The housing crisis continues and tenants can’t do anything about it
The national vacancy rate has fallen to its lowest level on record and the rental market is tilting firmly in favor of owners.
According to Domain, tenants will face more increases in asking rents and competition will intensify among families trying to find housing.
So if you are renting or trying to find a place to rent, should you expect sympathy?
Tightest rental markets on record
If you’ve lived in your own home for a few decades and haven’t had to live in the private rental market, you might not know what modern renters have to do to find a home.
The power imbalance between landlords and tenants is extreme.
And much of the problem has to do with the contradiction at the center of Australia’s approach to housing.
Housing is one of our most basic needs, but a generation of Australian policymakers who were bewitched by the siren call of “consumer choice” ended up building a system that restricted the housing choices available to people, especially for low-income families.
And it’s fueling a generation and wealth divide between landlords and renters, and a severe housing crisis.
Take a look at the tables below from Domain’s latest rental vacancy report.
Nationally, the vacancy rate hit a record low last month, with record lows recorded in Sydney and Brisbane.
The “vacancy rate” is a percentage that indicates the proportion of the rental stock estimated vacant over a month. A vacant rental property is defined as a property that has been on the market for more than 21 days.
The following chart shows the volume of vacant rental units that were on the market last month.
The number of rental listings has dropped dramatically over the past 12 months after COVID restrictions were lifted and the international border reopened.
Canberra was the only city to see an annual increase in rental stock, up 17.2%, after more rentals were added to its market in 2022.
Domain also posted a graph to show how rental listings fared in the COVID era.
It shows what happened when the international border was closed in 2020, what happened when Melbourne endured its prolonged lockdown and large numbers of people left Melbourne and Sydney for other states, and what happened after the borders reopened to international students and skilled migrants.
“All capital cities continue to operate in a landlord market, with a shortage of supply and availability of vacant homes driving up asking rents and further intensifying competition among tenants,” Domain said last week.
“This creates a difficult environment for potential tenants and highlights the need to address the rental crisis in many areas.”
We must talk about pacified income
At the moment, for people trying to find accommodation on the private rental market, it’s extremely easy to feel like you don’t matter as a person.
It feels like you’re nothing more than a bank account to some owners (but not the good ones, which can be fantastic).
The euphemism in investment circles is that rentals provide landlords with a source of “passive income“.
But a more honest expression would be returned pacified, in too many circumstances, because that describes the situation of too many tenants trapped in the rental cycle.
Try this thought experiment.
Imagine that you are not renting by choice. You were kicked out of the real estate market because the pace of house price increases pushed home ownership out of your reach years ago, and you didn’t have mom and dad’s bank to back you up. give you a boost.
You somehow got a place to rent, so you consider yourself lucky. But you only found out how bad the place was after you lived there. It has extremely poor insulation, for example, so energy costs are crippling. The internet connection is terrible. The plumbing is still blocked because tree roots have gotten into the pipes.
But after a year, your landlord tells you he’s raising the rent by $50 a week because that’s where the market is. They want you to pay them an extra $2,600 this year.
It’s insulting, but what can you do? Rental vacancy is at its lowest.
The average cost of a move is about $4,000 (excluding deposit), so you cannot afford to move. You know that, because you’ve had four rentals in five years and it broke you.
So you’re basically done. How can you save enough money to get out of the rental cycle and buy your own home? You resign yourself to the fact that you will likely face multiple rent increases.
You have become a peaceful source of income.
Why don’t owners have to provide a lot of information?
And remember, this all comes after the degrading process you had to go through to secure the rental in the first place.
On your application form, you had to provide a copy of your passport, driver’s license and bank statements.
You had to provide your rental history for the past five years, along with contact numbers.
You had to provide details of your current job, including whether you had a full-time or part-time position, how long you had been there and what your gross monthly salary was, along with your bosses’ contact numbers.
You had to do the same for your old workplace, including what your gross monthly salary was there.
You had to explain why you left your last tenancy, and how long you planned to live in that tenancy. You had to describe, in 250 words or less, why you wanted to live in that particular place, as if you were having a job interview.
You were also asked if you plan to buy your own property anytime soon.
And you answered all these questions, because what choice did you have?
But again you wonder why the same amount of information is never given to you about the owners.
As a potential tenant, it would obviously help you make better decisions about where to live if you received a lot more information during the application process. For instance:
- What are past tenants saying about this place? Did they like living here? Did they have problems with the owner?
- Are there any issues with the plumbing here? If so, how long have these problems existed?
- Does this place have a mold problem?
- How long does it take for the interview to take place here?
- What have been the average annual energy bills for this location over the past five years?
- What is the internet connection here?
- How often has the landlord raised the rent in the past few years? How much has the rent been increased each time?
- Does the landlord plan to increase the rent in the next three years? If yes, how much each time?
- How many investment properties does the owner own?
You might quibble over the questions, but you get the point.
It should be a two-way street with important info like that, but it’s not in Australia.
Renters typically have less than 30 minutes to inspect a place, and they’re largely flying blind with information after that.
And if they can’t afford to buy their own property, there are few housing options available to many people other than in this private rental market.
Why is it like this?
Build it, and they will come
Well, like the Australian Housing and Town Planning Research Institute highlighted in 2020policymakers put Australia on the path to “landlordism” years ago.
Over the past 40 years, policy makers have turned their backs on social and public housing, and they have not explored alternative housing models with much enthusiasm.
It is either home ownership or the private rental market where the rights of owners take precedence.
Professor Andrew Scott of Deakin University says Australia’s abandonment of major post-war construction and funding deals after the 1970s created a very different society in the 1990s.
“The effects of this are shocking – almost 14% of Australians now live in poverty after accounting for their housing costs. This proportion climbs to 50% among public tenants.
“The number of low-income private tenant households in rental stress – who pay more than 30% of their income in rent – has doubled since the mid-1990s to now exceed 700,000 households.”
It makes you think of Australian “society”.
Former British Prime Minister Margaret Thatcher said there is no society, only men, women and families.
But it is worth remembering the context of this quote.
When she said this, Mrs Thatcher was arguing that individuals need to start taking more responsibility.
She gave three examples of the types of complaints made by people who needed to take greater personal responsibility. And coincidentally, one of those complaints was about housing.
“I am homeless, the government must house me!” she imitated.
“They blame their problems on society and who is society? There is no such thing! There are individual men and women and there are families, and no government can do anything except through the people, and people look to themselves first.”
So if you’re struggling to find accommodation and feel like you’re not seen as part of society, take heart.
You can’t be part of something that doesn’t exist, so it’s one less thing to worry about.