In a recent survey published by the Australian Housing and Urban Research Institute (AHURI), three out of five Australian renters say that owning their own home is out of reach for them.

The report also suggests that while home ownership remains the dominant tenure type at the time of publishing, renting is on the rise in all capital cities across almost all age brackets – with only half of those renters represented expecting to own a home in their lifetime.

The report was commissioned as an acknowledgment among policy stakeholders of the shift towards renting as a dominant living situation in Australia, and by a concern for Australia’s ability to adapt its housing market, governance structures and planning systems in response.

Among the reports findings was the changing profile of who rents in Australia – with a trend towards an ageing sector. As stated in the report, “Whereas once private rental was seen largely as a tenure of transition in the early life stages on a journey to home ownership, renting now has a much more mainstream age profile.”

The report pointed to a growing focus on housing as an asset rather than as a human need as a key issue in our current structure – with concerns that sustained underinvestment in social housing has had long-term negative implications for all Australians. This is a key concern that needs to be addressed as growing numbers of lower-income, older renters with limited superannuation set to flood the sector in the next 10 years.

Renters in Australia are currently dealing with record high rental prices with the national median rent rising by approximately 8.5% over the year leading up to April 2024, with a record high of $627 per week. By September 2024, rental prices had increased by 6.6% over the preceding 12 months, a slight decrease from the 6.8% rise observed in August.

In an article from the Guardian, Joel Dignam, the executive director of Better Renting, said that outside the Australian Capital Territory, there are effectively no limitations on rent increases.

“When you see these big rent increases, it’s a symptom that the rental system is not working,” Dignam said.

“Policymakers sometimes act like this problem is fiendishly complex, but actually it’s pretty simple. The hard part is having the courage to act.”

Despite this, the AHURI report found that renters are generally willing to pay more for rent protection, property maintenance above minimum standards and the ability to extend their lease indefinitely.

But what could the change to a country of renters mean for Australia?

1. Economic Impacts

Changes in Wealth Accumulation

• Homeownership has traditionally been a primary vehicle for wealth building for individuals. When more people rent, they miss out on potential capital gains and equity accumulation from property appreciation.
• Renting typically involves higher long-term costs compared to owning (in stable markets), leading to reduced savings and wealth-building opportunities for renters. The shift can exacerbate wealth inequality, as property owners (including corporations and investors) accumulate more wealth at the expense of renters.

Housing Market Dynamics

• A shift towards renting can inflate rental markets, especially if there’s a supply-demand imbalance. Higher demand for rental properties often drives up rent prices, making it harder for renters to save.
• Property investors and real estate firms may see a surge in demand, leading to more investment in rental properties rather than single-family homes. This can reduce the availability of affordable homes for purchase.

Consumer Spending

• Homeowners often spend more on home improvement and local services, boosting local economies. Renters are less likely to invest in the property they live in, which can reduce spending in these sectors.
• Renters might have more flexible disposable income in the short term (without down payment and maintenance costs), potentially boosting consumer spending on goods and services.

2. Social and Cultural Implications

Decline in Community Stability

• Homeownership is often linked with longer-term residency, community involvement, and local engagement. As renting becomes more common, there may be an increase in population mobility and a decrease in community cohesion.
• Renters tend to move more frequently than homeowners, which can lead to a transient population, weaker community bonds, and less civic engagement (e.g., voting, volunteering).

Changing Family Dynamics

• Homeownership is often seen as a milestone tied to family formation and stability. A shift towards renting may reflect broader societal trends like delayed marriage, fewer children, or an increase in single-person households.
• The flexibility of renting might appeal more to younger generations or those prioritizing urban living and career mobility over settling down.

Shifts in Generational Expectations

• Homeownership has historically been a symbol of financial success and stability. A move towards renting could signal a change in generational attitudes, particularly if younger generations prioritize experiences over assets or if they find ownership increasingly unattainable due to high prices and stagnant wages.
• This shift might alter long-held cultural ideals about the “American Dream” or its equivalent in other countries.

3. Political and Policy Implications

Increased Demand for Tenant Protections

• As the renter population grows, so does the political pressure for stronger tenant rights, such as rent control, eviction protections, and regulations on lease agreements.
• Policymakers might face increasing calls to address housing affordability and stability, especially in urban areas where rental costs are high.

Changes in Tax Policy

• Governments may need to reevaluate tax incentives, such as mortgage interest deductions, which disproportionately benefit homeowners. There could be a shift towards policies that support renters, like tax credits or subsidies for rental costs.
• A decline in homeownership could also affect local property tax revenues, which are a key source of funding for public services (e.g., schools, infrastructure). Municipalities may face budgetary pressures as a result.

Political Power Dynamics

• Homeowners tend to be a powerful political constituency due to their stake in local property values and community stability. As the renter population grows, there may be a shift in political power and policy priorities towards issues affecting renters, such as affordable housing and urban development.
• This could lead to a rebalancing of political interests, potentially impacting elections and local governance, especially in urban areas with high rental populations.

4. Impact on Urban Development and Housing Policy

Rise of Institutional Investors in Housing

• A predominantly renter society may see an increase in institutional ownership of rental properties (e.g., REITs, private equity firms). This can lead to concerns about corporate landlords, who may prioritize profits over tenant well-being.
• Institutional investors might drive up property prices as they compete for real estate, further limiting opportunities for individuals to purchase homes.

Urbanisation and Changes in Housing Supply

• Increased demand for rental properties often coincides with greater urbanization, as people seek proximity to jobs, amenities, and public transport. This can lead to more high-density, multi-family housing developments.
• Policymakers may need to adjust zoning laws and urban planning strategies to accommodate the rising demand for rental units, which could reshape city landscapes and affect infrastructure needs.

5. Financial Stability and Market Vulnerability

Increased Household Vulnerability

• Renters are generally more vulnerable to economic shocks (e.g., job loss, inflation) than homeowners, who may have fixed mortgage rates or home equity to fall back on.
• In a predominantly renter society, more households may face financial insecurity, leading to a higher risk of housing instability and homelessness, especially during economic downturns.

Impact on the Broader Economy

• Housing markets play a significant role in economic stability. High rates of homeownership can act as a buffer during economic recessions, as homeowners are less likely to default than renters who may face sudden rent increases or evictions.
• A predominantly renter society might lead to greater economic volatility, as rent inflation can outpace wage growth, reducing disposable income and consumer spending power.

While renting offers greater flexibility and may align with modern, urban lifestyles, it also carries risks, including increased financial vulnerability, diminished wealth accumulation, and changes in community dynamics. Policymakers need to address these challenges proactively by promoting housing affordability, strengthening tenant protections, and adapting tax policies to reflect the new housing reality facing the Australian community.