Melbourne Ranked Second for Affordability Despite Rent Drop

Rental affordability has continued to plummet with previously 'affordable' areas across Melbourne vanishing, with low income earners bearing the brunt of the crisis, according to the tenth annual National Shelter-SGS Economics and Planning Rental Affordability Index released today.

The Index shows rental affordability in Melbourne is still declining, dropping a further six per cent in the year to 2024, after plummeting 10 per cent in the previous year. The trend of improving affordability between 2017 and 2021 has reversed, offsetting all gains made during the pandemic.

The average rental property in Melbourne costs 25 per cent of the average household income of $112,476. Rental affordability is now classified as 'moderately unaffordable' across the city with a RAI score of 118, the lowest point since 2011 when the data began.

Low income earners are suffering the most across the city, with people on Jobseeker facing 'critically unaffordable' rents, while single part-time workers on parent benefits and single pensioners are met with 'extremely unaffordable rents'.

Despite falling below pre-pandemic levels of affordability, Greater Melbourne remains the second most affordable metropolitan region in Australia after the ACT. While rental prices skyrocket, average incomes across Melbourne have only risen 3 per cent.

Tenants Victoria CEO Jennifer Beveridge said: "Renters tell Tenants Victoria's frontline services that housing affordability remains a huge concern and continue to report steep rent hikes to us. Indeed, our services can't meet the heavy demand from renters on low to middle incomes who seek our help.

"Under Victoria's rental laws there is no fixed method to calculate a rent rise, so we have long called for the State Government to introduce a fairness formula to guide the setting of fair rent increases."

Previously affordable areas across the city have all but vanished, with the spatial pattern of affordability dramatically changing since the Covid-19 pandemic. Footscray to North Melbourne, Parkville and Carlton offered affordable or acceptable rental options for the average household just two years ago. They no longer exist.

Now renters must look as far as Campbellfield, 20km north of the CBD, or Melton which is 30km west, to find affordable rent.

Principal at SGS Economics & Planning, Ellen Witte, said: "Low income earners in Melbourne will soon be pushed out of the city completely if we don't start making changes. Essential workers such as teachers, nurses and hospitality workers can no longer afford to live in the communities they serve. This has important economic ramifications. Rent rises are exacerbating inflation."

"We need a bold rethink on housing to ensure everyone can afford to live in communities with essential services such as healthcare, schools and transport. This may include the introduction of guide rails to prevent excessive rent increases like what has been done successfully in the ACT. This could serve the dual purpose of improving rental affordability and lowering inflation. "

* Table comparing each household in Greater Melbourne and their rent as a share of income, as well as RAI score and affordability.