Housing Crisis Misconception 2: We Already Have Enough Homes
The second in a series of articles, debunking the most widespread misconceptions about Australia's housing crisis.
A widespread misconception about Australia’s housing crisis is that there are already sufficient homes to adequately accommodate our current population. And that the ongoing shortage is due to people owning multiple homes and leaving them empty or under-utilised.
To assess this claim, we must compare the number of homes in Australia, with the number of homes required. The calculations that are used to do so are described in detail in our previous article1.
The number of homes present in Australia is rigorously counted at each census, with the 2021 edition reporting 10,852,208 dwellings. Projecting forward using construction and demolition data, the number of homes in Australia as of June 30th 2024 was 11.2 million.
To determine the number of homes required, demographers typically begin by calculating a quantity known as the underlying housing demand. This term refers to the number of homes needed for every person to live in the household type they would choose if housing were affordable.
The result of this calculation is that 11.13 million households would be formed. On face value, this may appear to indicate that Australia has 70,000 more homes than required.
However, research on rental markets has shown that to ensure proper functioning, and prevent landlords having excessive power, a rental vacancy of at least 3% is required. Adding this number of homes to the underlying housing demand results in a total of 11.23 million homes required.
Just as rental vacancies are required for a healthy rental market, researchers have also found that vacant homes available for purchase are required for a healthy home sales market. Specifically, analysts reccomend that a vacancy stock of 5 to 7 months of inventory. Adding this buffer gives a total of 11.50 million homes required.
In addition to rental and purchase market vacancies, there are further requirements that effect the number of homes required.
Chief among these are geographic distribution and dwelling type. Even if the national count of dwellings matches the number required on aggregate, a shortage may persist in particular regions or cities if the available homes are not located where people wish or need to live.
Similarly, imbalances in dwelling type can create effective shortages even if the total dwelling count appears sufficient. For example, an excess of one-bedroom apartments and a shortfall of family-sized homes.
As such, the approach presented here should be interpreted as a lower bound estimate of Australia’s housing requirement.
The above analysis shows that at least 11.50 million homes are required to adequately accommodate Australia’s population, while only 11.20 million homes currently exist.
This result demonstrates that Australia’s housing shortage is not merely a matter of vacant or underused properties, but a physical shortfall in the total number of dwellings.
Reducing the immigration rate to pre-pandemic levels and increasing the home construction rate is not a viable solution. This is because analysis has shown that even with an immigration rate of 180,000 per year, and home completions of 200,000 per year, it would take 26 years to eliminate the housing shortage2.
As a result, our petition calls for Zero Immigration Until Housing Affordability is Restored. With exemptions only for clinical healthcare workers and skilled construction workers, in the event that a genuine shortage arises. Or for other truly exceptional circumstances7.
If you agree, please sign the petition and share with others. Thank you for reading, and together we can end Australia’s housing crisis.