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.
something is wrong with the statistics, where would all those folks live? I trust flats are included in the stats, not only houses. the market must be saturated and that is the reason to build only 6+ houses per 1000 people. just figure that: population is 22’000’000 therefore 6 new homes per 1000 population equals 132’000 homes built every year. Isn’t that enough? what is the total number of domestic dwellings units flats townhouses in the whole of Australia?
One reason is the lack of funding options here in Australia. The holding costs and development cost are so high that many cannot find viable funding which can be eaten up with delays from council approvals etc. Also many developers were wiped out during the GFC and are now on the scrap heap because of their credit ratings. We all don’t have a government credit card like Rudd and Gillard had to get through the tough times. Until government take steps to open up the funding channels were people can obtain funding at a more reasonable rate this will continue.
My wife and I (happily married) have made the contingency plan. What’s best for the kids is for them to stay in the same house, stick in their routines etc. Parents buy a single bedroom flat, keep the family home. The kids stay in the family home. It’s Mum and Dad that should swap residence between the family home and the bachelor/spinster pad elsewhere.
That’s of course the parents can still have a semblance of a functional relationship. If they can’t, then the financial & emotional costs are much higher.
Better still, just Imagine mum and dad staying in the same house but in different bedrooms. Yes, I thought you’d say that. Morals have changed and so have the people. What chance do our kids have. No wonder unnatural practices are on the rise. I MARRIED my wife and are one of the select few couples still happily together from a 1973 era.
It is the over heads with no profit to the developer council or government not releaseing land or allowing development
Totally agreed.
Great article Jon
It’s a good article.
However, the graph is trailing a heavy lump of around 20 million people which masks the recent trends in population increases. What would be more interesting and telling would be a graph showing the yearly increase in housing (vertical axis) relative to the corresponding net increase in population (horizontal axis). That could also be expressed as a percentage for every year considered.
As shown by the “Components of population growth” graph of the ABS Australian Demographic Statistics (3101.0, March 2013), the natural growth in population is pretty flat and the ‘total’ population growth mirrors the net overseas migration (as it has always done in Australia) but with considerable leaps and bounds in the past decade in particular. These are the interesting years.
So it would be clearer to consider the net increases in houses built versus the population growth. That would also show leaps and bounds although I suspect that the yearly number of houses built would not be fluctuating nearly as much as the yearly movement in population because they vary for very different reasons.
Although there should naturally be a lot more houses being built when the population increases a lot, it cannot happen because of so many factors affecting construction, from the avaiability of labour (number of apprentices in deline) to slow land release and financial difficulties both from developers and people all facing higher prices etc. while in the meantime, hordes of people keep on coming…
Keep up the good work Jon…