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”.

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  1. The problem with population growth in Australia is not the growth itself, but rather its distribution. The very fact that half of the migrants to Australia between now and 2022 should be a concern. Our population is growing and we are putting all the people into the only areas of Australia that could actually claim to be overpopulated, while the rest of the country languishes for want of more people. If we took the steps to stop centralisation of government jobs and services and Sydney and Melbourne, this population growth could be decentralised to where it is truly needed. Having more, and smaller cities dispersed around the country would reduce the need for housing construction of any kind in Melbourne and Sydney, and facilitate higher amenity and quality of life in those cities and all over Australia

  2. Which scientific method was used to establish that only separate houses are appropriate dwellings for families? Most of the world has families living in apartments quite happily. Or other forms of medium to high density schemes. There is no valid reason to support the idea that a house on a quarter acre block is the only appropriate accommodation for families. In fact, to the contrary – there is more than enough research which shows that low density creates urban sprawl, with commuting times longer and longer having very negative impact on social and family life.

    The problem is not in the fact that we are building apartments. The problem is that apartments are being built too small, with inadequate amenities and lack of accompanying facilities for families. The problem is really in an attitude of ‘not in my backyard’ – we need higher density or we will actually lose amenity – the greenfields, agricultural land close to demand centres, long journeys to anything (school, workplace, doctor, shop).
    This latest push is just an action of greedy developers for state governments to release more land so they can cheaply build more suburbia.

    1. Any parent would know the value of backyards, plants, play equipment, trees to climb and pets. The report, “The housing affordability crisis in Sydney and Melbourne” states that “when young people create a household they typically start in a flat or apartment. When they begin a family, usually when the female partner is in her late twenties or early thirties, most switch to a detached house. They do so because raising children requires more indoor space than apartments usually offer, as well as some protected external space..” You can’t keep squeezing in people into our existing city without detrimental effects, avoiding urban sprawl, and lower living standards. This “housing crisis” is one manufactured purely to keep rolling out profits and jobs for the real estate industry, investors and mortgage lenders. It’s about warehousing humans, like battery hens.

  3. More than half of our population growth is due to overseas migration, not “natural growth” – also influenced by immigration rates. This “housing crisis” is really a manufactured crisis because our city is already designed, mature, and what’s being planned is retro-fitting it to cram more people in! We had immigration in the past to build our nation, to supply workers and to bring benefits for all. Now, it’s about propagating the housing/real estate industries, and Australians are not meant to question the growth (despite low fertility levels)? This “crisis” is to put pressure on older generations, so that their family houses can be trashed, and replaced with slick, generic apartments, for more people. How are families meant to be raised in apartments? This is a deliberate attempt to downgrade our living standards, and surrender to the greed of property developers, investors, and constructors.