Abstract: It is widely acknowledged that substantial spatial differences in economic well-being exist across Australia. There is a growing body of Australian literature examining aspects of disadvantage at a small area level, and substantial research into the impact of housing costs on financial disadvantage at a national and broad regional level. However, differences in the impact of housing costs on financial disadvantage at a small area level have not been examined to date, due to an absence of adequate data at a sufficiently disaggregated geographical level. This study uses spatial microsimulation techniques to estimate at a small area level the impact of housing costs on spatial differences in financial disadvantage, and the actual or potential effect of housing assistance in reducing disadvantage. The specific research questions that the project addresses are as follows: – What is the nature of the relationship between housing assistance, housing costs and financial disadvantage at a small area level? Which regions are affected? Are metropolitan areas more financially disadvantaged because of higher housing costs? – Which types of households are affected by the inclusion of housing costs? Household types analysed include those with different tenure types, different home equity and house value, different sources of income and different life cycle stages. – What would the impact on financial disadvantage at a small area level if the upper limit for Commonwealth Rent Assistance were removed? What are the implications for government? – What is the impact on financial disadvantage of people going from renting to purchasing housing? What effect do mortgage subsidy policies have on this impact?