New research into housing affordability shows that Australia's problem is worse than expected, with 31% of all households having very little capacity to save or to buy beyond what they need after meeting housing costs.

A further 14% suffer major financial and well-being pressures – and this lack of spending power had broader implications for the entire Australian economy, not just housing, warns Professor Terry Burke of Swinburne University.

“If we already thought it [affordability] was bad, it is actually worse,”he says.

Professor Burke, who co authored the Australian Housing and Urban Research Institute report, A New Lens on Housing Affordability and Market Behaviour, says renters and the elderly are facing the most severe affordability problem. Families with younger children under five also struggle, partly because some parents left the workforce to look after the children.

The study found that families with annual incomes less than $40,000 were forced out of buying a home altogether, while those with incomes between $40,000 and $80,000 could only afford homes in the outer suburbs or growth areas.

“Not until household income exceeded $100,000 was there much ability for families to purchase in the inner city and middle ring,” the study, which is based on data from Adelaide and Melbourne, found.

Professor Burke also points out that singles and couples had a much greater capacity to pay high house prices and rents than families earning the same income.

“The development industry has already worked this out, which explains the proliferation of one and two-bedroom apartments in inner-city and middle-ring Melbourne in the past decade,” the study says.

“These household affordability differentials appear to be shaping a new urban and social form, with families and detached housing on the fringe and non-family households in inner-city and middle-ring locations.”

Unfortunately, it appears there is little chance of this situation turning around, Professor Burke says, as housing wealth drives consumption and revenue in the form of stamp duty, so governments are unwilling to introduce policies to dramatically improve affordability.

“Any slowdown in property turnover or contraction in prices will affect the bottom line of state finances,” he says.