I am a single parent with two school-aged children earning a decent income but around 60 per cent of my pay every month goes on rent; childcare takes a good chunk of the rest.
I pay $650 per week for a small two-bedroom flat in an apartment complex in Petersham in Sydney’s Inner West. Ten years’ ago the same apartment was leased for $390 per week. In that time the flat’s value has more than doubled and it is now estimated to be worth around $885,000.
This puts me squarely in the category of Sydney renters paying ‘extremely unaffordable rents’, according to the Rental Affordability Index (RAI), produced by National Shelter, Community Sector Banking and SGS Economics, and well above the definition of households in housing stress, defined as being a household paying more than 30 per cent of income in rent.
May figures from the RAI showed that pensioners and working parents have been priced out of the rental market in all metropolitan areas across Australia and that rental affordability dropped over the last quarter in all metropolitan areas, except Perth.
For me, it is an unsustainable situation and part of the reason I’m moving back to the UK and to my family this month after 12 years in Australia.
But there are thousands of other Sydney and regional NSW renters who are also paying a fair whack of their wages in rent and it appears that there is little help in sight for them.
Census 2011 figures show that just over one-quarter of NSW households rent privately and a further 5 per cent rent in social housing. In NSW, 76 per cent of lower-income renter households, that’s those in the bottom 40 per cent of income distribution, were considered to be in rental stress in 2013- 14.
National Shelter’s and Choice’s report Unsettled: Life in Australia’s private rental market says that 49 per cent of renters in metro areas personally pay more than $301 a week rent versus roughly a quarter in regional areas and 42 per cent of renters overall. This rises to 55 per cent for renters in Sydney and Melbourne.
The house price boom has not only hurt first home buyers it has also hurt renters.
As more and more middle income earners are priced out of home ownership they swell the ranks of renters and they can often afford to pay higher rents, effectively pushing lower income households further out of the rental market as landlords charge what they can get away with.
While the most vulnerable groups are pensioners, single parents, people with disabilities, students and anyone on benefits, single people and couples on low wages or where one partner doesn’t work are also in the firing line. That’s a lot of people (and a lot of voters).
But the situation is unlikely to be eased by NSW Premier Gladys Berejiklian’s housing affordability reforms announced last week, which focused mainly on expanding stamp duty concessions for first home buyers and slugging foreign property investors with higher duties and taxes.
Tenants NSW says the NSW government needs to remember renters
Tenants NSW Senior Policy Officer Ned Cutcher is underwhelmed by the NSW measures.
“It’s not an increasing affordable housing package, that’s an access to debt package,” Mr Cutcher says. “It is disappointing. Clearly there are a lot more people for whom home ownership is more of a dream than an aspiration and they’re doing it tough.”
“We would have liked to have seen something more direct tackling the issue of rental affordability [although] the government has left it open to have a look at housing affordability targets.”
The government needs to look at what’s driving rising rents and pay more attention to renters, he adds.
Indeed, the new reforms could aggravate the situation for renters as the government steers first home buyers towards new apartments and shifts investors away from them.
Instead, he suggests there needs to be a raft of reforms and at least some of these should address negative gearing and capital gains tax discount, perhaps limiting negative gearing to new properties (as the Opposition has suggested) and reducing capital gains tax discounts, hoping to encourage long-term investment.
“The combination of negative gearing and capital gains discount encourages investment churn: buying and selling properties because they’re interested in gains rather than yields,” Mr Cutcher says.
Changes to negative gearing and capital gains discount would be significant because they could ‘change the way investors consider how and why they’re borrowing large amounts of money and investing in property’.
But he cautions: “People [investors] aren’t going to give this up lightly but it isn’t sustainable.”
Changing these price signals would enable landlords to continue to make money out of leasing property but could shift their attitudes to viewing rentals less as bricks and mortar that goes up in value and more like somebody’s long-term home.
“It’s all about keeping things going the way they [have]been going – helping a few people out on the margins – but if you’re not actually looking at the systems in place, we’re going to be here in another three or four years’ time having the same conversation about stamp duty concessions and first home buyers’ grants. It’s not a very imaginative solution.”
He also backs affordable housing targets for new developments to help increase supply and introducing a broad-based land tax to encourage investors to make the most effective use of their land, reducing vacant blocks and ensuring density and development where land is more valuable, for example in employment hubs.
He is an advocate for new social housing being built and the government offering more Commonwealth Rental Assistance for those on benefits, especially where it has not kept pace with the private rental market.
At a federal level, Mr Cutcher says Treasurer Scott Morrison’s idea of a bond aggregator model has legs.
This is where investors – companies or super funds for example – buy government bonds and the government loans the money cheaply to community housing associations to create relatively affordable rental housing.
He says renters would also benefit from having stronger legal rights in NSW because at the moment landlords can put up rents and terminate tenancies fairly easily.
Ultimately, he believes that the growing army of renters will force the government’s hand, at state and federal level and prove the catalyst to more decisive action.
“We need to be hearing from people raising families who have been renting for ten or 15 years but who don’t know where they’re going to be living next year. Increasing the visibility of people who rent, that’s going to drive these decisions.”
Economist and Mosman Mayor Peter Abelson says low income households under rental stress and first home buyers struggling to scrape together a deposit are the two critical housing problems in NSW.
“People at the lower end are really suffering from high rents. There are real problems.”
Long waiting lists for social housing, for example there are 40,000 households on the list in Sydney, and the widening gap between Commonwealth Rent Assistance and rental levels make the situation worse.
He suggests developers pay an affordable housing levy of 1.5 per cent of house sale value on new units. This is preferable to rent controls, Abelson says, which can be an administrative headache (for example, if tenants’ incomes change or they sublet) and reduce capital values with minimal impact on the affordable housing available.
The centrally-controlled fund could then subsidise rents for low income households.