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Vulnerable Private Renters: Evidence and Options

Commission research paper

This research paper was released on 25 September 2019. The paper examines the experiences of vulnerable people in the private rental market. It also discusses policies that affect outcomes for vulnerable renters.

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Visual summary

  • Setting the scene

    The private rental market houses a quarter of Australian households …

     

    The private rental market houses a quarter of Australian households: private rental 25%, owned 68%, social housing 4%, other 3%
  • Setting the scene

    … and there has been a shift towards private rental housing.

     

    This figure shows the share of households by tenure type from 1921 to 2016, based on Census data. Owner–occupation grew strongly from the mid-1940s to the mid-1960s to make up more than 70 per cent of households, with private renting declining commensurately. After a period of relatively little change, the trend reversed from the mid-1980s onwards. The proportion of households in public housing also fell over the latter period.
  • Setting the scene

    Property prices soared above incomes, making saving for a home more difficult …

    Ratio of property sales prices and rents to mean household disposable income, per cent change relative to 1995

    Property prices have soared above incomes and rents in the past two decades. This figure shows the per cent change in the ratios of mean property sales prices and mean rents to mean household disposable income, from 1995 to 2018. The property price ratio increased significantly since 2001, while the rent ratio has only grown slightly.
  • Setting the scene

    … and the supply of social housing has not kept up with population growth.

    Households in social housing: number and rate per 1000 of the population

    This figure shows the number of households in public housing, community housing and state owned and managed Indigenous housing, and the combined rate of all three forms of social housing per the total population, from 2007 to 2018. Public housing slowly declined since 2007 (while community housing grew) but still accounts for the large majority of all social housing. The total number of households in community housing remained steady at just below 400 000, representing a modest decline in the rate of social housing per 1000 of the population.
  • Setting the scene

    These forces have meant that the rate of private renting has increased across all age groups …

    Rate of private renting by age group, 1996 to 2016

    Private renting is on the rise among nearly all age groups. This figure shows the rate of private renting by age group for the five years of the Census from 1996 to 2016. Renting has grown more common among all age groups except for 85 years and over.
  • Setting the scene

    … and family types.

    Contribution to the overall increase in private renting by household type, 1996 to 2016

    Families with children have led the increase in private renting. Contributions from each household family type to the overall increase in the rate of private renting between 1996 and 2016. Most of the increase in renting came from families with children and single parents.
  • Setting the scene

    These forces have also led to more low- and middle-income households moving into the private rental market.

    Percentage point change in the proportion of households in different tenures between 1994‑95 and 1995‑96 (averaged), and 2015‑16 and 2017‑18 (averaged), by equivalised household income quintile.

    Households in the low and middle income quintiles have moved into the private rental market in greater numbers.This figure shows the percentage point change in the proportion of households in different tenures between 1994–96 and 2015–18, by equivalised household income quintile. In every quintile, private renting has grown more common, and both owner–occupation and public renting have grown less common. Private renting increased the most in quintiles 2 and 3, offset mostly by a decrease in owner–occupation. The decrease in public renting was greatest in quintile 1, for which it was larger than the decrease in owner–occupation.
  • Setting the scene

    Consequently, private renters are more likely than before to have low or middle incomes.

    Equivalised income decile distribution of private renter households, 1994-95 and 1995-96 (averaged) and 2015-16 and 2017-18 (averaged)

    The private rental market is made up of more low to middle income households, and fewer high income ones. This figure shows the equivalised income decile distributions of private renter households in 1994–96 and 2015–18. The 1994–96 distribution is made up of a slightly greater proportion of households in the middle and upper income deciles than those in the lower ones. Contrastingly, the 2015–18 distribution is slightly concentrated around the low-to-middle income deciles.
  • Setting the scene

    The population of low-income households grew by 42 per cent since 1994-95, while the number of low-income private renter households increased by 134 per cent.

     

    This figure shows the per cent change in the number of low-income private renters, and the number of low-income households generally, between 1994-95 and 2017-18. The number of low-income private renters grew at a faster rate than the number of low-income households over the period.
  • Overall performance

    Overall, the private rental market performs well. Affordability has been steady over the past two decades …

    Median rent‑to‑income ratios (dashed lines indicate averages)

    The left panel shows that the share of low-income private renters in rental stress declined between 1994-95 and the mid-2000s, before increasing at a slower rate in the following decade. By 2017-18, the share was slightly lower than in 1994-95. The right panel shows the number of low-income private renters in rental stress between 1994-95 and 2017-18. There were just over 300 000 private renters in rental stress at the beginning of the period, with the number increasing in most years and having doubled by 2017-18.
  • Overall performance

    … and most renters are satisfied with their housing.

     

    Low-income renters are less satisfied with their housing. This figure shows two charts. The first contrasts the share of low-income and non-low-income renters who are ‘satisfied or very satisfied’ with their dwelling; low-income renters are significantly less satisfied than non-low-income renters. The second contrasts the share of low-income and non-low-income renters who are ‘satisfied or very satisfied’ with their location; low-income renters appear slightly  less satisfied than non-low-income renters, however this difference is not statistically significant.
  • Overall performance

    Among low-income private renters, the rate of rental stress has declined over the past two decades but the number in rental stress has grown.

     

    This figure has two panels. The left panel shows that the share of low-income private renters in rental stress declined between 1994-95 and the mid-2000s, before increasing at a slower rate in the following decade. By 2017-18, the share was slightly lower than in 1994-95. The right panel shows the number of low-income private renters in rental stress between 1994-95 and 2017-18. There were just over 300 000 private renters in rental stress at the beginning of the period, with the number increasing in most years and having doubled by 2017-18.
  • Overall performance

    The combination of a growing share of low-income private renters in the rental market and their high rate of rental stress has lifted the rate of rental stress among all low-income renters.

     

    This figure has two panels. The left panel shows that the share of low-income renters who are private renters has increased and the share who are public renters has declined over the period 1995 to 2018. The right panel shows the share of low-income renters in rental stress from 1994-95 to 2017-18, and the share of low-income private and public renters in rental stress from 1994-95 to 2017-18. Rates of rental stress have increased among all low-income renters taken together, but the rate for private renters has generally declined. Because the rates of rental stress remain high in the private market, this has increased the rate of rental stress among all low-income renters.
  • Vulnerable renter issues: Affordability

    In the private rental market, many vulnerable renters struggle with affordability, spending far more than 30 per cent of their income on rent …

    Distribution of rent-to-income ratios, 2017‑18

    This figure shows the distribution of rent-to-income ratios among low-income and other private renter households in 2018. Low-income households tend to have higher rent-to-income ratios.
  • Vulnerable renter issues: Affordability

    … and having little money left over to meet other expenses.

    Distribution of the amount of money left over after subtracting household rent from household income per week, 2017‑18

    This figure shows the distribution of residual income (household income minus rent) for low-income and other private renter households in 2018. Low-income households tend to have less money left over after paying the rent.
  • Vulnerable renter issues: Affordability

    The 'stickiness' of rental stress has increased over time.

    While many people exit rental stress quickly, the proportion of private low-income renters in persistent rental stress has increased

    While many people exit rental stress quickly, the proportion in persistent stress has increased. This figure shows the share of people in rental stress in a given year who were in rental stress 1, 2, 3 and 4 years later. This is done for four five-year cohorts: people renting from 2001 to 2005, people renting from 2005 to 2009, people renting from 2009 to 2013 and people renting from 2013 to 2017. Around 40 to 50 per cent of people exit rental stress after the first year in stress across every cohort. In the 2009 to 2013 and 2013 to 2017 cohorts nearly half of the people in rental stress in the first year were also in rental stress four years later. In the 2001 to 2005 and 2005 to 2009 cohorts less than a third of the people in rental stress in the first year were also in rental stress four years later.
  • Vulnerable renter issues: Certainty of tenure

    Private renters tend to move often …

    Distribution of the number of times moved in the past five years, by tenure, 2013‑14

    Private renters are more mobile than owner-occupiers or social housing tenants. This figure shows the distribution of times moved in the past five years, by whether an individual is an owner-occupier, private renter or social renter. The majority of owner-occupiers and social renters did not move at all. Private renters were most likely to have moved once.
  • Vulnerable renter issues: Certainty of tenure

    … and mostly by choice …

    Main reasons for most recent residential move by private renters, 2013‑14

    Infographic: 74% of the most recent residential moves were voluntary, 19% were likely to be involuntary and 7% were unclear.
  • Vulnerable renter issues: Certainty of tenure

    … but a material proportion move involuntarily …

    Share of private renters who most recently moved due to a notice from a landlord, by various household characteristics, 2013‑14

    This figure shows the proportion of private renters who most recently moved because of a landlord notice, by various household characteristics. Households where the reference person was unemployed and low-income households were less likely than private renters in general to have moved for this reason. Single-parent households and households where reference persons were reliant on benefits, had low education, had a disability or long-term health condition, or were 65 or over were more likely.
  • Vulnerable renter issues: Certainty of tenure

    … which can impose great financial stress on low-income households.

    Share of renters unable to raise $2000 within a week for an emergency

    Low-income renters have smaller financial buffers. This figure shows the proportion of private renters who would be unable to raise $2000 within a week for an emergency, by whether the renter lives in a low-income household. 40 per cent of low-income private renters would be unable to raise this money, compared to just 13 per cent of non-low-income private renters.
  • Options: Affordability

    Commonwealth Rent Assistance (CRA) improves affordability.

    Distribution of rent-to-income ratios for low-income households receiving CRA, 2017-18

    Commonwealth Rent Assistance improves affordability. This figure shows the distribution of rent-to-income ratios among low-income private renter households where CRA is received, and a counterfactual distribution without CRA, in 2018. The figure shows that rent-to-income ratios would be higher for these households without CRA – the median rent-to-income ratio with CRA among this group is 29 per cent, and would be 39 per cent without CRA.
  • Options: Affordability

    CRA is the clearest path to lowering rental stress …

    Per cent of households in rental stress within selected groups, 2018

    Rental stress with and without Commonwealth Rent Assistance. This figure shows the proportion of households currently receiving CRA which would be in rental stress with and without CRA payments by household vulnerability characteristic. The figure shows a higher proportion of households would be in rental stress without CRA.
  • Options: Affordability

    … and is well targeted to low-wealth and low-income households …

    Share of payments made to low-wealth and low-income households in 2018 among working-age households

    Share of a range of government income support payments (for example the Age Pension) going to low-income or low-wealth working-age households (in the bottom 40 per cent of households when they are ranked by equivalised net wealth) in 2018. Among working-age households, 92 per cent of CRA goes to low-wealth households, and 71 per cent to low-income households.
  • Options: Affordability

    … particularly older households who do not own their home …

    Share of payments made to low-wealth and low-income households in 2018 among non-working age households

    Estimates for non-working age households. Among non-working age households the equivalent figures are 83 and 80 per cent.
  • Options: Affordability

    … but CRA, which is indexed to consumer price inflation, has not kept up with rents …

     

    Rents have grown faster than the consumer price index. This figure shows, from 1995 to 2019, the change in average rental costs (as measured using the Survey of Income and Housing), the CPI and the CPI rent price index. The figure shows that the first of these series has grown the most, followed by the CPI rent price index, and then the CPI.
  • Options: Affordability

    … which has resulted in the number of recipients receiving the maximum (capped) payment rising steadily since 2000.

     

    The number of CRA recipients receiving the maximum payment has risen steadily since 2000. This figure shows a rising number and proportion of households are eligible for the maximum payment. In 2001, 57 per cent or 556000 households were eligible whereas 80 per cent or over one million households were eligible in 2018.
  • Options: Certainty of tenure

    Notice periods for landlord-initiated, ‘without grounds’ or ‘no fault’ terminations vary across states and territories.

    Minimum notice periods for evictions without grounds and where the owner is intending to sell the property

    Notice periods for ‘no-fault’ terminations are short in some jurisdictions. This figure is a column chart that shows minimum notice periods for without-grounds evictions and evictions where the owner is intending to sell the property, by state/territory.
  • Options: Institutional investment

    Land taxes lower yields and discourage institutional investment.

    Annual rate of land tax applied based on an investor’s aggregate land holdings

    Land taxes are progressive and vary greatly across states and territories. This figure shows the rate of land tax for different land portfolio sizes in each state and territory. Both the rate of taxation and portfolio value threshold for taxation varies substantially by jurisdiction. Effective average tax varies between zero and three per cent.

Download the visual summary

  • Key points
  • Media release
  • Contents
  • Australia's private rental market works well for most people, most of the time. The market has adapted to a fast-growing population as well as to several structural shifts — stemming from the coincident rise in house prices as well as to the declining availability of social housing.
  • These forces have culminated in an increase in the share of the population renting privately since the mid-1980s — a reversal of the long run decline in this share since World War II.
  • Once considered a short-term form of tenure for young people, more families with children are renting nowadays, and they are renting for longer periods.
  • However, there are concerns with vulnerable private renters, most of whom have low incomes.
    • More than 1 million low-income households (2.65 million people) rented in the private market in 2018, a figure that has more than doubled over the past two decades.
  • Many vulnerable private renter households struggle with rental affordability. Two-thirds spend more than 30 per cent of their income on rent — the commonly used benchmark for identifying 'rental stress' — and many spend much more. 170,000 households have less than $250 available each week after paying rent.
  • Many households experiencing rental stress successfully escape within 12 months, generally through securing higher paid work. However, others are becoming 'stuck', with about half of these households still experiencing rental stress four years later.
  • While renting privately offers flexibility — desirable for many — moving involuntarily can be disruptive for low-income households, families with children, older people and people with a disability. It can heighten the risks of financial hardship and homelessness, especially if little notice is given.
  • The overall success of the private rental market in responding to the different forces at play highlights the need not to stymie the responsiveness of rental housing supply with unnecessary taxes or overly stringent regulations.
  • Commonwealth Rent Assistance has proven to be effective in supporting low income and low wealth households (including retirees) that do not own their own homes. However, maximum payment rates have fallen behind average rents over the past two decades.
  • Some state-based residential tenancy laws could do more to improve certainty of tenure for vulnerable tenants. For example, there are wide disparities across the country between the minimum notice periods required for eviction on sale of a property, from as little as four weeks to more than eight weeks.
Media requests

Leonora Nicol, Media Director – 0417 665 443 / 02 6240 3239 / media@pc.gov.au

Affordability is the key challenge for a growing number of vulnerable private renters

Private rental market affordability has remained steady in Australia, but there has been a rapid rise in the number of low-income renters.

A Productivity Commission report found the private rental market works well for many of the 6.3 million people renting, with rent paid compared with income steady, and the supply of rental properties increasing by more than one million over the past two decades.

But the number of low-income households in rental stress has doubled in the past two decades.

"Increasingly, we see families stuck in rental stress. We found that over 600,000 households are in rental stress, that is, they spend more than 30 percent of their incomes on rent. Of these, around 170,000 families have $35 a day or less left for all their other expenses after paying rent," Commissioner Jonathan Coppel said.

"More low-income households rent privately than ever before, in part because home ownership and public housing have become less attainable," Commissioner Jonathan Coppel said.

Half of households who experience rental stress successfully escape within 12 months, generally through securing higher paid work. But, the other half still experience rental stress four years later, the report found.

"Poor rental housing outcomes are a key driver of disadvantage. There has been a lot of discussion lately about whether income support payments are high enough."

"The role of Commonwealth Rental Assistance in addressing disadvantage has not really been part of those conversations and there is merit in looking at whether raising the level of rental assistance would be effective," Commissioner Coppel said.

The report found that more families with children are now renting, as well as people with a disability and retirees.

"Around 1 in 5 moves are involuntary, often as a result of the landlord selling their property, and the costs of eviction can be particularly high for vulnerable households. Having 30 days to find new accommodation if you are elderly or have family responsibilities can be very difficult," Jonathan Coppel said.

The Productivity Commission report Vulnerable Private Renters: Evidence and Options can be found at: www.pc.gov.au/renters

Media requests

Leonora Nicol, Media Director – 0417 665 443 / 02 6240 3239 / media@pc.gov.au

  • Cover, Copyright and publication details, Contents, Acknowledgements, Abbreviations and Glossary
  • Key points
  • Overview
  • Findings
  • Chapter 1 Setting the scene
    • 1.1 The private rental market is growing and changing
    • 1.2 The stakes are high when designing policies that affect vulnerable renters
    • 1.3 What this paper is about
  • Chapter 2 Vulnerable renters: patterns and trends
    • 2.1 Identifying vulnerable private renters
    • 2.2 How vulnerable are private renters?
    • 2.3 Disadvantaged people are increasingly renting in the private market
  • Chapter 3 Rental affordability
    • 3.1 Rents in the private rental market have moderated following a period of strong growth
    • 3.2 Rental affordability is poor for many in the private rental market
    • 3.3 Increasing numbers of households experience rental stress
    • 3.4 Rental stress in the private rental market has become more persistent
  • Chapter 4 Housing tenure and quality
    • 4.1 Certainty of tenure
    • 4.2 Dwelling quality — size, condition and location
  • Chapter 5 Selected policies to assist vulnerable private tenants
    • 5.1 Institutional investment may improve certainty of tenure, but would require large tax changes
    • 5.2 Commonwealth Rent Assistance is the clearest path to improving affordability
    • 5.3 Residential tenancy laws should give vulnerable renters greater certainty
  • Appendix A Consultations
  • Appendix B Supplementary information
  • References

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