While Sydney continues to be Australia’s least affordable city for rental accommodations, among all the cities, Melbourne has seen the greatest decline in affordability since 2013, notes the latest Rental Affordability Index (RAI), which was released today.

“The latest Rental Affordability Index shows housing stress is a common reality for people in the rental market, especially those on low incomes, who have little left to spend on essentials like food, electricity, fuel and education, after paying rent,” said Andrew Cairns, chief executive officer of Community Sector Banking. “People in the lowest income households are being pushed out of the rental market, and into poverty and homelessness - this situation is most dire in Sydney.”

Produced by National Shelter, Community Sector Banking, and SGS Economics & Planning, the RAI is an easy-to-understand indicator of rental affordability relative to household incomes across the country. Released bi-annually, the Rental Affordability Index is intended to complement the Housing Affordability Index (HAI), which is a price index for the purchase of homes.

“We are most concerned that there is no national strategy to tackle housing affordability, especially when we see that additional supply is not reaching low income households, and increases in homelessness are being reported,” observed Adrian Pisarski, executive officer of National Shelter.

With homeownership falling further out of reach for many households, rental unaffordability is a key issue that needs to be addressed. The RAI makes it clear that rental affordability is dividing the country, with service rich areas tending to be very unaffordable, while service poor areas tended to be more affordable.

No end in sight for Sydney’s rental affordability crisis 

Greater Sydney continues to be at crisis level in terms of rental affordability, with a RAI of 108 in the June quarter of 2016. The average renting household allocates nearly 28% of its total income to pay the median rent of $480 per week.

Most of Sydney’s inner-city areas remain extremely unaffordable, and regional New South Wales remains the least affordable regional area, despite experiencing a slight improvement in affordability over the past quarters.

Melbourne most unaffordable city for low income households

Despite seeing the most significant fall in affordability since 2013, Greater Melbourne is now the country’s second most affordable metropolitan area, with a RAI of 126 in the June quarter of 2016.

The average renting household spends around 24% of total income on rent. However, affordability varies greatly across different income groups and areas. The situation is most dire for non-family, mostly single person households. Such households allocate nearly 110% of total income on rent, even after discounting average rents for this group by 25% for access to social housing.

Brisbane and Adelaide reasonable but volatile

While Brisbane and Adelaide scored reasonably well overall in the latest index, some volatility was noted. Median rents fluctuated most significantly in Brisbane, from a high of $409 in March to a low of $397 in June 2016.

The average renting household in Greater Brisbane allocates around 25% of total income on rent, while those in Greater Adelaide allocate nearly 27% of total income on rent.

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