Regional rent crisis drives businesses to the brink

Across the country, the assault on regional rental affordability is fuelling homelessness, discouraging unskilled workers from the areas and driving businesses to the brink.

From Margaret River in Western Australia’s winegrowing southwest to the flooded plains of the eastern states, worker shortages brought about by a lack of affordable rental stock are hammering regional economies.

Steve Hughes, Director of the Grove Distillery in Wilyabrup told API Magazine that attracting workers to his idyllic part of Western Australia was impossible.

“Rents simply cost far more than the backpacker and seasonal workforce we rely on can earn,” Mr Hughes said.

Throughout dozens of southwest WA towns, from Bunbury to Albany, window advertisements plead for workers to fill positions in retail outlets, hospitality venues and trades businesses.

For Mr Hughes, the lack of housing supply and high rents have forced the closure of half of his business.

Steve Hughes, Director, Grove Distillery

“We can barely keep up with the demand in the distillery tasting packages and bar service area but the kitchen has been closed for nine months because we can’t attract chefs and other staff,” he said.

A newly published major research paper published by the Australian Housing and Urban Research Institute (AHURI) has reinforced what many regional communities already know – there’s simply nowhere for incoming workers, and many locals, to stay.

The very security of the regional housing system is at risk, it concluded.

“Low vacancies, the use of rental housing for the short-let holiday market rather than as housing; and increasing buy-up of regional housing present immediate risks to the security of Australia’s housing system, of which the rental sector is a critical component part.

“A coordinated national, state and territory, and local government response to secure rental housing for current and future tenants is essential – and urgent,” the report’s authors said.

The peer-reviewed AHURI study, The impact of the pandemic on the Australian rental sector, offered its own suggestions to try and alleviate some of the issues around regional rental affordability.

“Key initiatives could and should include reform of tenancy legislation, the provision of a larger stock of affordable housing available through the social housing sector, and measures to sustain affordable entry into home ownership.

“There is scope also to consider ways in which affordable housing provision could be better integrated with national urban planning aspirations through the economic and housing market development of smaller cities.

“These are an appropriate target for policy intervention as they offer the best possibility in many parts of Australia of ensuring housing that is … proximate to employment and services.”

According to AHURI there is currently a shortfall for social housing nationally of close to 433,000 properties.

Respondents to the study in regional areas said they noticed an influx of people from city areas, and a related increase in competition and prices.

“(Numerous) participants worried they would end up homeless because they simply cannot afford the current prices of rentals and would have trouble competing for homes,” the study noted.

It quoted one respondent as saying, “If I lose this place I’ll be homeless … I’ve seen people sleeping in cars along the beach.”

Regional Australia Institute CEO Liz Ritchie said she hoped the federal budget’s housing initiatives would go some way to alleviating the crisis.

“Unprecedented regional market tightness is frustrating the attraction of new people to the regions and contributing to an unprecedented 93,000 job regional vacancies, almost one third of the nation’s entire internet-advertised jobs on offer,” she said.

“The collaboration by all levels of government and the residential development, building and construction sectors, through a new Housing Accord is welcomed.”

No immediate respite

Before the pandemic, wages growth and inflation had been low.

When Covid struck and cities locked down, there was a huge flight to lifestyle property in regional areas, which drove prices up.

Today, many of those investors have returned to their city and suburban homes but retained their regional properties as short-term accommodation investments or even holiday homes for themselves.

As a result, vacancy rates are at record lows throughout the country and rents for the limited properties on offer are sky-high.

The rampant inflation and stagnant wages that have accompanied the post-Covid period have only exacerbated the difficulties facing the low-paid workers that form the backbone of many regional economies, from fruit pickers to bar staff.

The prospects of a quick turnaround are remote, if a speech delivered Tuesday (24 October) by Reserve Bank of Australia (RBA) Assistant Governor, Christopher Kent, is to be heeded.

The RBA is determined to rein in spending, so the prospect of policies that promote the higher wages that may draw staff back to regional towns appears unlikely, as it would only fuel inflation.

Mr Kent added that interest rates would keep rising, regardless of the impact on stressed households.

“Some with small or no buffers, they’re going to struggle more than others.

“They’re likely though, in our assessment, to be a small share of borrowers,” said Mr Kent at the Commonwealth Bank Global Markets conference.

President of the Real Estate Institute of NSW, Tim McKibbin, said that outside Sydney, finding a regional home to rent continues to present a real challenge for tenants.

“Vacancy rates in the Hunter region and Wollongong remained stable at 1.4 per cent and 1.1 per cent respectively, and regional areas across the state continue to be extremely tight,” Mr McKibbin said.

“These latest results show that there’s no denying that a rental crisis continues to grip New South Wales.

“Cost-of-living pressures continue to mount for tenants and landlords alike, and recent interest rate hikes will undoubtedly put pressure on some landlords to increase rents.

“Undoubtedly, many tenants would embrace the opportunity to secure a more affordable rental property, however, despite rent increases, they’re choosing to stay put because they’re just not confident that they’ll be able to secure another property.

“Supply continues to be the key problem. In short, there is simply not enough housing to cope with demand and this is putting tremendous pressure on the rental market and it’s difficult to see how the rental crisis will ease anytime soon.”

Back in Western Australia, Margaret River-Busselton Tourism Association’s Chief Executive Sharna Kearney said the housing situation was continuing to undermine the area’s reputation as a working holiday destination and its high levels of customer service.

“The inability of our businesses to deliver their offerings at the desired level will ultimately impact our hard-won reputation and our region’s prosperity,” she said.

Portable fix

One entrepreneur has adapted his original business model to try and help alleviate the rental crisis, worsened by flooding, that is hitting the eastern states so hard.

Housing start-up company PennyGranny offers prefabricated portable homes for hire from $230 a week.

Business founder Michael Doubinski said that by offering homeowners struggling with rising interest rates and cost of living pressures an opportunity to earn additional income by hiring a portable home in their backyard or on their rural property, they could make some income while also providing much needed affordable accommodation for desperately needed regional workers.

“We started in 2021 as a way for retirees on a pension to make a little extra income by hiring a granny flat to put in their backyard and renting it out at a profit,” Mr Doubinski said.

“Then the PennyGranny offices in Dural (NSW) started getting calls from desperate people caught in the grip of the growing rental crisis in Australia's eastern states – either no longer able to afford rising rents or simply unable to find a rental property at any price – and facing a life of couch-surfing or living in their car or a tent.

Tracy, who was living in a regional town in southern Queensland crammed into a tiny one-room cabin with no bathroom with her children after being evicted without a reason offered.

Growing increasingly depressed and looking for alternatives she started looking online for a portable home to put on her father's nearby property.

“Within a couple of months, Tracy was living in a new two-bedroom home with a modern kitchen and bathroom for $280.50 per week,” M Doubinski said.

“And with an option to buy, she is now feeling settled and positive about the future.”