Affordable housing and sustainable urban development are major challenges across the world including Australia. Generally there is a conflict between the approach of sustainable development and affordable housing. Sustainable development means compact city and often compact development is more expensive than the low-density residential development. In Australia sustainable housing has generally been constructed for the high end of the market. Affordable housing means small housing units, use of low cost material, in small blocks built on cheap land at the periphery of the city. Basic aspects of sustainable residential design such as increasing density, mixed use and proximity to public transport are being increasingly adopted in Australian cities. However, the sustainability of affordable housing remains questionable. The aim of the paper is to improve our understanding of current practices of sustainable residential development and housing affordability and discuss whether the approach of sustainable development aligns with affordable housing objectives