The paper will present and discuss a model for appraising the economic viability of residential development in cases where ëaffordable housingí is to be developed jointly with ëmarket housingí. The model computes indicative residual development values and compares them with alternative use values for prospective development sites. The model has been derived as a result of viability analysis undertaken for the Greater London Authority. The background to this work, including the policy ambitions to achieve 50% affordable housing on development sites in London, will be explained and discussed. The relationships between residual values, property types and the subsidisation of affordable housing will be explored. The consequences of variations in such factors as house prices, densities and building costs will be examined. The relationships between the principles of the model and conventional economic rent theory will be considered with a view to discussing the origins and distribution of development surpluses. Applications of the model will be demonstrated with the aid of recent data based on indicative development scenarios in London. The benefits, limitations and possible extensions of the modelling approach will be debated.