The committee has looked at home ownership and noted the
gradual decline in the number of people who own their own home and the
increasing challenge for aspiring first home owners to achieve the goal of home
ownership. In the second part of this report, the committee's focus turns to
those who through necessity must rent—those whose circumstances do not extend
to home ownership. It considers the Australian rental market, its changing
profile and the challenges and difficulties that low-income earners experience
in accessing suitable accommodation. The committee also looks at public and
community housing, at people with particular housing needs and the homeless.
Affordable rental market
A number of submitters noted that, in the context of affordable housing,
much attention has been given to home ownership but considerably less to
For example, Ms Molly Johnson, the Australia Institute, stated:
While barely a week goes by in which the issue of housing
affordability is not in the news, the effect on renters seldom makes the
In her view, the expense of buying a house was only one aspect of the
housing affordability issue. The cost of housing for those who rent was equally
part of the problem.
In this chapter, the committee considers Australia's private rental market, the
supply of rental properties, the costs of renting, the growing disparity
between rents and income, the changing profile of the rental market, rental
stress and tenancy laws.
Supply of rental properties
In its 2012 update on Australian housing, the National Housing Supply
Council (NHSC) recorded that the housing gap increased by 28,000 dwellings over
the year to end-June 2011, taking the cumulative shortage of dwellings since
2001 to 228,000. Assuming that historic demographic and supply trends continued,
the Council projected that the national shortfall in houses would increase to
370,000 dwellings by 2016, 492,000 by 2021 and 663,000 by 2031.
Dr Harley Dale, HIA, noted that Australia had produced on average around
156,500 new homes per annum. Based on a projected 35 million population target
by 2050, he suggested that:
Under the most conservative of estimates that one could come
up with, we need to average 180,000 dwellings per annum between now and the
year 2050 if we are to adequately and successfully house our growing and ageing
population. The difference is very wide and it is growing almost by the day.
In his view, the 180,000 figure was a bare minimum.
Clearly, as the Department of Social Services stated, 'Australia does not build
enough houses for its growing population'.
This shortfall in the construction of new homes not only affects
potential home owners but also those who rent. In this regard, the NHSC reported
in its 2012 update on housing supply in Australia that there was a lack of
properties that were affordable and available for lower income renters. The
Council estimated that there was a deficit of 539,000 affordable rental
properties available for this group. Available rental properties included some that
were affordable for less affluent households but were already occupied by
higher income earners. Sydney, Melbourne and Brisbane had the 'greatest
absolute and relative shortages'.
For example, in Sydney there was one affordable and available rental property
for every 15 very low-income households.
Moreover, the trend is toward further deterioration in the availability
of affordable rental properties.
Increasing house prices and rising
As noted in the first part of this report, house prices in Australia have
risen considerably over recent decades. In summary, median house prices had
increased from around three times average household earnings in the early 1990s
to around five times in 2009. The 2009 Henry Review noted that higher house
prices reduced rental affordability, as rents need to increase if investors
were to maintain their rental yield.
This continuing shortage of rental properties and rising rents have affected
low-income households in particular. A low-income household is defined as a
household whose equivalised gross income falls in the lowest 40 per cent of the
Further, such a household is deemed to have an affordability problem if their housing
costs exceed 30 per cent of their income because it has less money to spend on
The NHSC explained:
These households have less choice than more affluent groups
because they face binding affordability constraints, have less ability to absorb
increased housing costs, and are often displaced from affordable existing
housing by established households and those higher up the income spectrum.
According to the NHSC, lower income renters faced a worsening situation
between 2007–08, most notably in the capital cities. In the Council's view,
this trend highlighted the fact that those at the lower end of the income
distribution, many of whom would be in the private rental market, were likely
to be most affected by constrained housing availability. It stated further:
Given that rents have continued to rise, and outstripped
house price growth in 2011, rental affordability may have continued to
deteriorate, at least in comparison to the situation faced by home owners.
Growing disparity between income
In addition, increases in income have not kept pace with rises in rent.
The Henry Review observed the growing gap between the cost of renting and
household income. In 2009, the ratio of rents to average weekly earnings had
risen to its highest level since the late 1980s. The review explained:
As at 5 June 2009 there were 418,000 individuals and families
paying more than 30 per cent of their income in rent even after receiving Rent
Assistance; 129,000 of these were paying more than 50 per cent of their income.
Many of these people, especially age pensioners and disability support
pensioners (who make up around one-quarter of Rent Assistance recipients) are
likely to have limited capacity to increase their incomes. The number of Rent
Assistance households paying more than 30 per cent of their income in rent is
at its highest level since 2000.
The range of affordability measures calculated from the NHSC's 2009–10
Survey of Income and Housing show that:
In 2009–10, 60 per cent of lower income private renters faced
direct housing costs of more than 30 per cent of their income, an increase from
57 per cent in 2007–08.
A larger proportion of lower income renters in capital cities
faced housing costs of more than 30 (and 50) per cent of income than did low-income
renters outside those cities.
New South Wales, followed by Queensland, had the highest
proportion of lower income renters paying more than 30 (and 50) per cent of
In a more recent publication, the NHSC found that compared to a decade ago,
the average nominal rent paid had increased by 75.8 per cent for houses and
91.8 per cent for other dwellings (mostly flats/apartments). In contrast,
average earnings had risen by 57 per cent over the same period. It also noted
that vacancy rates remained low at around 2 per cent—a further factor suggesting
that the rental market remained tight.
Overall, the Council concluded:
More than ever, Australia's supply challenge is not simply to
add to housing stock but also to achieve substantial growth in the supply of
affordable rental stock where it is needed most. With a decline in home
ownership rates, likely to be exacerbated as the Baby Boomers (who have high
ownership rates) move on, pressure on the private rental market is likely to
increase in the years to come.
Many submitters referred to the growing disparity between income growth
and increases in rent and how this gap made it much harder for low-income
earners to find affordable and appropriate rental properties. For example, Mr Ian
Pritchard, Regional Development Australia, Gold Coast, referred to a report on housing
affordability on the Gold Coast, which revealed considerable disparity between
income growth and housing cost growth. Between 2006 and 2011, the median
household income increased by approximately 13 per cent whereas rental payments
increased by approximately 35 per cent.
Mr Mark O'Brien, Tenants Union of Victoria, similarly noted that the cost
of renting to income ratios had increased substantially over the last 20 to 25
years. He gave the following example:
At the moment in Melbourne only about 0.4 per cent of
lettings are affordable for a low-income household, so fewer than one in 100
lettings are affordable for a low-income household.
Anglicare also highlighted the scarcity of affordable rental properties
for low-income earners. To determine how many properties are available for
people on very low incomes, Anglicare conducts an annual one-weekend review of
the private rental market. In 2014, it found 13,000 private rental market properties
available for rent of which only 23 would have been affordable for people on low
In its submission, the National Affordable Housing Consortium spoke of a
'strong and consistent unity of message across the board', which contended:
...the long term relationship between incomes and house prices
has been seriously eroded over the past 20 years and, without action to address
the underlying factors, this trend will continue to create serious
affordability problems, particularly for those households in the bottom 40% of
Ms Felicity Hand, Department of Social Services, told the committee that
low-income households face affordability challenges and limited choices in the
private rental housing market, which had been exacerbated by a period of higher
than CPI rent growth between 2007 and 2013. According to Ms Hand, between 2007
and 2013 private rental costs, on average, had grown significantly faster than
CPI. Most recently, however, growth in rents had slowed and in the year to June
2014, rents had risen more slowly than CPI for the first time since 2006.
Australia's private rental market has been changing from its traditional
role as a transitional phase for households moving into home ownership or social
housing to a long-term sector for a significant number of households.
Mr O'Brien stated that it was never contemplated that the private rental sector
would continue to be as big as it is. He explained further:
It was anticipated that most people would achieve home
ownership and the few who could not would be housed by the government. So, in
effect, the system would become a two-part system.
Ms Johnson, the Australia Institute, observed that the growing number of
renters and increasing house prices in Australia was making it difficult for
aspiring home owners to enter the property market and was driving up the cost
Likewise, Dr Wendy Stone noted the changing profile of the rental market with
tenants renting for longer terms and the sector no longer serving as a transition
into home ownership for many Australians. She informed the committee that:
The number of renters who have rented for more than 10 years
has increased quite significantly in the last 15 years largely because we now have
people living in the private rental sector long term who once would have had
social housing or access to home ownership through being able to afford a home.
The pressure in the system is great for low- to moderate-income households,
spatially and in other ways.
Professor Kath Hulse referred to the 'boiling frog' of the private
rental sector. In her view, home ownership had attracted 'a lot of attention'
with social housing receiving some interest, but the reality was that the
private rental sector was 'growing'. According to Professor Hulse, the sector
grew by 18 per cent between 2006 and 2011, which was twice the rate of
household growth in Australia.
She noted in particular that while there was a range of people on different
household incomes in the sector, there were many people on low incomes who were
Also, Mr O'Brien indicated that discussions about rental housing
affordability were often bedevilled by the assumption that it was about young
singles, when the largest proportion of households in the rental market were
families with children. He pointed out:
They are the people who are also confronting these
affordability problems and are being forced to make difficult decisions about...their
children's future and trying to find an affordable place in the market so that
they can prosper as a family. 
Importantly, he underlined the fact that the market creating such
difficulties for renters was 'a very mainstream housing market' and not
confined to special groups.
Higher income earners now renting
One of the notable shifts in the profile of those in the private rental
market has been the increasing number of higher income earners occupying a
significant proportion of the private rental market. With supply already
stretched, this tendency has intensified competition in the market.
In its submission, the Council to Homeless Persons referred to the phenomenon
of households 'renting down', that is higher income households occupying low
rent properties. It suggested that this trend demonstrated that the problems
faced by low-income renters were not simply 'a problem of housing
affordability, but a problem of housing allocation'.
Professor Hulse also noted that much of the problem with access to an
affordable private rental property was around competition. Referring to
research she had undertaken, Professor Hulse informed the committee that there had
been an increase in higher income renters during the period 2006 to 2011—so
there was pressure in the sector. Further, Professor Hulse explained that people
letting properties were making a risk assessment and renting the property to
higher income households rather than the lower-income ones if they thought
there was a risk.
Indeed, an AHURI study on affordable dwellings in Australia's private rental
market found that:
...even if the private rental market worked perfectly and
allocated all affordable rental dwellings to low-income households, there are
simply not enough affordable private dwellings to go around. The fact that much
of this stock is taken up by higher income households only worsens the
Elaborating on this trend for higher income earners to rent, Professor Hal Pawson,
City Futures Research Centre, noted that some people who could afford to own a
home do not necessarily elect for home ownership. Rather than purchase a small
unit or house on the outskirts of metropolitan areas, which is affordable, they
choose to rent closer to the city to meet their housing needs. They then
squeeze out of the rental market those for whom renting is the only choice.
As Associate Professor Judith Yates explained:
...as our cities become more and more pressured by population
pressures, affordable housing moves out and so people would rather have the
lifestyle preferences of rental housing which they can access closer to the
amenities they want, and, particularly for two-income households, two-earner
households, have access to more jobs.
Dr Chris Martin, Tenants' Union of New South Wales, similarly observed
that some higher-income earners preferred to rent for lifestyle or labour market
decisions and occupied stock that might otherwise be affordable to low-income
people. He also noted the growing number of people renting longer into their
This tendency, in combination with limited rental stock, exacerbated the problem
for low-income earners finding affordable housing.
Indeed, Dr Martin argued that the shape of the rental market had altered
'particularly to the disadvantage of low-income renters'.
The Department of Housing and Public Works, Queensland, likewise observed the increasing
numbers of people on medium to high incomes choosing to rent in order to save a
deposit to buy.
This subsequent demand for affordable rental housing creates additional
pressure on low-income renters.
Housing stress is a measure of housing affordability where the
proportion of household income spent on basic housing costs (that is, rent or
mortgage) is calculated. Rental stress, therefore, is a situation where a
household's housing costs (excluding government rent assistance) exceeds 30 per
cent of the gross household income. According to the Australian Institute of
Health and Welfare (AIHW), any household spending 50 per cent or more is said
to be in severe housing stress.
Dr Martin stated bluntly:
What we call 'housing stress' is poverty by another name.
The AIHW found that the proportion of low-income households paying more
than 30 per cent of their income in rent had risen. In 2007–08, 37 per cent of
low-income households were in rental stress compared to 44 per cent in 2011–12.
The proportion of rental stress was higher (60 per cent) for the lowest 10 per
cent of households by income in 2011–12.
It noted that of the 1.2 million low-income households across Australia,
44 per cent were in rental stress in 2011–12, an increase from 42 per
cent in 2009–10 and 37 per cent in 2007–08.
Other witnesses agreed that the national picture for households in the bottom income
brackets had deteriorated.
Professor Hulse noted that not only had the situation worsened for low-income
earners but had extended further up the income scale. She cited the stark
housing shortages that occurred in towns and regional centres in Queensland and
Western Australia due to the mining boom and the concomitant escalation in
demand for housing.
Drawing on their experiences or from their own region or state, a number
of submitters highlighted the fact that many low-income earners were under
For example, Mr Adam Mills, City of Melbourne, cited statistics indicating that
the median rent in the City of Melbourne exceeded income growth by 150 per
cent. Currently, half of the city's renters were in housing stress, paying
greater than 30 per cent of their gross income on rent.
He went on to explain that there was poor access to affordable housing for
low-income essential service workers with only 10 per cent of all rental
housing affordable to this group within the City of Melbourne, which only
improved marginally to 18 per cent within a 56-minute commute.
Mr Pritchard, Regional Development Australia, Gold Coast, referred to a
commissioned report completed in March 2014 that clearly illustrated the extent
of housing stress in the Gold Coast region. It also showed that the majority of
those in housing stress were low-income renters. Essentially, the report found
that based on 2011 figures, of the 46,000 households spending in excess of 30
per cent of their income on housing costs on the Gold Coast, approximately
35,000 of them were low-income households. Of the 80,000 low-income households
on the Gold Coast, 35,000 households, or about 43 per cent, were in housing
stress. Of these 35,000 households, approximately 24,000 were in rental stress
and about 11,000 in mortgage stress.
More broadly, the National Council of Women of Australia maintained that rental
affordability for households on the lowest incomes continued to worsen. It
The impact of the housing crisis on lower income households
is more acute because of a lessened capacity to compete for housing. For the
lowest 10% of households by income, rental stress jumped from 49.2% in 2007–8
to 60.8% in 2009–10.
It should be noted that while the figure of 30 per cent of income is
generally accepted as a measure of rental stress, the burden of paying such a
sizeable sum on rent falls more heavily on some. In this regard, Regional
Development Australia, Gold Coast, observed that the 30 per cent ratio did not
take account of other relevant factors such as the number of people per
household and disposable income.
Along similar lines, and as discussed in chapter two, Dr Gennadi
Kazakevitch, Associate Professor Lionel Frost and Mr Luc Borrowman
argued that this ratio approach did not capture the 'dynamics of housing stress
for different compositions of households' and failed to reflect the complex
nature of housing and its interrelated nature with other costs. They suggested
Housing is the major item in many households budgets and for low-income
groups the financial situation after housing costs have been met is a pressing
As a more accurate reflection of rental stress, they supported using the
residual stress measure, which was based on the level of disposable income that
remained after housing costs had been met.
As noted earlier, HomeGround also favoured this approach, arguing that:
...for people on very low incomes, ratio measures of affordable
housing are meaningless. When someone pays 25% of their income in rent and
still cannot afford other basic necessities such as food and clothing, the
result is extreme poverty, residual measures of housing affordability at least
make allowances for the cost of other necessary purchases in calculating what
Mr Andrew Mills, HomeStart Finance, also acknowledged that the
definition of housing affordability varied for every household and was
dependent 'on particular life circumstances, such as childcare costs, whether
you need to own a car, travel to work'.
He conceded, however, that from a broad policy perspective, it was not possible,
in a practical sense, to evaluate different circumstances for every household
and accepted that the 30 per cent threshold provided a useful benchmark for
The committee understands the practicality of using the 30 per cent
benchmark as a measure of housing stress but notes the importance of keeping in
mind the different composition and circumstances of individual households and that
some will bear the burden of renting more heavily.
Level of hardship
Organisations providing assistance to people under rental stress
understand the level of hardship that high rents are causing. Mr Simon Schrapel,
Uniting Communities, informed the committee that those working in the
organisation's financial counselling services regularly see people who are
paying not 30 per cent but upwards of 50 per cent of their disposable income in
private rental accommodation.
Drawing on Shelter SA's experiences, Dr Alice Clark noted that Shelter SA's
consultations with people living in the community also show that people living
on low incomes pay 50 per cent or more of their income just on their house. She
went on to comment:
So if you are on a very low income that leaves you
practically nothing to buy necessities—things like medicines and health care,
school excursions and indeed food.
Anglicare WA explained that the emergence of a group of private renters
routinely accessing financial support services was 'a relatively new phenomenon'
and indicated strongly that the lack of affordable housing was affecting a
widening proportion of the community and 'increasing their vulnerability'.
Mr James Bennett, Tenants Union of Victoria, stated simply that workers
with the Union 'often see people on average weekly earnings now struggling to
meet average rent in a number of areas'.
This statement ties in with the observation that the difficulties for
Australian renters were very much a product of today's mainstream rental
Additional housing costs
When considering housing stress, it is important to recognise that the
actual expenditure on rent is not the only drain on the household housing
budget. There are additional costs associated with housing that further eat
into a household's finances. Energy, in particular, is a major source of
expenditure. Mr Schrapel indicated that some renters, notably people on the
lowest income, were paying upwards of 10 per cent of their remaining disposable
income on energy. He explained further:
In a lot of rental homes landlords have not traditionally
made their properties particularly energy-efficient or put in appliances that
have allowed that sort of comfort level to be realised.
Also, based on his experience as CEO of Uniting Communities, Mr Schrapel
observed that low-income housing tends to be located on the fringes. He
explained that it is 'the costliest place to live in terms of transport and
everything else, so you have a displacement effect which has a compounding impact
on low-income households'.
Mr Schrapel suggested that when 60 per cent of a person's disposable income is
consumed on those essential things there is not much left for necessities such
as food. In his assessment, a lot of low-income people were 'experiencing
extreme housing stress'.
Mr Ian Yates, COTA, likewise noted that housing affordability
encompassed other costs. For example, Mr Yates observed, and as Mr Schrapel
mentioned, people in the rental market not only had significant rental outlays
but were also frequently living in housing that was not energy efficient. He
Because there is not a lot of incentive for a landlord to
make a house energy efficient, pensioners are paying higher gas and electricity
bills out of a tight income stream because they are not in efficient housing.
In addition, Mr Yates referred to renters living long distances from
where they needed to be and highlighted the cost of transport, which, he
argued, should be considered part of the affordability of housing issue.
Affordable and appropriate housing
Many submitters stressed the importance of recognising that affordable
housing must also be appropriate housing. In its submission, COTA observed that
too often the only affordable housing was not appropriate, 'either because of
its design, or its geographic position and lack of proximity to necessary
Proximity to transport, services,
Some witnesses referred to the families and individuals on limited incomes
who, unable to find affordable, appropriate and secure housing, were
increasingly being forced to relocate to areas on the urban fringe without
adequate services and infrastructure and removed from their social supports.
For example, Mr O'Brien, Tenants Union of Victoria, noted that the natural
consequence of cities such as Melbourne commanding high rents meant that
low-income people were being driven further away from good-amenity suburbs
around the inner city and even the middle-ring suburbs. He suggested:
So the less than one per cent of lettings that are affordable
in Melbourne are now located in a sort of ring around the outer fringes of the
city. It has also forced low-income households to occupy housing in places like
Dromana, which is an old holiday destination. You have people now living
permanently in places that were never really intended that way in housing that
was never intended for permanent occupancy.
The committee has referred to the costs of transport for those living on
the periphery of metropolitan areas. But being relegated to the outskirts of
cities has implications that go beyond higher transport expenses. Indeed, the move
to the outer suburbs, according to Mr O'Brien, effectively forces people on
benefits to areas that have less access to employment, services and transport
thereby creating an environment for future social problems. In his view, such a
development does nothing to avoid the 'intergenerational transmission of
poverty or inequality', which happens simply by the normal processes of the
Drawing on her work with Shelter SA, Dr Clark also noted that people at the
lowest end of the rental market were being forced from where they want and need
to live, which might be near work or family:
We see people being pushed out and away from services and
infrastructure, and also the quality of those homes—the private rental
properties—is deteriorating. Landlords don't care. They have got a line of
tenants waiting to inhabit their places and they are not doing maintenance, so
there are serious issues for private renters.
Professor Pawson also spoke of the working poor being pushed
increasingly towards the fringes of Australia's capital cities—places remote
from 'the jobs-rich inner areas'. Likewise, Ms Jacqueline Phillips, Australian
Council of Social Service, referred to a spatial segregation driven by access
to affordable housing that:
...creates marked inefficiencies in lower paid labour markets
and imposes high transport costs on often quite low-income households.
In her view, housing should be seen not only in an economic context but
also as part of Australia's infrastructure.
As Associate Professor Wilkins, University of Melbourne, noted, you cannot
divorce affordable housing from 'infrastructure development and in particular
transport infrastructure, both public and private'.
Indeed, Professor Jago Dodson, RMIT University, spoke of spatial and social
polarisation and the differentiation in housing markets between the core of Australian
cities, the middle suburbs and the outer suburbs, where housing is most
affordable for those on low incomes. He argued:
The combined impacts of those locational processes affect
access to employment and access to public and social services such as health and
education services, which compounds not just affordability problems but also liveability
or wider opportunity questions for households in the lower income brackets.
These issues then need to be picked up in other portfolio areas such as health,
education, welfare assistance and that sort of thing. That dimension is another
issue that we have not coordinated very well within our policy architecture.
This lack of access to transport, services, education and jobs also has
productivity implications for Australia. In this regard, Mr Adrian Pisarski,
National Shelter, indicated that Australia would 'suffer major productivity
consequences because the country's workforce will not be located where it is
needed'. He observed that people who want opportunities to educate themselves
or receive medical services or get a job would not be close enough to do it. So,
in his view, Australia had in the making, 'a really major productivity issue
over the long term'.
Security of tenure
Professor Andrew Beer, Centre for Housing, Urban and Regional Planning (CHURP),
referred to the growing trend of Australians remaining in private tenancy for longer
periods of time throughout their life. He told the committee that, in reality, renting
for many people was no longer a transitional phase but a stage that would
occupy most of their lifetime. Although people may stay in the private rental market,
they often move from dwelling to dwelling and in many cases unwillingly. In
this regard, Professor Beer observed:
We found that involuntary moves were a major reason why
people moved from one tenancy to the next—that is, they are being evicted
because the landlord either wants the property back for another purpose, or
they have been deemed to be a poor tenant, or the rent has gone up and they are
being forced to move...But that is only one of the reasons people move.
According to Professor Beer, there was an attempt several years ago to
introduce seven-year leases but he did not think that the proposal 'ever really
took off in any substantial way'. He explained further:
The structure of our housing industry supply for the private
rental market is such that most landlords are investing in the private rental
market in order to achieve capital gains rather than returns on investment.
This therefore means that they want to be able to liquidate their asset at any
point in time, and so they are unwilling to give longer term leases.
In its submission, the Institute for Social Research, Swinburne
University of Technology, also commented on the structure of the Australian
private rental market. It stated:
...lease lengths are typically very short, rents can be
increased at regular intervals, and tenants have little control over their
home, and in most jurisdictions can be asked to leave with very little notice
compared with many developed countries.
Indeed, many witnesses referred to uncertain tenure as a major concern.
In its submission, National Shelter suggested that the rental market 'was not
currently set up to meet the needs of long term tenants'. It noted that
investors were mainly small households with only a marginal attachment to the
rental market, which meant that they were unable to provide any level of
security for their tenants. Furthermore, the regulation of the industry was
based around short-term tenancies and short notice periods for eviction, even
where there was no breach of tenancy conditions.
In this context, Dr Stone recorded that 40 per cent of renters move
three or more times in a five-year period, which represented eight per cent for
She stated further:
The private rental sector at the moment is creating
disadvantaged households, wearing them down through move after move after move,
and not enabling the sort of maintenance that social housing once did or the
growth that home ownership provided to households.
Lower income tenants experience these disruptions most keenly,
particularly vulnerable groups such as disability tenants, families with
children and indigenous households.
Cost of moving
In its submission, the National Affordable Housing Consortium noted that
one thing often overlooked in the regular tenancy law reviews was the personal
and systemic costs that resulted from a bias to short term lets and a
disaggregated rental investment market. In its view, these were 'really
national housing policy matters rather than residential tenancy law matters'.
A number of submitters have similarly referred to this lack of security in
tenure and the associated costs of moving borne by the people who least could afford
it. Dr Kazakevitch, Associate Professor Frost and Mr Borrowman voiced the
views of many other witnesses when they stated that lower-income groups were
the sector of the rental market least able to cope with the cost of moving:
Repeated moving reduces their ability to cope with these
burdens, eats into savings and depletes stocks of social capital that have been
built up in a current location.
Mr Pisarski highlighted some of the costs incurred for a family changing
schools, doctors, and pharmacists:
When you rent a property, every time you are asked to vacate
the property all of those networks that you build in a local community need to
be changed. That is a really major problem and a major cost for tenants over
the long term. If you have to do that, even once every two years, and you are a
tenant for 10 years or more—as most are now—then that is five major moves that
you have to pay for. That is a huge cost impost on tenants.
In a similar vein, HomeGround Services referred to the financial and
practical hardships caused by frequent moves.
It noted the difficulties that the lack of security of tenure in private
renting can pose for vulnerable tenants, including having to bear the costs of
frequent moves and exposure to unfair dealings by landlords. According to
HomeGround, Australian jurisdictions, compared to other countries, provide very
low levels of secure tenancy, imposing significant social costs on tenants and
the wider community.
Importantly, the additional costs of relocating and the disruption to
education, employment, and social networks and services may mean that a
household decides that a move is economically unviable or, for personal
reasons, unpalatable. Mr O'Brien noted that the high cost of moving may mean
that a tenant is prepared to settle for a higher rent rather than exercise the
choice of changing houses. In his view, tenants will tolerate rent rate
increases to a significant degree, even low-income tenants. He observed:
The amount of money that low-income tenants are spending on
rent is extraordinary. It is no wonder they have no money left for other
essentials. People will tolerate a lot for the security that their housing
Clearly, households under rental stress are forced to make difficult
choices between expenditure on necessities—whether to cut back spending on heating,
education, health services or even food.
Housing stress is indeed another name for poverty.
Rights of tenants
This matter of insecure tenancy in Australia introduces the issue of
tenants' rights. Mr David Chandler OAM, an independent industry adviser and
advocate for Australia's construction and housing industry, believed there were
flaws in the private rental market, which he described as:
...opportunist, often volatile and in some instances landlords
do not meet reasonable expectations.
In this regard, Professor Beer referred to what he termed 'clear
analysis by legal scholars working in this area' that showed that the rights of
tenants in virtually every jurisdiction in Australia compared to Europe and
other places were 'relatively weak'. From his perspective, Australian tenancy
legislation favoured the landlord rather than the tenant.
He referred to early research when evictions in South Australia were around
10,000 a year. In part, he attributed this high figure to the tendency of tenants
to accept that they had to move on. Professor Beer explained:
Even though they could take the landlord to the Residential
Tenancy Tribunal when the landlord was trying to move them on, most tenants
simply did not even bother to turn up to the hearings. So there is a culture of
accepting the relative powerlessness of tenants in the rental market.
In his view, people accepted this lack of power and the belief they had
few rights. Furthermore, according to Dr Beer, the fact that most tenancies were
for either a six-month or a 12-month period also contributed to evictions.
Dr Martin agreed with the proposition that tenancy was 'unnecessarily insecure'.
He explained that rental occupancy was insecure because 'tenancy laws, in every
Australian state and territory, allow for tenancies to be terminated without
Mr Pisarski informed the committee that at the moment landlords were able to
evict tenants without cause at the end of any lease. Consistent with the
evidence of other witnesses, he stated that most leases in Australia were
typically signed for six or 12 months.
On this same matter, Dr Stone noted the wealth of evidence in Australia concerning
problems created by structural conditions at access points for tenants in terms
of competition policies, which included discriminatory letting, frequent rent
increases and poor standards. She referred to an industry that basically
supported such practices including landlords increasing the rent regularly. She
also spoke about 'an environment of fear in which tenants cannot report
problems without being evicted or having rental increases'. Importantly, she drew
attention to forced and unwanted movement in rates which were far in excess of
other countries considered as good models.
One group of submitters, Dr Kazakevitch, Associate Professor Frost and
Mr Borrowmann, added weight to the contention that the Australian rental
market did 'not provide the same level of protection to renters as in other
Western countries', which particularly disadvantaged long-term tenants.
A number of other submitters also mentioned discrimination by landlords
and estate agents when selecting tenants and how low vacancy rates and
increasing competition between potential tenants only make the situation worse for
low-income renters or groups with particular housing needs.
For example, the Tenants' Union of NSW noted the high number of renters (both
low income and otherwise) who were reluctant to assert their tenancy rights. The
Tenants' Union referred to a recent survey, which suggested that 79 per cent
of tenants had put up with a problem rather than assert their rights.
The Western Community Legal Centres registered the same concern that 'in a
climate where the vacancy rate is low', tenants were reticent to exercise their
rights under the relevant state tenancy laws or seek help. They gave the
example of tenants not requesting repairs to be carried out or not taking
landlords to the Victorian Civil and Administrative Tribunal (VCAT) over unfair
rental increases for fear of eviction.
Benefits of affordable, appropriate and secure housing
Secure tenancy, affordable rents and appropriate housing have a critical
role in setting the foundations for a healthier and more productive population,
which in turn contributes to a strong economy and to government savings.
Dr Kazakevitch, Associate Professor Frost and Mr Borrowman contended:
Access to housing is a cornerstone of economic development
and welfare. Once a household has secured adequate housing, further important
life decisions can be made with more degrees of freedom.
Dr Julie Lawson and Professor Mike Berry, RMIT University, stated simply
that few material concerns were more important to Australians than the homes
they live in:
Secure, affordable housing contributes to our sense of
security, individual wellbeing, health and supports family stability.
Drawing on the research on secure occupancy in rental housing, they
The rental market has the potential to provide a refuge,
oasis and stepping stone for an increasing number of households. However,
compared to other advanced economies Australia's rental housing is the least
secure and most neglected pillar of our housing system.
Mr Scott Langford, Junction and Women's Housing, argued that people who
might be experiencing social and economic disadvantage need access to
appropriate services, so they can sustain their tenancy. According to Mr
Langford, secure tenancy was the bedrock of building capacity for social and
economic participation. In a policy context, he urged consideration be given to
such matters so that the policy design and solutions do not focus only on the bricks-and-mortar
Professor Pawson also underscored the benefits of having access to long
term tenure that provides continuity, security and predictability.
As did Mr Rod Astbury, Western Australian Association for Mental Health, who
suggested that safe and secure housing reduces the likelihood of mental ill
health. He argued that stable tenure:
...contributes to effective recovery, and it maximises the
opportunity for people with mental health issues to lead fulfilling and
Ms Maria Palumbo, Community Housing Council of South Australia, noted
the results from a preliminary survey on the benefits to the community stemming
from long term tenure. She reported that, according to conservative estimates
based on calculations on 15 people so far, the benefits range from 'something
like a $5,000-per-year return to the community up to about $60,000 per year'. She
For the program we are running, if you think about costs, it
is about an $8,000 package of support per person. In the case of homelessness,
that is actually considered expensive, but that is because we have run on this
transitional model that is about $3,000 a person and that is about churn. This
works on a housing-first model that is a lot more long term. It costs about
$8,000 a person, but compared with institutional care it is actually really
cheap. It prevents people from returning to institutional care, hospitalisation
and the like.
She conceded that the best return comes when people get jobs. She noted:
Where they are moving from welfare into employment, those
returns can be quite large, and in fact we have had those outcomes. But then
there are other returns to the community, where people have become more
productive. Those people are not as costly, if you like, because they are not
using services as much—they have reduced their need for services. And they are
more productive in that they are volunteering more and are involved in
community. So, for each different case the return is different, because people
have different capacity. There are people who are never going to be able to
work, but there is still a return that we can actually calculate and value. And
there are people we can move into a place where they are actually employed and
contributing, where the return is quite high.
Conversely, inadequate and insecure housing may give rise to escalated
domestic violence and overcrowding and poor educational, employment or health
Dr Baker, CHURP, referred to research that looked at the difference
between being in precarious, unaffordable and insecure housing versus equally
uncertain employment. She explained that when comparing the two, it was housing
that 'really' affected mental health within the household.
Dr Maree Petersen, University of Queensland, also linked secure
housing with the health and wellbeing of tenants. She stated simply:
The amount of anxiety and stress that is associated with the
threat of eviction is extraordinary. If you have other issues in your life as
well, like a very limited income and limited resources, that all adds up.
Likewise, in their publication, Exploring the Bi-directional Relationship
between Health and Housing, Dr Emma Wood and colleagues drew a similar
direct and positive connection between health and housing and housing and
Overseas experiences—security of
A number of witnesses referred to the stable rental markets in countries
such as Germany. For example, Mr Pisarski noted that in some European countries,
a tenancy can be entered into lasting over a decade or 20 years or more with 'really
solid rights' within that agreement. This practice, which favours long-term
tenancy, means that institutions were more likely to invest in residential
property because they have long-term certainty as well. In his view, it was 'a
win-win for everybody'.
The National Affordable Housing Consortium also noted that other
countries had achieved the goal of renters being able to enjoy stability and
longevity and with a greater measure of control in rented housing.
Dr Vivienne Milligan, City Futures Research Centre, contrasted the
different approaches to renting:
If you are a renter in Germany you can choose and put in your
own kitchen. If you are in Australia you cannot put a pot plant on the carpet
in case it leaks.
Professor Beer was another witness who cited Germany as an example of a
country with a much larger private rental market where government subsidies supported
and underpinned long-term tenancies. He remarked that both German and Austrian
leases were often for 10 years.
Also drawing on overseas experiences, Ms Marie Coleman, National
Foundation for Australian Women, noted that in a number of European nations and
in Britain people expected to have very considerable security of tenure in their
rental arrangements. She stated:
It is one of the reasons why so many people are very happy to
live in a rental situation—because they know it is unlikely that the house that
they are living in is going to be sold out from underneath them.
Ms Coleman contended that if Australia were to have more long-term
housing investments, which may be group housing or apartment living,
satisfactory outcomes for long-term renters would be far more likely.
Mr O'Brien also cited overseas countries where tenure arrangements worked largely
with indefinite tenancies. He explained:
They do not have a fixed term. They do not have any term in
particular, because the presumption is that the tenant will remain in
occupation and it is actually difficult for a landlord to get back possession.
The circumstances under which a landlord can get back possession are very
In his view, that approach to long term tenancy 'actually changes the
culture of thinking about how tenancy arrangements should work for everybody
involved, including people involved in a policy sense'.
Evictions and rent increases
Dr Petersen, University of Queensland, undertook a national study in
2013, which revealed that, in some cases, people who had conventional lives found
themselves facing homelessness. In her view, these situations arose as a result
of evictions under Australia's tenancy laws. She cited people being given a
notice to vacate, people whose housing was inaccessible or who were not able to
remain in their rental property because the landlord was unwilling to make
modifications. People may have fallen into rent arrears or events had happened
in their lives—such as ill health or loss of a spouse—which meant there was
only the one pension from which to pay that rent.
In some instances, tenants unwilling to move may be forcibly evicted. According
to Dr Petersen, in some European countries there was a right to housing, unlike
in Australia where there was no such right. She explained that if people do
become homeless in some European countries, they do not remain homeless—they
have that right to be housed:
...people can have leases for six years and they cannot have
more than one rent increase a year. Those kinds of things are inbuilt. But the
countries in Europe that have that also are a part of international treaties.
So there is not only a very different culture but a very different law and a
very different social housing system. There is an acceptance of private
rentals. There are lots of differences there.
For example, in contrast to this form of stable tenure, landlords in
Victoria can increase rents every six months with 60 days' notice, unless
a fixed term tenancy is in place. In its submission, the Tenants Union of
Victoria referred to tenants facing eviction after being in arrears for more
than 14 days.
Security of tenure—solutions
There was general agreement that current practices in Australia of
short-term tenancies and the ability of landlords to raise rents and to
terminate a tenancy work against the interests of low-income earners in the
rental market. Evidence pointed to a number of areas where improvements could
be made. One of the many witnesses who referred to the lack of security in
tenure, Mr Pisarski, called for tenancy law reform. He saw the need to create
law in Australia that would provide tenants with the sort of certainty that
European tenants enjoy.
Also, from Mr Yates' perspective, the challenge was to create an environment in
which there was security on both sides. He suggested:
At the moment we do not have that legislative facility so it
would be about working out how to create the opportunity for it to happen
rather than forcing it to. I certainly think there would be significant
upheaval if you suddenly said people must have 10-year leases. That would not
suit either side. But create the opportunity for longer-term arrangements to be
developed because, on the developer side, that would create some certainty too
in financing arrangements and so on...the possibility that we would bring tenancy
legislation up to the federal level.
To overcome the legal insecurity, Dr Martin maintained that Australia
needed to have tenancy laws that would 'provide for termination on a reasonable
set of prescribed grounds and do away with no-grounds terminations'.
Change in mindset for long term
Some of the witnesses favoured a gradual shift in attitudes in Australia
toward accepting long term-tenancies. Dr Stone argued that a key objective
would be to change the culture so that Australia would have a private rental
sector that would be 'a good place to be for all households', including
lower-income and highly vulnerable lower-income households. In her view, 'If we
make it [renting] a good place to be for everybody, the problems at the lower
end will also be resolved'.
Dr Stone suggested that over time, changes in regulation, if they were
substantial and well supported, would hopefully 'change the culture of renting and
the culture of landlordism'. She referred to some of the excellent overseas models
and how they could be applied in the Australian context.
Small investors and estate agents
Professor Dodson spoke of the need to review the duration of tenancies
and the procedures around rolling over or cancelling leases. He was
particularly interested in the current structure of Australia's rental market:
Anecdotal evidence I have heard suggests that the increased
number of investors in the rental market who are absentee landlords—in the
sense that they allow real estate agents to manage their property rather than
have a direct relationship with the tenants—has created an incentive on the
part of the real estate agents to roll over short-term leases and charge a fee
to the landlord so that they are generating income from their part of the
business—obviously there is a rational incentive to do that—but that leads to shorter
duration leases for tenants and increasing interaction with the real estate
agents because of the need to inspect properties on a three-monthly basis and
that sort of thing, which has issues...in terms of privacy and those sorts of
According to Professor Dodson, consideration should be given to the way
rental tenancies operate in terms of the renewal and length of leases 'to
provide for more medium-term security'. In this regard, he advocated reducing 'the
incentives for agents within the market to extract income from a process that
was of limited value to landlords and to tenants'.
Dr Martin also referred to the rental market as structurally insecure
because of the many smallholding landlords in the market on a speculative basis
with the strategy of being able to sell the property into the owner-occupier
market at a time that was optimal for them. He explained that in order to sell
into such a market, the landlord needed to be able to sell without a tenant.
Dr Martin suggested that reform was required to encourage a different sort of
landlord—one who holds property on the basis of receiving a steady trickle of
rental income. In his words, there was a need to attract 'an institutional
landlord with a long-term view and less interested in chasing speculative gains'.
Dr Ian Winter, AHURI, was of the view that longer term tenancies could
be achieved through regulation of the smaller mum-and-dad investors. But,
according to Dr Winter, the best way of getting secure, long-term tenure at
affordable rents would be to grow the housing association sector.
The committee looks at the community housing sector in a chapter 15.
National Shelter noted the importance of tenants having the 'kind of
legal protections that are appropriate for a long-term housing option'. It conceded
that tenancy law was primarily a state and territory responsibility, but argued
that at the national level the main focus could be on coordinating legislation
and developing best practice models.
It recommended that:
the Australian, state and territory governments work together to develop
best practice standards for tenancy legislation;
these standards be geared towards developing a framework for longer-term
leases as opposed to the current focus on short-term tenancies; and
these best practice standards include
improved coverage of marginal forms of housing such as boarding houses
and caravan parks,
better protection against eviction, including removal of 'without
grounds' evictions (with careful codification of appropriate grounds) and
consideration of extended notice periods,
ongoing regulation of residential tenancy databases,
minimum standards of safety and habitability, and
mitigation of excessive rent increases.
As noted earlier, the Western Community Legal Centres noted that in a climate
where the vacancy rate was low, tenants were often reluctant to exercise their
rights or to seek help.
They recommended that the State Government legislate for an independent body
such as an ombudsman or Consumer Affairs Victoria to have special powers under
the Residential Tenancies Act (RTA) to act for the tenant and pursue the landlord
The Tenants Union of Victoria suggested that state governments need to
do better with their laws regulating rents in the private rental market. The
Union was not necessarily referring to rent control, but the current
arrangements at a state government level, which were very focused on allowing
the market to run its course. In its view, that approach has clearly had the
effect of locking many low-income households out of the market.
Dr Petersen thought that there were some lessons to be learnt from
considering the tenancy laws. She mentioned, however, the importance of keeping
in mind the differences in jurisdictions when considering policy transfer.
There is a chronic shortage of affordable rental properties for low- to
moderate-income earners. Rents are increasing at a rate above that of household
incomes and this widening gap shows no discernible signs of abating.
Australia's private rental market is not only growing and becoming a 'very
mainstream housing market' but its profile is changing with increasing numbers
of higher-income earners opting to rent and to rent longer. This shift means
that there is greater competition in the private rental market with people
better able to afford the high rents crowding out lower income earners who have
no choice but to rent.
The number of landlords whose primary interest is with capital gains and
tax advantages from their investment rental property means that home
maintenance and repairs and having an energy-efficient building and appliances
are not a priority. Renters are then faced with expensive gas and electricity
bills that add to the already high cost of their housing.
Low-income renters not only struggle to pay high rents and associated
housing costs but are also subject to involuntary moves. The rental market in
Australia is structured around short-term tenancies and it is the lower income
tenants who experience these disruptions most keenly, particularly vulnerable
groups such as disability tenants, families with children and Indigenous
The changing nature and composition of Australia's rental market has had
a profound effect on lower income households, many of which are families with
children. Single people on low incomes also face difficulties accessing
affordable and appropriate housing. Indeed, the number of households under
housing stress and severe housing stress is increasing. As Dr Martin
noted, 'what we call "housing stress" is poverty by another name'.
With rent eating into their disposable income, families and individuals have to
make hard choices. They must decide whether to disrupt their lives and bear the
costs of moving to a cheaper location with fewer services, isolated from social
networks, and with increased transport costs or to stay put, continue to pay
higher rents and forgo expenditure on education, health and other essentials.
A number of witnesses identified the need for cultural change in
Australia—a gradual shift in attitudes—that would favour longer term tenancies
as a high-level objective. This aspirational goal of having longer, stable and
secure tenancy with reasonable rent rises is certainly desirable but more
concrete action must be taken to reform tenancy laws to ensure that the rights
of low-income renters are appropriately protected.
The committee is also of the view that the Commonwealth should be taking
an active part in driving the process of attitudinal change that would produce
a general acceptance and encouragement of longer term tenancies in Australia.
As a national policy issue, affordable home ownership tends to
overshadow affordable renting even though many Australians struggle to access
affordable and appropriate housing in the rental market. With this in mind, the
committee recommends that the Australian Government recognise affordable
renting as a mainstream form of tenure in Australia and place it prominently on
the national policy agenda.
Given that renting will be the only form of housing for many
Australians, one of the key challenges for government is to change the traditional
view of renting as a short-term transitional phase. The committee recommends
that the Australian Government in collaboration with the states and territories,
through the recommended ministerial council on housing and homelessness within
COAG, start the urgent process of turning around this acceptance of short-term
insecure tenure as normal. As a first step, the committee recommends that the
proposed ministerial council consider tenancy regulations in the various
jurisdictions with a view to delivering greater security for long-term renters.
Renters in a very tight rental market and with little bargaining power
are also in a weakened position when it comes to protecting their rights as
tenants. Current tenancy practice and laws leave them vulnerable.
13.100 The committee
acknowledges that this area of law is the responsibility of the states. Nonetheless,
it urges them to consider carefully their tenancy laws with a view to putting
in place a framework underpinned by that aspirational goal of creating longer,
safer and secure tenancies with reasonable rent rises.
13.101 The committee
believes that the Australian Government has a definite leadership role in
supporting the states and territories to establish best practice tenancy
requirements that would include:
minimum standards of safety and habitability, including dwellings
that are comfortable to live in and efficient to heat and cool;
stability and fairness of rent prices (and what constitutes reasonable
security of tenure (including fair and just eviction laws); and
better protection for vulnerable groups in marginal housing such
as boarding houses and caravan parks.
13.102 Furthermore, the
committee believes that tenants should also have access to a dispute resolution
body and be able to pursue their cause without fear of recrimination from their
presented to this inquiry indicated strongly that affordable renting must be
recognised as a mainstream form of tenure in Australia's housing system. With
an increasing proportion of Australians now seeing renting as their only
option, including the emergence of 'renters for life' and an increasing number
of renters under pressure from a lack of choice and unaffordability, improving
the conditions of rental stock as well as the rights of tenants is now
considered overdue. There is no national standard that governs the rental
market, and very little advocacy or support provided to tenants, in an
asymmetrical market where the owner or landlord holds most of the power. More
than 95 per cent of the rental housing market is provided by the private
market, and as such, strong protections of consistent, national standards is
appropriate. The committee notes there are national standards that govern
education and healthcare services, work safety and even bike parking
facilities. The private rental market should not be an exception.
13.104 Considering the
evidence presented to this inquiry, the committee recommends that the states
and territories review their tenancy laws to ensure that all rental properties
are required to meet minimum standards.
13.105 The committee
also recommends the Australian Government:
together with the states and territories, investigate national
minimum standards that would set specific minimum standards including security
of tenure, stability and fairness of rent prices, a new efficiency and comfort
standard, safety and security of the home, and better protection for groups in
review (and increase) funding levels and access to tenancy
in recognition of the value of tenancy advice services, make
funding through NAHA conditional on the states and territories ensuring that
they have in place adequate tenancy advisory services; and
include as a priority for the re-established Housing
Supply Council (see recommendation 2) to review and publish detail on the
current national rental affordability gap.
13.106 Recognising the
reluctance of tenants to exercise their rights under the respective residential
tenancies legislation in each state, the committee recommends that the states review
their existing system for settling tenancy disputes. The committee recommends
further that the states consider establishing an independent body such as an
ombudsman or giving specific powers to their consumer affairs agencies to act
for tenants. Again, the committee recommends that the Australian Government act
as a catalyst through the COAG process to encourage the states and territories
to establish dispute resolution bodies that provide easier and less expensive
access to a mechanism for the resolution of tenancy matters.
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