of housing gets almost constant coverage, it shows that for the lowest-income households the issue of housing affordability is much more desperate and critical.
Out of the 65,614 properties surveyed, the snapshot found only 10 would be affordable for a person living on Newstart.
Such a number certainly highlights there are two levels of housing affordability crisis – those who struggle to own the roof over their heads get the most attention; the other relates to those for whom affording to live under any roof is a struggle.