The Residual Income Approach to Housing Affordability

The residual income approach to housing affordability looks at what different household types can afford to spend on housing after taking into account the other necessary expenditures of living. It is an alternative to benchmark measures of affordability as used in social housing rent settings in Australia (the 25% rule) or assessing the overall affordability in the wider housing market (the 30/40 rule) as commonly used by a range of housing affordability researchers in Australia.

This Positioning Paper does two things. Part A provides an overview, using existing literature, of the various semantic, substantive, and definitional issues around the notion of affordability, leading to an argument in support of the soundness of the residual income approach. This overview is set in the historical contexts of discussions about affordability measures in the US, UK, and Australia.

Also Read: Roma Access to Quality and Affordable Housing in Albania