This essay argues that new approaches to measuring housing affordability are needed and are possible in Australia.

The residual income approach has a key advantage over the more commonly used ratio approach, because it measures household outcomes (such as living standards) rather than inputs to household welfare (such as housing costs and income). This is consistent with wider moves towards output and outcome based measures in social policy research. While this approach requires additional data around household expenditures on goods and services, this is available through Australian budget standards data.