Increasing rents eroding the wage gains of low-income workers

Low-income households are spending more than half of their income on rent, according to analysis.

CoreLogic and ANZ bank found that rents at the lower end of the market were increasing faster compared to higher-end rentals, with a $53 (US$34) weekly increase in the 25th percentile rent over the past year.

The Housing Affordability report for the March quarter noted that the 25th percentile of income earners were allocating 54.3 percent of their income to rent in the 25th percentile of available rentals.

Even though the Fair Work Commission’s significant wage increase in 2023 was acknowledged in the report, the $48 per week pay raise for a full-time minimum-wage worker was completely offset by the $53 per week rental hike during the same period.

Based on CoreLogic data, rents have started to increase again in the early months of 2024, indicating potential further financial strain.

Rental prices rose from 8.1 percent annual growth up to October to 8.6 percent in the 12 months ending in March.

Rents have been rising rapidly since the pandemic due to reopened borders and a shift towards smaller household sizes.

ANZ chief economist Richard Yetsenga mentioned that new home construction has been slow, exacerbating the imbalance between housing demand and supply.

He added, “International competition for both materials and labor remains intense.”

The report also highlighted worsening affordability for mortgage holders, with the median income required to service a new home loan reaching a record high of 48.9 percent nationally in March.