Measuring Housing Affordability: What Types of Australian Households are in Stress?

The measurement of housing affordability in Australia is reconsidered to contribute to better housing policies. The ratio approach, based on the percentage of income that is spent on housing, is the most common method of measuring housing stress, but this is applied uniformly across housing situations (renters and homeowners), locations and household compositions. We use a residual stress measure, based on the level of disposable income after housing costs have been met, which is then compared to a poverty line or budget standard. The measure is adaptable to different household types and may inform decisions on housing policies that specifically target the type of households that are most vulnerable to housing stress. Using data from the Australian Bureau of Statistics Income and Housing Surveys, the residual measure and ‘after housing’ budget standards, we develop an Ordered Probit model to identify the specific factors that predict housing stress.