Projects
Rental Affordability Index: research report

Annual research tracks rental affordability across Australia and highlights the experiences of disadvantaged households.

Our annual rental affordability index (RAI) report is an easy to understand indicator of rental affordability relative to household incomes. It is a crucial tool for policy-makers to track rental affordability trends and inform evidence-based policy responses. The RAI is a valuable tool for quantifying the rental affordability challenge in a way that brings out nuances between places and highlights the experiences of disadvantaged households.

We have partnered with National Shelter, Community Sector Banking, and Brotherhood St Laurence on the RAI since 2015.

Background

Studies of housing affordability in Australia have focused primarily on purchase affordability (e.g. housing affordability index) and measuring housing stress at different points in time for different household types. However, a gap existed in tracking rental affordability over time across Australia.

The RAI fills this gap, providing insights into how rental affordability impacts different places and household types. Its basis is customised data and analysis revealing affordability trends in the rental market, with a particular focus on low-income households. Rental affordability concerns a growing and already large proportion of Australians as households increasingly face constraints to purchasing their first house. Renting households on average have lower-incomes, and therefore affordability issues affect renting households more than homeowners.

The RAI method

It is generally accepted that if housing costs exceed 30% of a low income household’s (households with the lowest 40% of income) gross income, then that household is experiencing housing stress (30/40 rule). In the RAI, households who are paying 30% of income on rent have a score of 100, indicating that these households are at the critical threshold for housing stress. A score of 100 or less indicates that households would pay more than 30% of income to access a rental dwelling, meaning they are at risk of experiencing housing stress.

To better illustrate the situation for vulnerable groups, we assess the rental affordability situation for ten Australian household types. These are:

• Single pensioner
• Pensioner couple
• Single person on benefits
• Single part-time worker parent on benefits
• Single full-time working parent
• Single income couple with children
• Dual income couple with children
• Student sharehouse
• Minimum wage couple
• Hospitality worker

_{The RAI is calculated using the following equation, where ‘qualifying income’ refers to the household income required to pay rent where rent is equal to 30% of income. RAI = (Median income ⁄ Qualifying Income) x 100}