Report Shows Average Australian Must Earn More than $130,000 Annually to Rent Typical Home without Financial strain

A recent report has highlighted the high costs associated with renting in Australia, leaving many individuals with minimal funds for essentials like food, utilities, and transportation.

The Everybody’s Home report indicates that to keep rent within the internationally accepted benchmark of 30 percent of income, individuals would need to earn over $130,000 annually.

This benchmark is in place to prevent financial distress among renters, but due to escalating rents, achieving the 30 percent threshold has become increasingly challenging.

Across all states and territories, a person earning $40,000 per year would need to allocate 92 percent of their take-home pay to afford the median unit price of $635 per week.

Even those earning $80,000 annually would have to allocate 52 percent of their income towards rent.

With an annual income of $130,000, the average Australian would still need to spend 34 percent of their earnings on rent, exceeding the desired amount.

The data represents averages, which vary significantly across the country.

Case Study

In Queensland’s Gold Coast region, the situation is even more severe—individuals earning $40,000 annually would have to spend all of their net income plus an additional 16 percent on rent.

Even individuals earning $130,000 yearly would allocate 43 percent of their income towards rent in the Gold Coast.

Conversely, more affordable regions like the West Queensland outback show that individuals making $40,000 would only need to use 25 percent of their earnings for rent, with those earning $130,000 only needing to allocate 9 percent of their income.

Middle Earners Struggling

The report illustrates that rental affordability is particularly challenging in capital cities, with regional areas also posing difficulties for low and middle-income earners.

Remote areas are largely unaffordable, primarily due to increased demand from the mining industry.

Everybody’s Home attributes these findings to a significant shift in Australia’s housing market, where rental stress has extended beyond low-income individuals to middle-income earners.

Social Housing Shift

Everybody’s Home highlights a change in social housing criteria, which was previously available for low to middle-income earners but is now predominantly reserved for individuals in dire circumstances.

The organization advocates for increased investment in social housing, proposing the construction of 940,000 social homes over the next two decades based on estimates from the University of New South Wales City Futures Research Centre.

Furthermore, they recommend that state, territory, and local governments incentivize new developments to incorporate more affordable housing.

Everybody’s Home suggests phasing out negative gearing for investors and capital gains tax, redirecting the resulting funds back into public housing.

While some experts argue against abolishing negative gearing, citing potential negative impacts on supply, others support this strategy to address the housing crisis.

A recent Housing Industry Association (HIA) report revealed the heavy costs associated with purchasing new builds, particularly in Sydney, where buyers pay significant taxes and fees.

Building Hope

In Queensland, the restoration of the Queensland Productivity Commission (QPC) aims to enhance productivity in the construction sector, ultimately leading to lower costs and increased housing affordability.

The Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella believes that this initiative will reduce construction costs and improve housing affordability in the state.

She highlights the importance of investigating cost drivers and implementing solutions to address productivity issues in the housing sector.