Australia’s housing crisis is a bit of a misnomer really. What we are really suffering is a housing to household mismatch where large family homes that were once occupied by several people now accommodate just two.
I’d hazard a guess that if you totted up all the bedrooms in Australia, we would have more than enough to house the nation.
The 2021 Census underlines the problem with figures that show 816,364 two-person households living in houses of four or more bedrooms; a figure larger than for families of three, four, five and more people.
In the interests of full disclosure, I’m among the offenders. Our five-bedroom home in which we raised two children now echoes to the sound of just the two of us.
Logic would dictate that we sell and downsize, freeing up those five bedrooms for a family who could more effectively use the space.
We would benefit by moving to a house better suited to our needs, the incoming family would put those bedrooms to good use and the environment would have a small respite through recycling existing housing stock.
Yet the number of older Australians remaining in over-sized homes has grown over the past decade.
At the 2011 Census there were around 570,000 two-person households in four-bedroom plus houses. Now it’s around 816,000. We can safely assume that the majority of these are empty nester households.
So let’s explore what that actually means.
The increase in under-utilised housing stock over the last decade is almost 250,000 properties. This number happens to coincide with the assessed shortage of properties that would enable the current housing crunch to be effectively eliminated.
But that’s just the impact of the increase in housing under-utilisation over the last decade.
Looking at the overall number, if we were able to reduce this number to around 400,000, then that would result in well over 800,000 residents being able to live in more suitable residential housing that already exists.
Governments are fully aware of this misalignment and as the challenges of meeting housing demand have increased so too have their efforts to encourage older couples out of their family homes.
Since July this year the Australian Tax Office permits a $300,000 per person superannuation contribution from the sale of the family home for the purpose of downsizing.
The downside is the potential impact on pensions, however the Federal Government has attempted to fix this pitfall by proposing a doubling of the asset test exemption from 12 months to 24 months.
The sacred cow that no government appears willing to touch is stamp duty and transaction costs.
It hurts young people on the way up and older people on the way down, taking a big chunk of funds that would be better directed towards meeting living costs in retirement.
It’s a little like gaming revenue in that regard. Addictive behaviours are hard to break especially when you’re dependent on the funds they contribute to balancing the books.
The flow-on effect of stamp duty dependency is one of the contributors to the illiquidity of the property sales market which in turn is reducing the effective utilisation of the current housing inventory.
Of course, there are many other reasons why older people choose to remain in the family home. Speaking to Eliza Owen, Head of Residential at CoreLogic, she noted that the average number of people per household came down through the pandemic period and has continued to trend lower.
Eliza’s view is that the bigger barrier for downsizers is that the family home plays a central role in their post-retirement where they have more time for cooking and gardening, and want space for the children and grandchildren to visit.
Also weighing on their choices is a preference to remain within their communities where they have support networks, friends, favourite shops and local restaurants.
All of this is true but in my case, and there will be many thousands of people like me, if the transaction costs were not so high and there were more plentiful options to consider moving to, then I would be only too happy to free up my house for others to better utilise.
It should be possible to downsize while fulfilling all these retirement lifestyle aspirations but for too long, the need to increase medium density housing has been overlooked.
Not for want of trying though. As NSW Planning Minister, in 2016 Rob Stokes introduced the Medium Density Housing Code to address the “missing middle”, a move that was howled down by councils across the state.
Come 2018, with a tight election looming for candidates in electorates strongly opposed to the legislation, and a new Planning Minister, Anthony Roberts put the reforms in the freezer.
After leading the Coalition to victory, Gladys Berejiklian restored Stokes to the planning portfolio and medium density housing was back on the agenda.
When Berejiklian resigned, Premier Perrottet shuffled Stokes out of the planning portfolio, reinstalling Roberts.
The renamed Low Rise Housing Diversity Code was eventually legislated in 2020 but the council obstructionism associated with this and so many other beneficial reforms illustrates the unhealthy and unhelpful relationship between politics and planning.
If we are to meet the needs of a diverse and ageing population, it’s obvious that we need housing diversification.
Making more efficient use of land need not lead to a loss of character or the bulldozing of suburbs but it might mean that older couples who have outlived the family home can downsize locally and still have space for the grandkids to visit.
But until governments at all levels decide to get serious about significantly increasing housing liquidity, we’ll be stuck with the current housing crunch with a solution literally under our feet.
In the upcoming edition of Elite Agent Magazine, we take a look into the issue of property under-utilisation and why it is one of the many factors contributing to Australia’s current rental crisis. Get your free copy of the magazine by becoming an Elite Agent Pro member here.
