Australia’s two most populous cities, Sydney and Melbourne, could face a housing crisis in the near future, due to developers “building the wrong thing”, according to researchers for demographic think tank The Australia Population Research Institute.
The housing affordability crisis in Sydney and Melbourne_Report One: The demographic foundations says current urban policy is based on “a flawed evidence base” that will result in a continuing scarcity of affordable family-friendly housing in both cities, and a “serious glut” of high-rise apartments.
The study, which was conducted by founding director of the Centre for Population and Urban Research at Monash University Dr Bob Birrell and former Deloitte Analytics partner David McCloskey, estimates that Sydney and Melbourne will receive around half of the 240,000 people expected to migrate to Australia every year until 2022, which will require Sydney to build another 308,000 dwellings and Melbourne another 355,000, if they are to accommodate both overseas migrants and a growing local population.
However, the authors note that although current urban policy is aimed at housing a growing population, it is (erroneously) based on the assumption that rapid growth in the number of couple and single person households, will result in “a new era of high demand for apartments”.
The authors state that policy does not taking into account “the life-stage factor” – that the population increase will include older people, who rarely “show much interest in downsizing or any need to do so because of ill health, care needs or partner death”, and young families, which typically live in larger, detached houses with garden space, thus placing an “unprecedented squeeze” on the amount of appropriate houses available.
Large number of older people living alone in detached housing
The report notes the strain that an increasing number of older people living alone in detached houses near city centres will have on the market, especially as data shows that the share of older households living in detached dwellings does not start to decline significantly until people reach 75 years of age.
It reads: “[I]n the inner and middle suburbs of Sydney and Melbourne, as of 2011, 50 to 60 per cent of the separate housing stock was occupied by older households…
“Our projections indicate that there will be an additional 110,000 households aged 45-plus living in Sydney by 2022 and 162,000 in Melbourne as compared with 2012.”
Most of these, the authors state, will be either couple households (as the children leave home) or single person households as one or other of the partners die or move into care.
“The main consequence of this ageing effect will be a large increase in the number of small households aged 45 plus who will be occupying mainly detached houses in both Sydney and Melbourne.
“Every extra occupancy due to ageing means one less of the stock of detached houses in Sydney and Melbourne that will be available to younger households who are seeking a detached house, whether a resident or newly-arrived migrant.
“Most industry, planning and housing industry commentators on the housing crisis neglect the significance of these demographic factors.”
Potential surplus of 172,000 apartments
The authors added that if the two cities do not increase the amount of affordable (under $600,000) detached houses and reduce the amount of high-rises being built, “there will be a serious mismatch between the dwelling needs of households over the decade to 2022 in Sydney and Melbourne”.
This “mismatch” could reportedly amount to a shortfall of approximately 28,500 separate houses and a surplus of around 59,000 apartments by 2022 in Sydney, and a shortfall of around 19,000 detached houses and a surplus of 123,000 apartments in Melbourne.
Although no suggestions are made to overcome this “crisis” – as such options are to be discussed in a subsequent paper – the authors highlighted that “things may not remain the same” (residents may accept that they have no choice but to live in a unit or apartment block, or may delay leaving home and starting a new family) and that there needs to be more “rigorous academic research” to inform public urban policy.
Indeed, academic institutions are already looking at solutions to Australia’s urban housing policy dilemmas, with Swinburne Institute for Social Research publishing a paper earlier this year on apartment affordability.
It stated that developers could improve the housing situation by supporting “deliberative” development, which tailors developments to the wants, needs and preferences of consumers, thus reducing the amount of apartments that are unattractive to potential buyers and remain unoccupied.
Other options included overcoming “economic inefficiencies of the traditional pre-sales process” and mitigating “demand-side risks” by aggregating buyers; and having urban policy implement “density restrictions” (in the form of height limits, floor space ratios or bedroom quotas) in localities where housing demand is high, in order to “dampen speculation and de-risk development by creating certainty”. However, this latter reform would need to be “offset by permitting intensification of ‘greyfield’ suburbs”.
Read the APRI’s first report into “The housing affordability crisis in Sydney and Melbourne”.