Rental stress: Shock as Hobart becomes Australia’s least affordable city

The latest Rental Affordability Index shows that Hobart is now Australia's least affordable capital city.

The latest Rental Affordability Index shows that Hobart is now Australia's least affordable capital city. Photo: Getty

Hobart has leapfrogged Sydney to become Australia’s least affordable city according to new figures, as city renters continue to struggle.

The latest Rental Affordability Index (RAI) shows that Hobart has overtaken Sydney to become the least affordable capital city, followed by Adelaide, Brisbane, Melbourne, Canberra and Perth.

The RAI is a price index for housing rental markets around Australia. Released twice a year by National Shelter, Community Sector Banking and SGS Economics & Planning, it provides a snapshot of rental affordability relative to household incomes.

What is rental stress?

Rental or housing stress occurs when affordable housing is unavailable, and rent consumes a disproportionately high amount of household income.

Households paying 30 per cent of their income on rent have an RAI score of 100, indicating these households are at the critical threshold for housing stress.

For such households, the prohibitive cost of housing undermines their ability to pay for basic necessities including food, power and water, health services and medication, travel and transport, education, household goods and debt repayments.

Measuring ‘rental stress’. Source: Rental Affordability Index, May 2018

Hobart unaffordable even for average income earners    

“The most shocking result is that Hobart has overtaken Sydney as the least affordable city in Australia,” National Shelter executive officer Adrian Pisarski said.

With an RAI of 102, rents in greater Hobart are now unaffordable even to the average-income household, where the median-rental household has a gross income of $61,300 a year.

The average household in Hobart faces rents of 29 per cent of total income.

Hobart has usurped Sydney as Australia’s least affordable capital city. Source: Rental Affordability Index, May 2018

Low incomes, interstate migration, and an inadequate supply of rental housing are driving Hobart’s rental affordability crisis, Mr Pisarski said.

“There’s a lot of pressure in the market with people moving to Tasmania, Airbnb is also considered a significant issue down there as it takes a significant chunk of housing out of the market.”

Sydney: ‘extremely unaffordable’ for pensioners

As of September 2017, the median-rental household in greater Sydney had a gross income of $98,500 per annum with an RAI of 113, equating to ‘moderately unaffordable’ rents.

Greater Sydney remains ‘critically unaffordable’ for low-income households, with the average-rental household spending around 27 per cent of its total income on rent.

“The average household must travel over 20 kilometres west of the Sydney CBD, to areas such as Blacktown and Liverpool, to find acceptable rents,” the report found.

In order to afford rent in greater Sydney, a single pensioner would have to shell out 94 per cent of their total income, making it the least affordable location for pensioners in Australia. With an RAI of 32, rents for single pensioners are classified as ‘extremely unaffordable’.

Sydney’s least affordable postcodes. Source: Rental Affordability Index, May 2018

Melbourne: hospitality workers can’t afford to live in ‘Australia’s food capital’

Greater Melbourne has declined in affordability since 2013-14, and currently has an RAI of 126.

The median rental household in greater Melbourne has a gross income of $88,400 a year, and faces housing costs of about 24 per cent of its total income, classified as ‘acceptable’ according to the RAI.

Low income earners in Melbourne struggle to find affordable housing, with rental unaffordability “spreading outwards” from the Melbourne city centre.

“Australia’s food capital is unaffordable for hospitality workers and minimum-wage households,” SGS Economics and Planning partner Ellen Witte said.

“Full-time hospitality workers may pay 34 per cent of their income on rent, forcing them into housing stress.”

Melbourne’s least affordable suburbs. Source: Rental Affordability Index, May 2018

Perth: still most affordable

Rental affordability in Perth continues to improve, according to the RAI, with Western Australia’s capital remaining the most affordable capital city for renters.

The median-rental household in greater Perth has a gross income of $84,200 per annum, with an ‘acceptable’ RAI of 145.

The average-rental household in greater Perth face rents at around 21 per cent of its total income, but rents remain unaffordable for lower-income households, with a single part-time working parent on benefits facing ‘severely unaffordable’ rents of 46 per cent of income.

Adelaide:  third-least affordable capital city  

Rental affordability in greater Adelaide has remained unchanged for the past 18 months, with an RAI of 117 in December.

Adelaide is Australia’s third-least affordable capital city, with unaffordable rents having spread to suburbs north of the city including Wingfield, Parafield Gardens and Para Hills.

ACT: affordability continues to drop  

The ACT recorded a RAI of 128 in the December quarter of 2017, with median households facing rents of 23 per cent of income, which is deemed ‘acceptable’.

But a single person on benefits faces ‘extremely unaffordable’ rents at 109 per cent of income, while a single part-time working parent on benefits faces rents of 58 per cent of income, or ‘severely unaffordable’.

Brisbane: more affordable

With an RAI of 121 in the December quarter, rents in Brisbane are considered ‘acceptable’ for the first time since the inception of the RAI in 2012, with the average household facing rents of 25 per cent of total income.

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