Bedroom-blockers: Fixing the inefficient utilisation of housing stock

One important dimension of Australia’s housing crisis is how we use existing housing supply. In particular, the impact on, and of, older people. Many retirees continue living in the family home even after their children have left. This is an inefficient use of the larger home. And may leave them isolated in housing that isn’t suited to their needs as they age. A common perception is that greater provision of a small studio or 1-bed apartments would encourage downsizing. And help ease this inefficiency. Our analysis reveals otherwise.

Misperceptions: The data is clear

‍Crunching the data for Sydney and Melbourne confirms that households aged over 59 years are 66% childless or 70% are lone persons. The vast majority – 82% in Sydney, 87% in Melbourne (Figure 1) occupy large houses with more bedrooms than they need. That’s about 3 million dwellings in each capital city with too many bedrooms for their occupants. Almost a quarter (21% in Sydney, 19% in Melbourne) have at least 3 spare bedrooms. This greatly exceeds the equivalent proportion for younger households (6% in Sydney, 5% in Melbourne). Older households are much more likely to live in houses with more bedrooms than needed.

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Figure 1: Household size vs Number of rooms in Dwellings

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Many older households live in single dwellings. With a sizeable minority living in apartments. Of these, some 64% in Sydney and 68% in Melbourne occupy apartments with one or more spare bedroom. This suggests that when older households trade homes, they still want extra bedrooms. These findings run contrary to the belief held by some planning authorities. (Which is evident in adopted development standards.) The belief is that older households favour single-bedrooms or studios of the type found in traditional aged care facilities.

Older householders today are in much better physical and financial health than previous generations. ‘Rightsizing’ is often a lifestyle choice. Rather than a forced decision due to an inability for independent living. Many may want a home that is cheaper and easier to maintain or in a different location. But they also want space for friends and family visitors.

Inefficient use of housing stock: The housing implications

‍The presence of so many older households in large homes is an extremely inefficient use of existing housing supply. Better age-appropriate alternatives would encourage movement into more suitable housing. But the development pipeline is generally focused on small high-density dwellings in urban areas. Well-intentioned but misguided policy responses aimed at increasing the supply of age-suitable housing may be worsening it.

Evidence from the UK shows that only 20% of older homeowners looking to downsize do want a smaller home. The motivations for older Australian households are likely to be similar. Offering better alternatives for older households is imperative. But planning policies can mistakenly believe this to mean studio or one-bedroom apartments. As our analysis shows, older households usually want extra bedrooms. So, a small apartment product does not serve their needs.

Solutions: Better alternatives needed

‍We need better downsizing alternatives. Crucially this means increasing the supply of modern two, three or four-bedroom apartments. Found in suitable locations near where they already live. Or in areas where they have established friends and family networks. Couple this with other initiatives like cleaner ownership/rental structures and pension rules. As well as longer-term rental leases. This would, for example, offer downsizing households better security. Current retirement living laws vary between the States and can cause barriers. Downsizing may impair eligibility for the Aged Pension. And could act as a major disincentive. We will cover this in our next article on tax recalibration.

In regards to housing supply, government policies could facilitate giving older households optionality. This could be location based and in the format of alternative accommodation. This could include a better mix of apartment sizes within high density urban residential schemes. Making it easier also to build granny-flats next to inner suburban dwellings. Often supply responses are a one-size-fits-all model. Which does not reflect the wide variety of unique wants and needs of older households. And very rarely comprise of high-density small apartments.

Conclusion: New housing is only part of the solution

‍Recalibrating the housing market to account for the needs of older people introduces supply cost and complexity. But the upside is significant. It will make better use of the dwellings that we already have. Helping older households into age-appropriate housing. New housing supply is part of the solution to the Housing Crisis. But how we deal with our existing housing supply is no less important. New housing supply is a drop in the ocean compared to existing housing supply. This issue will escalate rapidly given the proportion of Australians aged 64 years and over set to rise by 4.8 million (3) to 2062-63. There is an urgent need to enable ‘rightsizing’. And supply age-appropriate housing for older people in suitable locations. Removing the barriers for them to move out of area.

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