The coverage of Australia\'s rental crisis has been very silly.

As @BenPhillips_ANU shows, rents as a share of income are not historically high (first image)

Rents, as a rule of thumb, track household incomes.

What has happened is the following.

1. Rents fell from 2017-19 due to rapid housing completion and no income growth.
2. Rents fell further in capitals during 2020-21 due to COVID.
3. Since 2022, household incomes have grown quickly (second image)
4. Rents are now catching up on temporary declines AND adjusting to higher household incomes (third image). So the pace of increase is high.
5. But Sydney rents only regained their nominal 2017 levels in mid-2022.

The problem with private rental markets is that not all households see their income adjust equally. So these adjustments are very disruptive, even if the level of rents is not abnormal.

The way to deal with disruptive adjustments is to enact policy now to smooth out future market price changes. This can be done with tenancy regulations that limit the pace of rental increases to smooth out these extremes.

But another way is to have fewer households renting in private markets and subject to these pressures, such as by getting more homeownership and more non-market rental options.

If only 10% of households rented in the private markets, instead of over 30%, these disruptive rental market periods would be far less costly.

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