Housing challenges: Navigating Australia’s growing population
Australia’s burgeoning population presents a major challenge and opportunity when it comes to housing provision and planning.
Australia’s growing population presents a significant challenge and opportunity when it comes to housing provision and planning.
As the country continues to experience population growth through both natural increase and net migration, understanding the relationship between population dynamics and housing demand is vital for developing effective strategies to address the housing needs of Australians.
By considering current population growth trends, combined with the existing dwelling stock, we can explore the interplay between population dynamics, demographics, and housing requirements, shedding light on the factors that shape the housing landscape across the nation.
According to the ABS National population estimates, the Australian population saw growth from 24.1 million in June 2016 to 25.9 million in June 2022, with an average annual increase of 1.7 per cent. The Centre for Population published the latest population figures considering the 2023-24 budget. These projections expect the Australian population to grow by two million over the next five years.
As the population grows, there is a higher demand for housing, which results in the formation of new households. New households are typically formed when individuals or families establish their own separate living arrangements. This can occur through various means, such as young adults moving out of their parents; homes, couples getting married, or individuals relocating to a new area.
To determine the number of households, we rely on two data sources. The ABS Household and Family Projections dataset, which was published in 2019, estimated that there were 9.2 million households in Australia as of June 2016.
The projections for June 2021 suggested that the number of households would range from 9.9 to 10 million.
However, due to the impact of the pandemic, the ABS Census conducted in 2021 indicated that the actual number of households in Australia was approximately 9.8 million, falling short by 147,000 households. By adjusting the figures based on the Census findings, we can approximate that the number of households in 2022 to be around 9.9 million.
Household numbers and dwelling stocks are interconnected. Dwelling stocks refer to the total number of residential properties or housing units available within a given area or market. Surge in household numbers drives demand for housing and subsequently affect dwelling stocks, while the availability of dwelling stocks influences housing supply, vacancy rates, and affordability.
The number of existing dwelling stocks can be determined from the ABS Estimated Dwelling Stock dataset. This dataset provides quarterly estimations of Australia’s dwelling stock from the June 2016 quarter to the June 2022 quarter, based on the 2021 Census of Population and Housing.
According to the data, Australia had about 10.8 million dwelling units in June 2022. This is an increase of one million units from 9.8 million in June 2016. The growth rate remained stable at 1.5 per cent per annum from 2016 to 2019.
However, it decreased to 1.2 per cent in 2019-2020, further dropping to 0.2 per cent in 2020-2021. Subsequently, it increased back to 1.2 per cent in 2021-22.
The decline in the number of dwellings can be directly attributed to the impact of the pandemic and the shortage of construction labour during that time. These factors likely hindered the pace of new dwelling construction, resulting in a slower growth rate.
When comparing the number of existing households and dwelling units, it becomes apparent that there is a surplus of 921,000 dwellings as of June 2022.
This surplus raises the question of why there is still a housing crisis despite an abundance of available dwellings. The existence of a housing crisis can be attributed to several factors, primarily stemming from a mismatch between the supply and demand of dwellings.
One significant reason is the mismatch in the types of dwellings available. In certain areas, there may be an oversupply of high-end luxury housing or small apartments, while there is a shortage of affordable housing or larger homes suitable for families in high-demand locations.
Another contributing factor is the geographic distribution of dwellings. Some regions or neighbourhoods may have an excess of dwellings, while other areas with high demand or desirable amenities, such as employment opportunities, transportation networks, or quality schools, experience a housing shortage.
The availability and affordability of housing varies significantly depending on location. This discrepancy in distribution can further exacerbate a housing crisis, even if there is an overall surplus of dwellings at the national level.
A surplus of dwellings can be observed in all cities and regions of Australia, except for regional NT. To gain more insights and understand housing demand concentration, examining each city at a suburban level is essential.
In Melbourne, dwelling stock grew by 16 per cent, while households only grew by 9 per cent between 2016 and 2022. In 2022, the mismatch between supply and demand is present in only 4 per cent of Melbourne’s suburbs, indicating a relatively balanced housing market.
Sydney, on the other hand, experiences an under-supply of dwelling units in 7 per cent of the suburbs, primarily concentrated in the urban fringes. Sydney’s dwelling stocks increased by 13 per cent, while households increased by 8 per cent.
In Darwin, the housing crisis is more severe, with 48 per cent of suburbs facing an under-supply of dwellings in 2022. Over the six-year period leading up to 2022, Darwin’s dwelling stock grew by a mere 6 per cent, while households grew by 7 per cent.
Perth follows Darwin, with 28 per cent of its suburbs lacking sufficient dwelling units to meet the needs of its households. Although there is an overall surplus of around 67,000 dwelling units in Perth, there is an under-supply in the inner and middle suburbs.
In Brisbane, approximately 20 per cent of suburbs experience a shortage of dwelling units. These under-supplied suburbs are distributed throughout the city, except for the city centre. This indicates that the shortage of dwellings is more concentrated in the suburbs. Brisbane’s dwellings increased by 14 per cent, while households increased by 12 per cent.
Adelaide and Hobart exhibit a similar pattern, with 20 per cent and 15 per cent of their suburbs facing an under-supply, respectively. In Adelaide, households increased by 4 per cent, and dwellings increased by 7 per cent, while in Hobart, households increased by 6 per cent, and dwellings increased by 8 per cent.
The shortage of dwellings in ACT is more concentrated towards the inner city and extends to the eastern suburbs. About 17 per cent of the suburbs in ACT are under-supplied in 2022. The dwelling stocks grew by 16 per cent and the households grew by 13 per cent between 2016 and 2022.
The data highlights the diverse distribution of housing demand among different cities, emphasising the need to tailor housing development to meet the specific needs of each local population. To effectively address this variation in the future, considerations must be given to population trends, household types, and the customisation of housing options.
According to the 2021 ABS Census, the average household size in Australia is 2.5 persons per household.
With this information, we can estimate that a population growth of 2m over the next five years would likely result in an increase of about 800,000 households.
Based on the ABS Building Activity data, an average of approximately 156,000 new residential buildings are constructed each year in Australia. Notably, the first two quarters of the 2022-23 financial year witnessed the completion of around 92,000 dwellings. These figures indicate a robust and upward trend in building completions.
By projecting these figures over the next five years, we can estimate that around 780,000 households could potentially be accommodated. This projection highlights the potential for significant growth in housing supply, which has the potential to address housing demand and alleviate some of the pressures associated with housing availability.
In the immediate term, it is crucial to act and make use of surplus dwellings to address housing challenges. Recent data from the ABS Census reveals that approximately 10 per cent of private dwellings were unoccupied in 2021. These under-utilised properties may include short-term rentals (such as AirBnBs) or holiday homes that are only occupied for a few weeks each year.
One effective approach is to repurpose these surplus dwellings specifically for affordable housing programs that cater to low-income individuals and families.
To encourage this, many councils across Australia are now imposing restrictions on the number of short-term rentals allowed. The aim of these policies is to redirect under-utilised housing into the housing market, making it available for long-term renters and potential home buyers.
Additionally, surplus dwellings can play a crucial role in rent relief programs.
By incorporating them into such initiatives, reduced rental rates or subsidies can be offered to eligible households experiencing housing affordability challenges.
To further optimise the use of surplus dwellings, considering alternative uses is essential. Repurposing these dwellings for co-living spaces, shared housing arrangements, or community centres can effectively address diverse housing needs and make the most of available resources.
The housing market faces significant challenges that revolve around two key aspects: delivering a diverse range of housing options and ensuring affordability for individuals and families. However, there are potential solutions that can mitigate these challenges and promote growth.
With proper planning and proactive measures, these challenges can be transformed into opportunities for growth. By aligning housing policies, urban planning, and infrastructure development, we can create an environment that fosters sustainable growth in the housing market.
Hari Hara Priya Kannan is data scientist at The Demographics Group.
