Housing supply

Resizing housing supply is crucial to defusing the affordability crisis

More single occupancy housing is needed to ensure Australia scales up housing demand in the future, according to a leading social and affordable housing body.

The 2021 census results showed a sharp increase in the number of one-person households, with the average household size increasing from 2,594 people per household in 2016 to 2,541 in 2021.

The number of people choosing to live in apartments continues its upward trend, now accounting for almost a third (30.9%) of the increase in the number of private residences since 2016.

More than 2.5 million people, or about 10% of the population, live in apartments.

PowerHousing Australia chief executive Nicholas Proud said while the drop in household size seemed insignificant, it was enough to drive demand for 200,000 more homes over the past five years.

“There is clearly strong demand for new homes, but Australian housing construction also appears to be out of step with the reality of Australians’ needs,” Proud said.

“The census reveals that households of three or more people have decreased as a proportion of households. Couples have remained stable while one-person households have increased significantly, from 24.42% of households in 2016 to 25.56% of households in 2021.

“The proportion of homes with four or more bedrooms has increased from 32.23% in 2016 to 34.76% in 2021.”

Proud said 77,429 new one-bedroom homes have been added to the market over the past five years, while there has been an increase of 347,205 one-person households as demand outstrips supply by more four times.

He said more than a million properties, or just over 10%, were vacant on census night, which Proud said was too high in a housing affordability crisis.

‘The census highlights the need to create affordable housing supply, particularly rental accommodation to match Australia’s changing demographics,’ he said.

▲ The supply of one bedroom apartments is drastic.

“With so many people facing rental stress and homelessness, there is a clear need to re-examine the types of housing being built.

“There is clearly a disconnect between the housing system that currently exists and the expectations and needs of the community.

“The census highlights opportunities to resize existing housing supply, direct new housing construction towards smaller households and bring unoccupied housing online to ease Australia’s housing crisis.”

Data from the 2021 census revealed that over the past 25 years, the number of owned homes has increased by 10%, while the number of homes owned with a mortgage has doubled.

AMP Chief Economist Shane Oliver flagged high household debt and rising inflation as a potential cause of mortgage stress going forward.

Oliver said that in 1990 the average household debt was $69 for every $100 of average household income after debt. Now that’s $187 of debt for every $100 of after-tax income.

He said this was largely due to the escalating cost of property on top of low interest rates, deregulation of financial institutions making lending more competitive and a softening of attitudes towards debt.

But Oliver said while interest rate hikes remained relatively subdued, debt servicing was not a concern.