Australia's first Rental Affordability Index reveals that some households are paying as much as 65% of their income on rent. A household with a rate of more than 30% is considered to be in housing stress.

Affordability is worst in Sydney, where low-income families earning $500 a week are spending 65% of their income on rent.

Melbourne is Australia's most affordable capital city, with households paying 24% of their income on rent.

National Shelter's Adrain Pisarski said 'The report is designed to fill a gap in available data on rental affordability and focus attention on the need to reform our rental system. Rental stress is a drag on productivity, is increasing poverty, and breaking down social cohesion.'

Overall, average rental affordability remained below the 30% threshold across Australia. However, the lowest-income 40% of households faced severely unaffordable rent. Non-family households spend more than 60% of their income on rent. The decline in affordability is pushing more people into homelessness.

There was an overall deterioration in housing affordability over the five years studied, except in Perth, where there was a short-term improvement, that disappeared at the end of the mining boom.

The best value housing lies in regional areas, where overall rental affordability has improved Australia-wide since 2012.

The index will be released quarterly, and is produced by National Shelter, SGS Economics & Planning, and Community Sector Banking.