Homeowners’ Spare Rooms Worth $700 A Month In Today’s Rental Crisis

Thousands of Australian homeowners are renting out spare rooms amid the rising cost of living, anaemic wages growth and a national shortage of rental homes. A survey by consumer company Finder shows 9% of respondents – extrapolated to more than 600,000 householders — are renting out their spare rooms. They’re making an average of $667 per month or $167 per week by renting out the spare room.

According to the Australian Bureau of Statistics, 77% of households have at least one spare bedroom that they could rent out during today’s rental housing crisis. CoreLogic estimates there is currently a rental housing shortfall of 47,500 homes, making it difficult for many Australians to find a rental home amid weekly rents increase by 30% over the past three years as a result. Meanwhile, homeowners are grappling with large increases in loan repayments due to rapid-fire interest rate rises. The combination of these two problems is creating a strong market for spare-room renting, with apps such as flatmates.com.au and AirBnb facilitating connections.

Finder’s money expert Richard Whitten said: “For many Aussies, living with a roommate is better than the consequences of missed repayments. It’s also a good opportunity to create an extra revenue stream. You could be missing out on thousands of dollars by not making use of your extra room. If you do decide to go ahead with it, you’ll need landlord insurance to be covered. Home insurance doesn’t typically cover damage caused by tenants.”

The number of householders living in larger homes than they require is a structural problem in the Australian housing market that was raised by former Reserve Bank Governor Philip Lowe at a Senate hearing in May.

During the pandemic, many householders switched from smaller forms of accommodation in inner city areas, such as apartments, to larger suburban houses on the city outskirts or in the regions because they were allowed to work from home. The number of people renting share housing also fell as people sought their own space to make working from home more comfortable and to cope with long periods of lockdown.

Now, Dr Lowe says rising interest rates and rents will force people to “economise on housing”. “The way that this ends up fixing itself, unfortunately, is through higher housing prices and higher rents,” Dr Lowe said. “Because as rents go up people decide not to move out of home, or you don’t have that home office, you [get] a flatmate. That’s the price mechanism at work. We need more people on average to live in each dwelling, and prices do that,” he said.

Dr Lowe said strong population growth would exacerbate the housing shortage, and rents would continue to rise. This means demand for accommodation, including spare rooms, is likely to remain high. “We’re going to have 2 percent more people in the country this year, [but] the capital stock is not increasing by 2 percent,” he said.

Rents have risen by 10% in capital cities and 4.1% in the regions over the past 12 months.

Renting it out is the latest method used by homeowners to derive an income from their homes. An explosion in short-stay accommodation apps over the past decade has also seen many homeowners renting separate living quarters or studios at their homes to short-term holidaymakers or travelling executives. In addition, the Finder survey found that 5% of the population – or more than 300,000 people – are renting out a garage. Australian websites such as Parkhouse, Parking Made Easy and Space Out are enabling homeowners to rent parking spaces including their own driveways.

The Finder survey asked respondents about their side hustles to earn extra income amid today’s cost of living crisis brought about by the highest rate of inflation in three decades and rising interest rates. The survey found that 35% of Australians — or 7.1 million people – are earning additional income through a side hustle. ABS data shows a record number of Australians now have a second job. Popular side hustle jobs include dog walking, mystery shopping, tutoring, freelancing and ride-sharing. The favoured non-employed side hustles include recycling cans and bottles, earning an average of $46 a month, making and selling goods ($213 per month) and selling pre-owned goods ($897 per month).

Auto dealers across many parts of the country say electric vehicles are becoming too hard a sell for buyers worried about the range, reliability and price of these models.

When Paul LaRochelle heard Ford Motor was coming out with an electric pickup truck, the dealer was excited about the prospects for his business.

“We thought we could build a million of them and sell them,” said LaRochelle, a vice president at Sheehy Auto Stores, which sells vehicles from a dozen brands in Virginia, Maryland and Washington, D.C.

The reality has been less positive. On Sheehy’s car lots, LaRochelle says there is a six- to 12-month supply of EVs, compared with a month of gasoline-powered vehicles.

With automakers set to release a barrage of new electric models in the coming years, concerns are mounting among auto retailers about whether the technology will have broader appeal given that many customers are still reluctant to make the switch.

Battery-powered models have been piling up on car lots, dealers say, as EV sales growth has slowed in the U.S. this year. Car companies have been offering a combination of discounts and lower interest-rate deals in an effort to juice demand. But it hasn’t been enough, because buyer reticence extends beyond the price tag, dealers say.

“I’m not hearing the consumer confidence in the technology,” said Mary Rice, dealer principal at Toyota of Greensboro in North Carolina. “People aren’t beating down the door to buy these things, and they all have a different excuse why they aren’t buying one.”

Customers cite concerns about vehicles burning through a battery charge faster in cold weather or not being able to travel as far as they expected on a single charge, dealers say. Potential buyers also worry that chargers aren’t as readily accessible as gas stations or might be broken.

Franchise dealerships fear that the push to roll out new models will inundate them with hard-to-sell vehicles. Research firm S&P Global Mobility said there are 56 EV models for sale in the U.S. this year, and the number is expected to nearly double to 100 next year.

“I start to think, you know maybe we should just all pump the brakes a little bit,” Rice said.

A group of dealers expressed their concerns about the government’s role in pushing electric vehicles in a letter last month to President Biden.

A Toyota Motor spokesman said the majority of dealers have become “increasingly more confident in their ability to sell Toyota EV products.”

At Ford, the company’s electric-vehicle sales are rising, including for its F-150 Lightning pickup, but demand isn’t evenly spread across the country, according to a spokesman.

Dealers say that after selling an EV, they sometimes hear complaints about charging and the vehicles not always meeting their advertised range. In some cases, customers seek to return them to the dealer shortly after buying them.

“We have a steady number of clients that have attempted to or flat out returned their car,” said Sheehy’s LaRochelle.

While EVs remain a small but rapidly expanding part of the new-car market, the pace of growth has slowed this year. Electric-vehicle sales increased 48% in the first 11 months, compared with a 69% jump during the same period in 2022, according to Motor Intelligence. Sales remain concentrated in a few states, with California accounting for the largest chunk, S&P Global Mobility data found.

The cooling growth has raised broader questions in the industry about whether car companies face a temporary hurdle or a longer-term demand challenge. Automakers have invested billions of dollars to bring more EV models to the market, and many analysts and car executives say they remain optimistic that sales will continue to expand.

“Although the rate of growth has slowed recently, EV demand is clearly moving in the right direction,” said General Motors Chief Executive Mary Barra on a recent conference call with analysts. A combination of more affordable model options and better charging infrastructure would help encourage more people to buy electric vehicles, she said.

There are also varying views within the dealer community about how quickly buyers will adopt the technology.In hot spots for electric-vehicle demand, such as Los Angeles, dealers say their battery-powered models are some of their top sellers. Those popular EV markets also tend to have more mature public charging networks.

Selling an electric car or truck outside of those demand centres is proving more difficult.

Longtime EV owner Carmella Roehrig thought she was ready to go full-electric and sold her backup gasoline vehicle. But after the 62-year-old North Carolina resident found herself stranded last year in a rural area of South Carolina, she changed her mind. Roehrig’s Tesla Model S got a flat tire, but none of the stores in the area carried tires for a Tesla. She ended up paying a worker at a nearby shop to drive her home.

Roehrig still has her Tesla but bought a pickup truck for long road trips.

Tesla didn’t respond to a request for comment.

“I have these conversations with people who say we’ll all be in EVs in 15 years. I say: ‘I’m not so sure. I’ve tried to do it,’” Roehrig said. “I think you need a gas backup.”

Customers who want to ditch their gas vehicle for environmental reasons are sometimes hesitant, said Mickey Anderson, president of Baxter Auto Group, which owns dealerships in Kansas, Nebraska and Colorado.

“We’re in the Colorado Springs market. If this is your sole mode of transportation, and you’re in a market in extremes of elevation and temperature, the actual range is very limited,” Anderson said. “It makes it extremely impractical.”

Dealers representing around 4,000 stores across the U.S. signed the letter in November addressed to Biden, saying the administration’s proposed auto-emissions regulations designed to promote electric-vehicle sales are unrealistic. The signatories ranged from stores owned by family businesses to publicly held giants such as AutoNation and Lithia Motors.

“Some customers are in the market for electric vehicles, and we are thrilled to sell them. But the majority of customers are simply not ready to make the change,” the letter said.

Some carmakers are pushing back EV-rollout plans. GM said in mid-October that it would delay the opening of an electric pickup plant by a year to late 2025. In response to weaker-than-expected consumer demand, Ford said in late October that it would defer $12 billion of planned spending on electric-vehicle investment.

Since September, dealers on average took more than two months to sell an EV, compared with 40 days for all vehicles, according to car-shopping website Edmunds.

While discounts have helped boost sales of some electric vehicles, they also have led to repercussions for some current owners because it reduces the value of their vehicles, dealers say.

“Most people don’t have the confidence to buy an EV and know what it will be worth in 10-15 years,” said Rice from the Toyota dealership.

It may take some time for the industry to adjust because it is still in an early stage of switching to electric vehicles, Sheehy’s LaRochelle said.

“We’re asking for this market to grow organically,” he said.

Homeowners’ Spare Rooms Worth $700 A Month In Today’s Rental Crisis

Rising mortgage costs and the rental housing shortage have combined to create strong demand for spare room accommodation

Concern about electric vehicles’ appeal is mounting as some customers show a reluctance to switch