Could $200 for marriage counselling improve housing affordability? Australian’s just don’t living together as much as they used to, despite government tinkering, and that means we need more housing, or price rises are inevitable.
There was a cute measure in the last budget to offer all couples $200 worth of marriage counselling…
Sorry, “relationship guidance.”
Some people wrote it off as more conservative social engineering, but could it have actually been a back-door attack on ‘housing affordability’?
How’s that now?
I don’t really know what $200 buys you when you take it to the counselling market. I don’t expect it buys you much, or maybe therapeutic advice like this.
But even if it only sows a seed of relationship reconciliation, if enough families stick together, rather than going splitsville, it could do a lot to help housing affordability.
I’ve written a lot about how the current shortage of housing in Australia is one of the main drivers of prices. Put simply, we’re just not building enough houses.
At the same time, the population is growing strongly, particularly in recent years. Just to keep up with that growing population we should be building more and more houses every year.
But we’re not. The latest building starts data show that the current boom has sparked a surge in new housing coming on line, but the number of starts this year is only marginal higher than the previous peak…
… all the way back in 1994!
For 20 years we haven’t been able to do anything to build more houses than we did back in the year of Forrest Gump.
And so with these two together – a growing population and weak housing construction – the shortage of housing gets more and more severe every year.
To represent this graphically, is this little gem from Macrobusiness, which looks at the number of new dwellings per 1000 people – like a population adjusted construction rate.
What we can see is that since the 80s, there’s been a trend decline in construction rates – meaning the housing shortage just gets worse and worse.
And this is one of the key reasons why we’ve seen such strong price growth over the past 30 years.
But this isn’t the only story. Because at the same time as construction is lagging behind population growth, Australians are actually demanding more housing than they used to.
Because we live in smaller and smaller family units.
This chart here follows average household size over the past 100 years! Back in 1911, the average household size was 4.5 people – with many households much bigger than that.
By 2011, that had fallen dramatically to just over 2.5 people per house.
So what’s driving this?
Well there’s a few things. But it mostly reflects the changing way Australian society operates.
First up there is the ageing population. As baby-boomers move into retirement we have more and more empty-nesters. With the transaction costs associated with moving (fees, but also the cost of moving away from long-loved homes and neighbourhoods) many folk decided to stay put long after the kids have left.
100 years ago, Granny would often move in with the kids, but not any more. Granny has a big-screen TV and likes watching her own shows thank you very much.
There’s been a lot of talk about the potential for baby-boomers to ‘downsize’, but we haven’t seen much evidence for it yet, and I think it underestimates how attached people are to the suburbs they live in.
Second there’s been increased demand for holiday homes. Third, a lot of couples are delaying moving in together until much later in life.
But fourth, there have been growing numbers of relationship breakdowns and families splitting up.
100 years ago it was rare. Now it’s more than common.
But the structures and housing needs of these new families are changing too.
30 years ago, Mum would keep the house and look after the kids, and Dad would get himself a bachelor pad somewhere and see the kids on weekends – if at all.
More and more though, we’re seeing ‘shared-time’ parenting, where the kids spend a more equal share of time with each parent. Week on / week off type things.
An ANU study has found that ‘shared-time’ parenting arrangements have doubled over the past ten years.
And what that means is that now Dad isn’t happy with a 1 bedroom flat. He wants a house and a yard and rooms for his kids too.
The effective demand for housing has increased. Not only are more families splitting up than a 100 years ago, but the new family structures need more housing.
Enter Social Services Minister Kevin Andrews, with $200 bucks for each couple – married, de facto, or even in a same sex relationship. The drive is to keep couples together.
If he can do this, if he can convince couples to keep living together, he might be able to take some of the edge of housing demand. In a market with a chronic shortage of housing, this could take some of the pace out of property price increases.
… which might just increase our beloved affordability.
Sound like a long bow to draw? Of course it is. I don’t think this policy is about affordability any more than it is about reducing traffic congestion.
And the factors that have cut average household size in half over the past 100 years are long-run social trends. This is about how we want to live. There is very little I can see that the Government could do to turn it around, even if it wanted to.
But its always wroth remembering that our ‘housing preferences’ are one of the key factors behind the price surges of recent years, and will remain one of the key drivers going forward.