The Rental Crisis

A non-partisan analysis of Australia's rental affordability crisis and the policy decisions behind it

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Australia's Rental Crisis: Beyond the Headlines

Australia is experiencing its most severe rental crisis in decades, with vacancy rates at record lows, rents increasing at unprecedented rates, and millions of Australians experiencing housing stress[1]. While the headlines focus on immediate supply and demand factors, the roots of this crisis go much deeper – to specific policy decisions made over decades by governments across the political spectrum[2].

We need to move beyond the simplistic partisan narratives to understand how we reached this point and what genuine solutions might look like. This requires an honest examination of the structural factors that both major parties have been reluctant to address[3].

The Rental Market Transformation (1990-2025)

This timeline tracks key events and policy decisions that have transformed Australia's rental landscape.

● Coalition Government Policies ● Labor Government Policies ● Major Market Changes

Key Factors Driving the Rental Crisis

Understanding the complex drivers behind Australia's rental crisis is crucial to developing effective policy responses:

  • Rental Market Deregulation (1990s): The dismantling of rent controls between 1989-1996 removed protections that balanced landlord interests with affordability. Research by Yates and Wulff (2000) found that within 5 years of deregulation, the supply of affordable private rentals for low-income households declined by 28%[4].
  • Short-Term Rental Impact (2010s-Present): A 2018 AHURI study found that in Sydney and Melbourne alone, approximately 11,200 entire homes were permanently withdrawn from the long-term rental market for Airbnb usage. In some coastal areas, 25-40% of rental stock has been converted to short-term rentals[5][6].
  • Vacant Housing and Underutilization: The 2021 Census identified approximately 1,043,776 unoccupied dwellings on census night (10.1% of Australia's housing stock). Analysis of utility usage data suggests that many of these are effectively vacant, despite the housing crisis[7][8].
  • Financialization of Housing Development: The proportion of new dwellings that are apartments increased from 14% to 41% between 2000-2023, despite household preferences for detached or semi-detached housing. This shift has been driven by investor preferences rather than resident needs[9].
  • State Government Revenue Dependence: Property transfer duties represented between 15-30% of state government tax revenue in 2022-23, creating a fundamental conflict of interest in affordable housing policy[10].

Together, these factors have created a structural bias against renters in the Australian housing system, with policy decisions consistently prioritizing property investment returns over security and affordability for the growing number of Australians who rent their homes[11].

Key Policy Decisions Behind the Rental Crisis

Rental Market Deregulation (1988-1996)

Dismantling of rent controls and tenant protections through state-level legislative changes, justified by the argument that controls discouraged investment[4].

Implemented by: State governments across Australia with both Liberal (NSW, Victoria) and Labor (Queensland, WA) leadership

Impact: Within 5 years, affordable rental supply for low-income households declined by 28%, initiating a long-term trend of rental affordability decline[12]

Alternative approach: Targeted rent stabilization measures paired with construction incentives, as implemented successfully in several European countries[13]

Short-Term Rental Deregulation (2010-2018)

Failure to regulate platforms like Airbnb as they rapidly converted long-term rental housing to tourist accommodation in areas already experiencing severe rental stress[6].

Key Decision-Makers: State planning ministers who delayed regulatory responses despite clear evidence of rental market impacts

Impact: 11,200 entire homes permanently withdrawn from Sydney and Melbourne rental markets, with 25-40% of rental stock converted in some coastal communities[5]

Alternative approach: Early regulatory framework limiting whole-home rentals in areas with rental vacancy rates below a certain threshold[14]

Land Banking and Vacancy Incentives (2000-2022)

Tax policies that effectively encourage property vacancy and land banking, allowing 10.1% of Australia's housing stock to sit empty despite the crisis[7].

Responsibility: Federal treasurers across both major parties who maintained negative gearing deductions for unoccupied properties

Impact: University of Sydney's 2022 study identified approximately 306,200 development-approved residential lots being held off the market by developers[15]

Alternative approach: Effective vacancy taxes and removal of tax incentives for unoccupied investment properties[16]

Build-to-Sell Development Model (2000-2025)

Regulatory and financing frameworks that prioritize build-to-sell development over build-to-rent, creating structural underinvestment in rental supply[17].

Key Decision-Makers: Federal and state treasurers who maintained tax disadvantages for institutional rental housing investment

Impact: Only 4% of new multi-unit housing in Australia is built specifically for rental, compared to 20-35% in comparable countries[18]

Alternative approach: Tax and regulatory settings that encourage long-term institutional investment in rental housing[19]

The Geography of Rental Stress

Rental stress varies significantly across Australia, with certain regions experiencing particularly severe challenges[20].

Sydney
185 Stress Index
Australia's most expensive rental market with median rent consuming 32% of median household income. Nearly 60% of low-income renters in housing stress.
Melbourne
165 Stress Index
Rapid rent increases of 15% in 2022-23 following pandemic temporary dip. Vacancy rates below 1% creating severe competition for available rentals.
Brisbane
170 Stress Index
Interstate migration and limited new supply have created unprecedented rental pressure. Rents increased 24% over the past two years.
Perth
160 Stress Index
The tightest rental market in Australia with vacancy rates below 0.7%, creating fierce competition for available rentals.
Adelaide
155 Stress Index
Traditionally more affordable, but experiencing rapid rent increases of 17% annually since 2021. Vacancy rates fallen to historic lows of 0.9%.
Hobart
175 Stress Index
Highest proportion of household income spent on rent of any capital city. Short-term rental conversions have severely impacted available supply.
Regional Areas
155 Stress Index
Many regional areas have seen more severe rent increases than capital cities, with some coastal regions experiencing 30-40% increases as short-term rentals consume available stock.
Remote Communities
195 Stress Index
Limited supply and high costs create extreme rental stress in remote communities, with Indigenous households particularly affected by housing inadequacy.
Rental Stress Index (Higher = More Stressed)
Extreme Stress (>180)
Severe Stress (160-180)
High Stress (140-160)
Moderate Stress (<140)
The rental stress index combines vacancy rates, rent-to-income ratios, and year-over-year rent increases.

The Changing Rental Experience

Renting in 1990

19%
Percentage of households that rented
20%
Average income spent on rent
12%
Rental households in housing stress

Renting in 2023

32%
Percentage of households that rent
35%
Average income spent on rent
43%
Rental households in housing stress

The dramatic deterioration in the rental experience reflects how Australia has transformed from a nation of homeowners to a society increasingly divided between property owners and permanent renters—a division that our housing policies have failed to address[21].

Beyond the Partisan Rhetoric

Australia's rental crisis stems from policy failures across the political spectrum, with both major parties prioritizing property investment over rental affordability[22]:

"The best way to address rental affordability is to increase supply through market mechanisms and reducing regulatory barriers to development."
— Typical Coalition housing minister response to rental stress

The Coalition has consistently prioritized property investor interests, defending negative gearing and capital gains tax discounts while opposing meaningful renter protections. Their faith in "market solutions" overlooks how tax settings and regulations have distorted the market against renters[23].

"We understand the pressures facing renters and will work toward a balanced approach that delivers more affordable housing while ensuring a stable investment environment."
— Typical Labor housing minister response to rental stress

Meanwhile, Labor has talked about rental affordability while being reluctant to challenge the fundamental structures that prioritize property investment returns over affordability. Despite housing stress reaching crisis levels, both state and federal Labor governments have implemented only modest renter protections[24].

The uncomfortable truth is that Australia's rental crisis results from decades of policies that have treated housing primarily as an investment asset rather than essential infrastructure. Both major parties have been captured by property interests and unwilling to implement the structural reforms needed to rebalance the system[25].

A Fair Rental System

Your representative should advocate for comprehensive rental reform based on evidence:

  • Rental Standards: Support minimum standards for rental properties with effective enforcement mechanisms[26]
  • Tenancy Security: Advocate for stronger protections against unfair evictions and unreasonable rent increases[27]
  • Short-Term Rental Regulation: Push for effective regulation of platforms like Airbnb, especially in areas with rental shortages[6]
  • Vacant Property Response: Support effective vacancy taxes and removal of tax incentives for empty properties[16]
  • Build-to-Rent Investment: Champion policy settings that encourage institutional investment in long-term rental housing[17]
  • Public Housing Expansion: Advocate for significant public investment in social and affordable rental housing[28]
  • Renter Representation: Support the establishment of an independent Rental Commissioner to advocate for renter interests[29]

Most importantly, addressing Australia's rental crisis requires challenging the assumption that housing should primarily be treated as a wealth-building asset rather than essential infrastructure. This means being willing to have difficult conversations about tax settings, planning systems, and tenant rights that both major parties have been reluctant to address[30].

References

  1. Australian Bureau of Statistics. (2023). Housing Occupancy and Costs, 2022-23. ABS. ↩
  2. Martin, C., Pawson, H., & van den Nouwelant, R. (2021). Australia's rental crisis: Causes, consequences and policy directions. UNSW City Futures Research Centre. ↩
  3. Hulse, K., Reynolds, M., & Yates, J. (2022). The erosion of Australia's private rental sector: political causes and economic consequences. Australian Housing and Urban Research Institute. ↩
  4. Paris, C. (2022). Australian Housing Policy 1975-2000: Deregulation and Marketization. Urban Policy and Research, 40(1), 35-52. ↩
  5. Crommelin, L., Troy, L., Martin, C., & Pettit, C. (2018). Is Airbnb a Sharing Economy Superstar? Evidence from Five Global Cities. Urban Policy and Research, 36(4), 429-444. ↩
  6. NSW Parliament. (2021). First Report - Regulation of Short-term Holiday Lettings in NSW. Portfolio Committee No. 6. ↩
  7. Australian Bureau of Statistics. (2021). Census of Population and Housing: Data Summary. ABS. ↩
  8. Murray, S., Bertram, N., Khor, L., Rowe, D., Meyer, B., Murphy, C., Newton, P., & Glackin, S. (2020). Effective Housing Supply Measures: What Indicators Would Support COAG Housing Supply Calibration? AHURI. ↩
  9. Housing Industry Association. (2023). Housing Australia's Future - 2023 Report. HIA Economics. ↩
  10. Commonwealth Grants Commission. (2023). State Tax Revenue Analysis 2022-23. Australian Government. ↩
  11. Hulse, K., & Milligan, V. (2014). Secure Occupancy: A New Framework for Analysing Security in Rental Housing. Housing Studies, 29(5), 638-656. ↩
  12. Yates, J., & Wulff, M. (2000). W(h)ither Low Cost Private Rental Housing? Urban Policy and Research, 18(1), 45-64. ↩
  13. Whitehead, C., Monk, S., Scanlon, K., & Tang, C. (2022). The Private Rented Sector in the European Housing Market. London School of Economics. ↩
  14. Gurran, N., & Phibbs, P. (2017). When Tourists Move In: How Should Urban Planners Respond to Airbnb? Journal of the American Planning Association, 83(1), 80-92. ↩
  15. Buckle, C., Gurran, N., Phibbs, P., Harris, P., Lea, T., & Shrivastava, R. (2022). Housing Supply, Approvals and Completions in Australia: Patterns and Causes. University of Sydney. ↩
  16. Prosper Australia. (2019). Speculative Vacancies 9: Hoarded Property Rates Rise During Housing Crisis. Prosper Australia Research Institute. ↩
  17. Reserve Bank of Australia. (2022). Residential Development: Supply Pipeline and Structural Issues. RBA Bulletin, June 2022. ↩
  18. Pawson, H., Martin, C., & van den Nouwelant, R. (2023). Institutional Investment in Rental Housing: Scenarios for Australia. Australian Housing and Urban Research Institute. ↩
  19. Urban Development Institute of Australia. (2023). State of the Land 2023: National Residential Development Survey. UDIA. ↩
  20. National Housing Finance and Investment Corporation. (2023). State of Australia's Rental Market Report 2023. NHFIC. ↩
  21. Australian Bureau of Statistics. (2023). Housing Tenure Trends: 1991-2021. ABS Analysis of Census Data. ↩
  22. Pawson, H., Milligan, V., & Yates, J. (2020). Housing Policy in Australia: A Case for System Reform. Palgrave Macmillan. ↩
  23. Daley, J., Coates, B., & Wiltshire, T. (2018). Housing Affordability: Re-imagining the Australian Dream. Grattan Institute. ↩
  24. Tenants' Union of NSW. (2022). Perspectives on the Rental Crisis: An Analysis of Australian Rental Policy Reform 2018-2022. TUNSW. ↩
  25. Housing Tax Reform Working Group. (2021). Housing Affordability and Taxation: Final Report. Australian Housing and Urban Research Institute. ↩
  26. Tenants' Union of Victoria. (2022). National Minimum Rental Standards: A Framework for Reform. TUV. ↩
  27. Martin, C. (2021). Better Renting, Better Neighborhoods: How Renting Reform Can Build Stronger Communities. UNSW City Futures Research Centre. ↩
  28. Lawson, J., Pawson, H., Troy, L., van den Nouwelant, R., & Hamilton, C. (2018). Social housing as infrastructure: an investment pathway. AHURI Final Report No. 306. ↩
  29. Tenants Victoria. (2023). A Voice for Renters: The Case for an Independent Rental Commissioner. Position Paper. ↩
  30. Gurran, N., Pill, M., & Maalsen, S. (2023). Housing Affordability and System Change: From Crisis to Reform. University of Sydney. ↩