Rental affordability across regional Victoria is continuing to rapidly decline, hitting an historic low in 2024 with low income earners bearing the brunt of the crisis, according to the tenth annual National Shelter-SGS Economics and Planning Rental Affordability Index (RAI).
The RAI is the ratio of actual income to the income required for average rentals to to be 30 percent of that income. In other words, if average rentals are 30 percent of average income, the RAI is 100. An RAI of 100 to 120 indicates moderate unaffordability with rental households less likely to meet and pay off unexpected costs or bills easily. Young families with children in childcare may find it particularly difficult to make ends meet. An RAI of 80 to 100 indicates unaffordable rents; 60 to 80 represents severely unaffordable rents.
The average rental household in regional Victoria is now paying 28 per cent of their gross income of $84,203 if renting at the median rate. Renting in the region is now classed as “moderately unaffordable” with a score of 108.
The trend of declining affordability is consistent across all parts of regional Victoria but at different levels. Rental affordability in regional cities such as Bendigo, Shepparton and Ballarat have continued to decline and are now considered “Moderately Unaffordable” for the average household.
Coastal towns are among the least affordable regions in the state. While the Surf Coast and Geelong regions experienced some of the largest decreases in affordability between 2020 and 2021, Ocean Grove and Torquay are now considered “Severely Unaffordable” to the average regional Victorian household.
People on low incomes are suffering the most, with a single person on JobSeeker facing “extremely unaffordable” rents with 59 per cent of their income going towards a rental. Another group that is struggling is single part-time workers on parent benefits with “severely unaffordable rents” sacrificing 46 per cent of their pay. Meanwhile, single or coupled pensioners are facing “unaffordable” rents in regional Victoria.
Rental Affordability by Type of Household in Regional Victoria. (Source: SGS Economics)
Tenants Victoria CEO Jennifer Beveridge said: “Renters tell Tenants Victoria’s frontline services that housing affordability remains a huge concern and continue to report steep rent hikes to us. Indeed, our services can’t meet the heavy demand from renters on low to middle incomes who seek our help.
“Under Victoria’s rental laws there is no fixed method to calculate a rent rise, so we have long called for the State Government to introduce a fairness formula to guide the setting of fair rent increases.”
SGS Economics & Planning Principal Ellen Witte said, “The rental market in Victoria is spiralling and what was once affordable is slipping out of reach for many. Households are being forced to live further away from their jobs to access affordable rents, causing fatigue and other issues in workers.”
“This is a severe problem which needs to be addressed by the government with an expansion in social and affordable housing, before we have more people on the streets. Both state and federal governments need to provide urgent intervention.
“After reaching a peak during the Covid-19 pandemic, most regional areas in Victoria have seen a decline in affordability and people on low incomes are suffering the most. Families and pensioners are in dire straits.
“We need urgent rental market reform to ensure residents across the state have access to safe and affordable housing and remain in areas with access to essential services such as schools, hospitals and emergency services.”
The full report is available at sgsep.com.au/projects/rental-affordability-index.
This article is based on a media release from National Shelter and SGS Economic and Planning.
