Australia’s housing failure

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Detached housing represent more than two-thirds of all home built, yet less than half of prospective home buyers would choose it given real-life budget constraints.

Detached housing represent more than two-thirds of all home built, yet less than half of prospective home buyers would choose it given real-life budget constraints. Image: Creative Commons

Australian cities are being hobbled by a housing market that doesn't give people the housing they want or need. In this edited extract from their book City Limits: Why Australia's cities are broken and how we can fix them, Jane-Frances Kelly and Paul Donegan analyse the results of research conducted by the Grattan Institute into people's housing preferences given real-life constraints.

Everyone wants to live in a big house on a quarter-acre block” – these words are said so often in Australia that they have passed into legend: unquestionable, self-evidently true. They have shaped housing policy, as generations of developers, planners and politicians have assumed that our cities can go on expanding without limit, since new buyers will always prefer a detached house, requiring new land beyond the existing city limits.

City Limits: Why Australia’s cities are broken and how we can fix them by Jane-Frances Kelly and Paul Donegan, published by Melbourne University Press. Image:  Melbourne University Press

There are many assumptions, but very little actual data available on the housing preferences of Australians. The only certainty seems to be that when people are asked to choose anything they want, they typically say they’d like a large detached house near the centre of the city. But people also know that in the real world, we don’t get everything that we want. We make all sorts of considered trade-offs every day. Of course, unrestricted choices are easy – most of us would jump at the chance of being given an enormous house set within extensive gardens within easy walking distance of both serene parks and the buzz of downtown. While we’re at it, we should throw in a large garage for the sports cars.

In reality, most people start looking for a home with a sense of where they want to live, the space they need and what they can afford. But unless we are really lucky, the place we end up with will often be smaller, in poorer condition, further from transport or in a less appealing suburb than the one we hoped for. Sometimes it will be all four. These are the kinds of compromises the world imposes on us.

In 2011, the Grattan Institute conducted research to establish what Australians would choose when they had to trade off their priorities against their actual housing budgets. We hoped to find out if the current market was giving them the housing they wanted. We asked focus groups in Sydney and Melbourne to explain what the phrase “owning your own home” meant to them. People often responded by describing a detached house on a block of land. The dream is deep in the psyche of many Australians, as one respondent made plain: “We’re born and bred in Australia – we’re ingrained and conditioned to have that attitude towards detached homes … I’ve worked hard and earned the right to own my own place – it shows I’ve done well”.

In Australia, home ownership is seen as the norm. Yet in the years after World War II, only about half of households owned their homes. Postwar government policies led to home ownership rapidly increasing. By the early 1960s, three-quarters of households owned or were buying their home. That figure stayed relatively stable for a long time, then more recently started gradually declining. Today 68 percent of households are home owners.

To get a handle on what matters most to people when they choose housing, we conducted research with a representative sample of home- buying adults in Melbourne and Sydney. First, we asked them to choose their priorities among fifty-six different characteristics of dwellings and neighbourhoods. The number of bedrooms was most frequently chosen as their top concern. What was more surprising, though, was that most of the top ten characteristics that people valued in a home concerned its location rather than its size. Living in a safe neighbourhood, being close to family and friends, shopping and public transport were all very important.

We also examined how different kinds of households responded. Older people, in particular, considered the neighbourhood more important than the dwelling itself. For them, proximity to friends and family, shops and health services were all prime considerations. Single-person households also ranked the location over the home. Unsurprisingly, couples with children saw the size of a dwelling as central. Parents aged eighteen to forty-four rated the number of bedrooms as most important, while 45- to 64-year-old couples without children saw it as eighth most important.

In other words, the preferences of couples with younger children look most like what we assume everyone wants – a big, detached house with a garden. Public debate about housing – not to mention advertising from real estate agents and property developers – focuses disproportionately on this household type. Yet couples with children make up less than a third of Australian households. Couples aged eighteen to forty-four with children make up less than a fifth. Since the mid-1970s, couples with children have declined as a proportion of all Australian households, while the proportions of lone-parent and lone-person households have increased. These changes should be reshaping the housing market, but it is struggling to keep up.

Homebuyers’ preferred dwelling type and location with real-life budget constraints, Sydney and Melbourne, 2011  Image:  Melbourne University Publishing

When Grattan asked the people in its survey to mimic real-world decisions that consider the type of house and location they can afford on their real budget, they turned out not to have a fixed desire for a detached house above all other considerations. Instead, they had a range of preferences, as the table above shows. Faced with actual property prices and actual budget constraints, fewer than half the Melbourne people said they would prefer to live in a detached house. About a quarter of people surveyed said they would choose semi-detached housing such as townhouses, units or terraces, and another quarter would choose a flat or apartment, if they could live in the kind of neighbourhood they wanted. In Sydney, the preference for detached houses in a real-world scenario was even less. About 40 per cent preferred it. A quarter preferred semi-detached townhouses, units or terraces, and about a third preferred apartments or flats. 

Overall, the trends were surprisingly similar across groups and cities. They showed that contrary to myth, not all Australians want to live in detached houses. The housing people actually want is a much more varied mix than our cities currently provide. A significant proportion of people want to live in a semi-detached home or an apartment in locations that are close to family or friends, to shops and to transport options. The survey was repeated in Perth in 2013, with similar results. Presented with real-world scenarios, 56 percent of residents of Perth opted for detached houses, 35 percent for semi-detached homes and 9 percent for flats or apartments.

This diversity shouldn’t be a surprise. Yet in Australia today, there is a great mismatch between people’s preferences expressed within their real-world budgets, and the actual stock of housing. There are large shortfalls of semi-detached housing and apartments in the established areas of both Sydney and Melbourne. Semi-detached homes represent only around one in ten homes in both cities. One in five Sydney households expressed a preference for an apartment in a building four storeys or higher, but these represent only one in ten homes in Sydney. This leaves more than 150,000 Sydney households whose preferred trade-offs cannot be accommodated by the housing stock in that city.

Our research found that only 12 percent of Melburnians, given a full range of choices within their budget constraint, preferred a family- size detached house on the city fringe. Yet detached houses represented more than two-thirds of homes built in Melbourne in the decade to 2010, with most of these houses built on the fringe.

In Australia’s largest cities, almost none of the demand found in our surveys for semi-detached housing and low-rise apartments in established suburbs is being met.

This extract has been taken from City Limits: Why Australia’s cities are broken and how we can fix them, written by Jane-Frances Kelly and Paul Donegan, published by Melbourne University Press

Paul Donegan will be a keynote speaker at Design Speaks: Housing Futures on 31 July 2015. Book tickets here.

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