Australia’s rental accommodation crisis

Rents are surging across Australia

Various factors have come together to create Australia’s rental accommodation crisis. The signs of a crisis are all around us. People are living in cars and people aged 50 plus are seeking share-house accommodation. 

It is legitimate to talk about a crisis in rental accommodation in Australia, with record low vacancy rates and asking rents in capital cities increasing by double digit percentages over the last twelve months (Figure 1). 

Various factors are pushing up the demand for rental accommodation

A surge in rents of this magnitude is the result of a big shift in demand relative to supply. Factors which have increased the relative demand for rental accommodation include:

  • a return to a high rate of immigration following the pause during the pandemic; 
  • various natural disasters across Australia which have forced many people in the rental market; and 
  • Higher than usual levels of renovations and alterations, partly due to the HomeBuilder grant program, although the amount of activity has fallen from its recent peak in 2021-22.

At the same time as supply is being constrained

At the same time, various factors have likely reduced the supply of rental accommodation relative to the baseline (see the chart below), including:

  • a trend toward short-stay accommodation (e.g. Airbnb), particularly in holiday areas (e.g. Gold Coast, Byron Bay) and in inner cities where business travellers like to stay; and
  • a return of relatively wealthy expatriates to Australia during the pandemic who have purchased properties which previously served as rentals. 

Furthermore, there has been a continuation of various policies which restrict higher density accommodation in Australia’s cities and towns, limiting the supply of housing overall.

The result is ultra-low rental vacancy rates

Whatever the reasons, rental vacancies are now at very low levels, at under 1 percent of rental accommodation in Brisbane, Adelaide, Perth, and Hobart (Figure 2). Policy settings from different levels of government are partly responsible. The rate of immigration is under the influence of the federal government and state and local governments have restricted residential development through various zoning, heritage, and environmental policy settings. This is not to say such policy measures are necessarily undesirable, but their impacts on dwelling supply need to be recognised. 

Adept Economics Director Gene Tunny spoke about the rental accommodation crisis with Australian Taxpayers’ Alliance (ATA) Chief Economist John Humphreys on the ATA EconChat livestream on 7 March 2023:

On his Economics Explored podcast, Gene has previously spoken with Peter Tulip, Chief Economist of the Centre for Independent Studies, about how town planning and zoning rules can substantially reduce the supply and increase the cost of housing:

The high cost of housing and what to do about it w/ Peter Tulip, CIS – EP134 

Published on 14 March 2023. Please get in touch with any comments or questions via or by calling us on 1300 169 870.

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