Australia faces it’s worst ever housing crisis as rental affordability has dropped to its lowest point in nearly a decade.

Lower income households are spending more than half of their income on rent, according to a recent release in the ANZ CoreLogic housing affordability report.

The Australian Bureau of Statistics released data on households’ monthly spending that indicated an 8.2 percent increase throughout the year with a 13.9 percent rise on non-discretionary expenses which are essential for daily living, such as rent, mortgage repayment utilities or groceries.

The rental market has tightened as rent inflation has spiked for tenants, accelerating in both capital cities and regional areas, with an increase of approximately 6 percent over the year to February 2023.

Source: Australian Bureau of Statistics 

University of Wollongong nursing student Cleo Sissian said she is deferring next year just so she can work as much as possible to have enough financial stability to complete her degree.

“Throughout the year there have been points where I was so broke, I had no money,” she said.

“There is a term called rent poor, the idea in a first world country, that I think a maximum 40 percent of your weekly income should go towards your rent, but myself and all my friends in university are using 80 per cent towards rent.”

Miss Sissian expresses her frustration, explaining as a nursing student, her mandatory placement weeks means she is unable to work over some periods in the semester, leaving her with no income to afford rent.

“If I miss even one week of work, my rent won’t get paid, so we’re forced to go work in awful conditions and sometimes skip classes,” she said.

“We live pay-check to pay-check.”

Renters and homeowners experiencing financial hardship, due to housing expenses, came as no surprise when the Reserve Bank of Australia raised the cash rate for the 11th time, by 25 basis points to 3.85 per cent in May.

Source: Reserve Bank of Australia 

Although the interest rate has recently reached its highest point in over a decade, there is no indication of it slowing down in the foreseeable future. Economists expect the inflation to skyrocket to 4.6 percent before year’s end.

Will the RBA hike the cash rate in June and how will this impact you?

Miss Sissian said, she is already struggling with overdraw fees from her bank and if her rent does increase significantly, she will have to move somewhere else. “But there’s not much else,” she added.

“If my rent increases, I’ll have to work more, but I already feel like I’m working too much…too much where I’ve got to fit in university as well.”

As the RBA cash rate increases, landlords may pass on their higher monthly repayments to their tenants by lifting their rent, to cover increased mortgage repayments.

Impact Economics Lead Economist Angela Jackson, told ABC News that rising interest rates will increase pressures on renters.

“While renters are not directly impacted by rate rises, it may lead landlords to increase rents to recoup higher interest costs,” she said.

The RBA’s financial stability report acknowledges the majority of households and businesses demonstrate resilience in the face of the difficult economic conditions; the distribution of this resilience is uneven.

“The households most affected have been those on lower incomes, including many renters, and relatively recent borrowers who have larger debts (relative to income) and have had less time to build up savings buffers.”

As interest rates increase, more and more renters and home buyers struggle with affordability and face financial stress.

Numerous young adults believe they will never be able to buy a home, making the Australian dream out of reach.

As cost of living increases, tenant Cameron Hennock, who lives in a 5-person shared student house voiced his anger in a fear for his future as he describes, “buying a house is a big milestone in life, you know people say get a mortgage and kids.”

“How are we ever supposed to buy a house?” He said.

“I get so worked up thinking about it, I try not to, it makes me mad.”

“Soon we are at the age where we start to look at buying houses, looking for solid living, permanent housing. You can’t not buy a house; I mean you can pay rent for the rest of your life but that’s just too expensive and moving home is not an option for me.”

Similar to Cleo Sissian, Mr Hennock explained his difficulty in balancing work and university, particularly when he needs more shifts to keep up with the increasing expenses.

“We’re getting less shifts, same pay with higher expenses!” He said.

“I’m losing money, not getting the pay raise that is affected by inflation to be able to afford things like groceries and rent.”

“So, we end up with this negative feedback, where you’re getting paid less whilst you need to be paying more, it’s just not fair.”

“It’s just a cycle leading us into poverty,” Mr Hennock said.

ABS calculated there was a 0.9 percent decrease in the number of new loan commitments for owner-occupier first home buyers, which reflects a 16.2 percent decline from the previous year.

Australia is heading towards a severe housing crisis, with an estimated shortage of 106,000 homes by 2027.

Further ABS data shows mortgage interest charges as the main contributor for employee households, which skyrocketed 78.9 percent over the year, reflecting increases in home loan interest rates.

Homeowner Anthony Johnson, a single parent paying off his mortgage debt, said the increase in interest rates has been challenging and he is currently in the process of arranging with a mortgage broker, so he can change banks again to try and get a better interest rate.

“I want to be able to provide for my kids, I like to have a bit of money aside so I can help my son purchase his first car. He’s 21 and doesn’t have enough money. I want to be able to do these things as I did the same for my oldest son,” he said.

“But my 16-year-old, I really worry about what I’m going to be able to help him with cause I’m bottom of the barrel…just overwhelmed with making payments and keeping the mortgage happening.”

“It doesn’t rain, it pours. Everyone’s talking about shock and horror in the RBA, but I don’t see the government doing anything to support the taxpayers that have worked all their life.”

“It feels like a kick in the gut at the moment.”

Housing affordability by UOWTV