Discussions regarding living affordability in Australia typically focus on the cost of housing – but housing is only part of the story of living affordability in our cities. According to the Australian Bureau of Statistics, after housing and food, transport is the largest expenditure for households in Australia1. Housing and transport costs are often related – areas with poor transport connectivity often have more affordable housing, but transport costs for households in these areas tend to be higher. Conversely, areas with good transport connectivity and therefore, lower transport costs, often have less affordable housing options.
The Affordable Living Index enables consideration of the interplay between housing and transport costs in assessing living affordability. The Index can support governments to make decisions about housing policy or social housing provision with the aim of improving overall living affordability for the residents.
The Affordable Living Index is powered by KPMG’s ground-breaking Melbourne Agent and Activity Based Model (MABM) combined with housing cost data derived from the Australian Bureau of Statistics’ 2016 Census.
KPMG’s Affordable Living Index combines the typical annual housing and transport costs for a low income household in a given area2, to generate a score. For the purpose of the Affordable Living Index, low income households are defined as households in the bottom 40 percent of equivalised3 household income for Melbourne. The Affordable Living Index builds on the Australian Housing and Urban Research Institutes’ 30:40 indicator of housing affordability stress4. This indicator identifies a household as being in housing stress if it is in the bottom 40 percent of income distribution and pays more than 30 percent of its income on housing costs.
The Affordable Living Index also has two sub-indices, the Affordable Housing Index (AHI) and the Affordable Transport Index (ATI). The figure below provides a high level description of the Affordable Living Index methodology:
This map shows transport costs as a percentage of household income per week for households in the bottom 40 percent of income distribution.
This map shows housing costs as a percentage of household income per week for households in the bottom 40 percent of income distribution. Housing costs are high across most of Greater Melbourne. Suburbs such as Bulleen, Mont Albert and Chadstone are particularly unaffordable for households in the bottom two income quintiles.
The true level of affordability becomes apparent when housing and transport costs per week for for households in the bottom 40 percent of income distribution are combined.
The Affordable Living Index is periodically updated as updated versions of the Melbourne Agent and Activity Based Model become available. The results shown here use the current baseline year of 2018. Projections for future years (including 2036 and 2051) are also available.
1. ABS, Household Expenditure Survey, Australia: Summary of Results, 2015-16, https://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6530.0Main%20Features32015-16
2. For the purpose of this analysis, area means SA3.
3. Equivalised means: total household income is household income adjusted by the application of an equivalence scale to facilitate comparison of income levels between households of differing size and composition, reflecting that a larger household would normally need more income than a smaller household to achieve the same standard of living. ABS, Equivalised Total Household Income (weekly) (HIED), https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/2901.0Chapter31502016#:~:text=Equivalised%20total%20household%20income%20is,household%20to%20achieve%20the%20same