About affordable rental housing

Affordable housing is housing available to very low to moderate income households which is priced so that these households are also able to meet other basic living costs such as food, clothing, transport, energy, medical care and education.

As a rule of thumb, housing is usually considered affordable if it costs less than 30% of gross household income.^[1]

In this context, affordable housing refers to housing that has been developed with some assistance from the NSW, local and/or commonwealth governments, including through planning incentives. It may include a range of housing types and sizes, including single or multi-bedroom units or houses, as well as studio apartments.

Affordable housing is only available in some locations and eligibility criteria apply. It is usually available for rent at a discount to the market rent for a comparable property in the area it is in.

Affordable rental housing may be owned by local or state government, community housing providers, charitable organisations, private developers or investors. It must be managed by a registered community housing provider and in accordance with the NSW Affordable Housing Ministerial Guidelines PDF, 14062.98 KB.

^[1] While this figure provides a useful benchmark of housing affordability, the definition of affordability varies according to a household’s individual circumstances. Demands on the same gross income may differ significantly.

Definitions of what is meant by very low, low and moderate incomes are enshrined in Section 13 of the State Environmental Planning Policy (Housing) 2021, and are as follows:

People on a very low income are those earning less than 50% of the NSW or Sydney median income, depending on where they live^[1]. They include workers in a range of lower paid occupations, particularly in areas such as retail or manufacturing, as well as people earning the minimum wage^[2] or who are on an aged or disability pension or other government benefit.

People on a low income are those earning more than 50% but less than 80% of the NSW or Sydney median income. They include many people working in jobs such as a child care worker, secretary or cleaner.

People described as being on a moderate income are those earning between 80-120% of the NSW or Sydney median income. They may include people working in occupations such as teaching, policing or nursing, particularly if they are in earlier stages of their careers.^[3]

^[1]  The 2021 ABS Census data found that the median income in Sydney is $2,077 per week ($108,004 per annum). For NSW it is $1829 ($95,108 per annum). These figures are updated each Census.

^[2] From 1 July 2023, the national minimum wage is $882.80 based on a week of 38 ordinary hours ($23.23 per hour and $45,905.60 per annum). Generally, employees in the national system shouldn't get less than this. (For more information, go to the Fair Work Ombudsman’s website.

^[3] Income figures for various job types in this section are derived from AHURI Final Report No. 355 “Housing key workers: scoping challenges, aspirations, and policy responses for Australian cities” Published 27 May 2021 and authored by Catherine Gilbert, Zahra Nasreen, Nicole Gurran

Affordable housing is not the same as social housing.

Social housing is government subsidised, long-term, rental housing for people on very low incomes with a housing need. Social housing includes public, community and Aboriginal housing. Public housing is managed by Homes NSW while community housing is managed by non-government organisations.

Housing need may include homelessness, experience of family violence or other complex needs such as medical or age-related support needs. People accessing social housing are very unlikely to be able to afford private rental accommodation.

Affordable housing is rental housing for very low to moderate income households.  It is open to a broader range of household incomes than social housing.  Households do not have to be eligible for social housing to apply for affordable housing, though people who are eligible for social housing may also be eligible for affordable housing properties.

Affordable housing is managed more like a private rental property, but there are eligibility criteria and the managers are mostly not for profit community housing providers. When there is a vacancy for an affordable housing property, this is usually advertised and people submit an application to the manager as they would if they were applying for a property in the private rental market. Some managers may keep waiting lists if there is no vacancy, but this is not required.

Rents for affordable housing are usually calculated differently to social housing and there are different tenancy arrangements. Generally, affordable housing tenants cannot transfer between properties and household members cannot apply to take over a tenancy.

Some affordable housing properties are available to people who are also eligible for social housing and on the NSW Housing Register. If someone on the NSW Housing Register is eligible and accepts a tenancy in an affordable housing property, they will be considered suitably housed and removed from the NSW Housing Register.

Many different people need affordable housing and for lots of different reasons. This may include people who work full- or part-time in lower paid jobs, where their household income is not high enough to pay market rent in the area in which they live and/or work. This is sometimes the case even for people working full-time in an essential service such as a police officer, a nurse or a childcare worker[1], particularly if they are just starting out in their career or supporting a family on only one income.

People may also need affordable housing because a change in their lives has impacted on their financial circumstances – for example, a household member has lost their job, a family has separated, a family moves to a single income household after a baby is born or a spouse has died.

Affordable housing is sometimes only needed for a short- or medium-term period, depending on the life changes a household is experiencing. Over time, the household’s circumstances or income may change again and some households may re-enter the private rental market or purchase a home. For example, the primary income earner may progress in their career or a family on one income moves to two incomes.

People in NSW earning very low to moderate incomes are increasingly unable to access housing that is affordable.

At the 2021 Census, 59.2% of very low to moderate income rental households in NSW were in housing stress^[1].  This is over 480,000 households.  Since the Census, additional COVID income assistance has been withdrawn, rents have increased considerably and the rental market has tightened with very low vacancy rates. This figure is likely to be much higher in 2023.

Between the June quarter 2022 and the June quarter 2023, median rents for units in the Greater Sydney Metropolitan Region increased by 25.0%, from $520 per week to $650 per week^[2].  Over the same period, according to the ABS, the wage price index in NSW increased by just 3.4%.  Clearly rents are increasing at a much faster pace than wages.

Demand for affordable housing far exceeds supply. This continues the upward pressure on rents and house prices and leads to a decline in the number of affordable private rental properties available, even in suburbs where there is an overall increase in supply. Analysis of Rental Bond Board data from June 2022 showed a 10% decline in the number of available private rental properties affordable to low income households when compared to data from June 2021^[3]. This trend appears to be consistent across the state in both regional and metropolitan locations.

While there are increasing numbers of households relying on the rental market as a long term housing option rather than a transitional one between leaving home and buying a home, there are declining numbers of private rental properties which are affordable to lower income households.

People on low incomes living in rental housing are some of the most vulnerable people in the community and at highest risk if there is any tightening of supply or price increases in the private rental market. Households which are struggling to pay housing costs are faced with a range of issues that further erode their ability to meet costs. These include:

• living with unmanageable levels of debt, further exacerbating housing vulnerability
• working long hours to pay for housing
• travelling long distances to work or services
• living in overcrowded or substandard housing
• going without essentials such as adequate food, heating, medication or education
• missing out on other opportunities because housing costs are too high relative to income.

^[1] A household is described as being in housing rental stress when they are paying more than 30% of their gross household income in rent.

^[2] Rent and Sales Report

^[3] Housing NSW analysis, using Rental Bond Board data

Initial eligibility for affordable housing mostly depends on household income, which must be within limits set by the NSW and/or Commonwealth Governments. The more people, including children, living in a household, the higher the household income is allowed to be.

Other factors may also be considered when assessing eligibility, including:

• Australian citizenship or permanent residency
• whether the household would be able to secure suitable or adequate housing in the private rental market
• whether the household owns any assets (for example, a property) which they could be reasonably expected to use to solve their housing need.

Eligibility, including income limits, can vary depending on the way a property was funded or developed, and who manages it. Income eligibility limits set by the NSW Government are outlined in the NSW Affordable Housing Ministerial Guidelines PDF, 14062.98 KB. Income eligibility limits on properties receiving National Rental Affordability Scheme (NRAS) funding are outlined on the DSS website.

Tenants of affordable housing must remain eligible to stay in the affordable housing property and regular eligibility reviews are carried out by property managers.

For more information about renting affordable housing, or to apply, please see the section on renting affordable housing.

Affordable housing rents vary, and are set either as a discount to the market rent or as a percentage of a household’s income.

Where rent is set as a discount of the market rent, the discount is usually between 20 and 25% compared to the market rent for a similar property in the area.

Where rent is set as a proportion of a household’s income, households may be charged between 25 and 30% of their before tax income for rent, although providers may charge slightly more in some circumstances.

The method used to set rent is often determined by how a property was funded originally and the requirements of the funding contract. It is also influenced by the strategies managers use to ensure that affordable housing properties are available to a range of income groups balanced with a need to ensure rents cover the cost of managing the properties.

For more information about renting affordable housing, or to apply, please see renting affordable housing.