EXECUTIVE SUMMARY Between 2001 and 2006, Australia’s private rental sector grew by 11 per cent bringing the total number of private renter dwellings to 1.47 million. This happened in the context of: a continued rapid increase in real house prices; an unprecedented increase in households borrowing against their housing equity; record increases in immigrants, both permanent and temporary, coming into Australia; continuing high economic growth; rapid population growth in some large regional centres; and household growth continuing to outstrip population growth. Against this background, this Positioning Paper addresses the following questions: Æ Within the private rental sector, what has happened to household incomes and rents during this period? Æ To what extent do shortages exist for low-income private renters? Æ How are shortages spatially distributed across Australia’s cities and regions? This Positioning Paper contains extensive original empirical analysis and, as such, goes beyond the content of a conventional AHURI Positioning Paper. It presents results on patterns and trends in private rents, household incomes, and shortage, with a view to providing an evidence-base on shortages in the private rental market to the policy community as quickly as possible. The research updates the information provided in the Positioning Paper for the 1996 to 2001 intercensal period (Yates, Wulff and Reynolds 2004). In addition, this paper incorporates three new features: (1) inclusion of household income quintiles into the income distribution; (2) the identification of large regional centres outside the capital cities, and (3) a simultaneous analysis of household income and weekly rent at the household level, thereby allowing us to derive a more refined measure of affordability.