The rental market is a game of musical chairs for low income earners

Rental Affordability Index shows not a single neighbourhood in Melbourne, Geelong, Ballarat or Bendigo is affordable for low-income households. Click To Tweet

Rental Affordability in Melbourne for single person households, November 2017

If we need further evidence that Victoria’s rental market is failing those on the lowest of incomes, the latest Rental Affordability Index (RAI) delivers the news that low income households, including pensioners and single parents, can no longer afford to live anywhere in Melbourne, Geelong, Ballarat or Bendigo.

The startling report coincides with the release of our submission to the 2018-19 State Budget, which calls on the Victorian Government to build and acquire 14,500 new social housing properties over the next five years, to help level the playing field for low income earners.

With competition for rentals fiercer than ever, it’s a game of musical chairs, and when the music stops, it’s people on low incomes who are left without a roof over their heads, or living in poverty, just so they can pay the rent. Watch our video on why more social housing would stop the game of musical chairs for Victoria’s poor.



The RAI shows that there is now not a single neighbourhood in Melbourne or Victoria’s regional cities that is affordable for a single person on Centrelink, a single pensioner, or a single parent on a low part-time income.



The stark reality is that Centrelink incomes have not kept pace with the cost of rent.



Although Victoria has seen greater workforce participation in recent times, those on Centrelink incomes are doing it harder than ever. If you’re a single person, struggling to find a job, your Centrelink income of $320/week (Newstart + Commonwealth Rent Assistance) will only just cover Melbourne’s median one-bedroom rent of $280/week, and leave little for bills, food, transport, medical costs, let alone financial emergencies.

The result is vulnerable Victorian households left with barely anywhere to live or anything to live on, forcing many into unsafe or severely crowded accommodation or out on the streets.

The Rental Affordability Index shows that that even households who aren’t on the lowest income rungs are struggling with rent stress. Around 30 per cent of Victorian households have an income of $50,000 p.a., and according to the RAI those households must live 115kms away from Melbourne if they want to find a two-bedroom rental that doesn’t leave them eating tinned spaghetti for every meal.



Here are some more of the topline Victorian take-outs from the RAI. The methodology tracks rental affordability relative to household income for a number of hypothetical household types:

  • Every suburb in Melbourne, Geelong, or Bendigo is rated as “extremely unaffordable” for people on Newstart, meaning they would have to pay at least 60 per cent of their income on rent and, in some areas, over 100 per cent.
  • All of Melbourne is either “extremely” or “severely unaffordable” for single pensioners, who would have to pay nearly 70 per cent of their income for a new lease.
  • A single parent working part-time and relying on some benefits cannot afford to live anywhere in Melbourne, the major regional cities, and even in major regional centres like Warrnambool
  • The closest areas for a $50K p.a. income household to live without being in rent stress are Seymour (115kms from Melbourne), Moe (160kms from Melbourne), Ballarat East (113kms).

So what’s the answer? Simply increasing the number of homes is not the solution to improving affordability. We need Government boost supply of housing designated for low-income earners, so they can pay the rent without skimping on life basics like groceries, bills and other life essentials..

This is a problem that needs both state and federal governments to pull together to fully resolve – and the Federal Government is currently asleep at the housing affordability wheel.

CHP’s submission to the 2017-18 State Budget calls on the State Government to commit to building 14,500 new social housing dwellings in Melbourne and key regional centres over the next five years – three times the current plan.

The good news is that the Government can afford this, with tax revenue from stamp duty having nearly doubled over the past five years to $6.2 billion a year.

We think that the windfall gains to the budget from skyrocketing house prices should be used to mitigate the pain that the housing crisis has caused.

CHP’s submission notes that Victoria is Australia’s economic success story, with thousands of new jobs driving unprecedented labour market participation and, as a consequence, more people doing well.

However the success has a dark flipside, manifesting in fierce and growing competition for rental properties, with those able to benefit from economic growth crowding out those left behind – with growing homelessness as a consequence.

Read the full Rental Affordability Index

Read CHP’s State Budget Submission