Locked Out: How Australia’s Housing Crisis is Crushing a Generation of Renters

‘Close to 65% of my income is spent on rent. This situation makes it impossible for me to plan anything else, and I even have to ask my parents for help sometimes.’

Amanda, 24 years old, is a Chinese student who graduated with a degree in Interaction Design a year ago and is currently living in Sydney.

‘To be honest it didn’t meet my ideal expectations so I had to adjust my work planning.’

In Sydney, there are many young people like Amanda who are anxious about the high cost of housing. Increasingly, young people living in Australia are being pushed to the margins of the housing system by having to revise their ‘future plans’.

For Amanda and other young people of her generation, ‘moving’ or ‘raising the rent’ has become a daily routine. Despite Australia’s reputation for ‘fair chance’ and high quality of life, the ‘good times’ seem to be slipping away from young people. In particular, renters are the biggest casualties of the structural imbalance in the housing market.

A Structural Crisis

According to a CoreLogic report, housing prices in Perth, Adelaide and Brisbane have risen by more than 65% since 2020, much higher than Sydney and Melbourne. At the same time, vacancy rates have fallen below 1%, meaning tenants are not only paying high rents, but also struggling to find a place to live amidst extremely tight competition for housing.

“When I arrived in Sydney during the start of the university term, I couldn’t rent a suitable house at all. The main problem was still that the rent was too expensive, so I had to stay at my friend’s house temporarily first.”

Increasingly, young people – including students, recent job seekers, and even full-time commuters – are living in their cars, on couches, or in overcrowded group rentals. Sketchy living conditions can no longer provide them with a high quality of life.

While rising interest rates and inadequate housing supply are always attributed as important causes of the housing crisis. But there are still deeper causes that have been overlooked. The government has heavily incentivized home buyers through tax breaks and negative tax deductions, with no attention paid to the rights of renters. Although researchers Pawson and Martin from the University of New South Wales point out in their report: In recent years there has been a large number of emerging private landlords in fringe areas such as Western Sydney, who have been incentivized primarily by government tax policies to use housing as an investment vehicle for wealth accumulation.

This trend has ostensibly eased supply pressures in the rental market, but in reality it has resulted in a decline in housing quality, instability in tenancy relationships and further marginalization of vulnerable groups, reflecting deeper systemic problems in the Australian housing market.

Unaffordable Rental Burden

For Amanda it’s not just a financial strain, it’s a psychological torture.

“I’m even now starting to debate whether I want to stay and work in Australia or not. I just want a safe and stable space where I can work and live in peace. But even that minimum requirement is becoming out of reach in the current market.”

According to a report by Homelessness Australia, 52% of the feedback from services for homeless people in Australia came from housing finance issues, where they could not afford to pay high rents. The probability of people on low incomes being able to rent affordable housing in major Australian cities has fallen by more than 50 percent over the past decade. At the same time, federal and local government investment in social housing construction has continued to decline.

The data also confirms that housing affordability in Australia is continuing to deteriorate. According to data provided by CoreLogic to the Grattan Institute 2024, housing prices in Australia are already growing much faster than the average person’s wages, and housing prices as a share of middle household income have risen dramatically. Housing prices have also increased from 4 to 8 times the median income in the past, and nearly 10 times in busy cities like Sydney.

A coordinated policy response needed to address the rental crisis

“While the Australian states are making progress in some areas towards improving the rental experience across Australia, we have to recognize that there are unresolved issues in the area of rental affordability and rent increases.”

The NSW Tenants Union says the rental market has not improved as expected, even though some states have said they have made adjustments in line with renter-friendly policies.

According to the Housing Occupancy and Costs report released by the Australian Bureau of Statistics (ABS), private renters spend a median of about 26% of their weekly income on rent, much higher than the homeowners with mortgages’ proportion . This suggests that renters are spending a higher proportion of their income on housing despite generally having lower incomes, reflecting the continued pressure on lower income groups in the rental market.

The Government and relevant departments can respond to the rental crisis in the following ways:

• Sustained increase in affordable housing

The federal and state governments should significantly increase their financial commitment to public and community housing programs and prioritize the construction of affordable housing in cities and regions with the greatest housing pressures in order to alleviate the rental difficulties of low-income and marginalized populations.

• Reform of housing-related tax policies

In order to alleviate the problems of increasing housing burden and imbalance in the rental market, the government should take stronger intervention measures at the legislative and tax levels. Gradually reduce preferential policies for investment-type home purchases, such as negative gearing and capital gains tax exemptions, in order to curb the tendency to financialize housing and redirect the housing market to a “residence-based” track.

Only with the dual force of rental protection and tax structure can the housing market return to the essence of “housing first” and realize a more equitable and sustainable development path.