What type of housing do we prefer?

Comparison of preferred housing, existing stock and current supply (Grattan Institute)

The Herald-Sun reported last week that “the great Australian dream of owning a home on a quarter-acre block might no longer exist. Instead, Australians want more town houses and apartments in the more desirable areas”.

The important words are the last five – “in the more desirable areas”. Australians still love their big, detached houses but they also value location. The baby boomers could have a detached house on the suburban fringe and still have reasonable access to the rest of the city, but those days are vanishing. Now, people who want to live in an accessible location increasingly have to forgo space and accept a smaller dwelling, often a town house or apartment. As illustrated here, those leading this trend are young, small households without dependents – they’re less sensitive to space than families and place a higher value on density.

The Herald-Sun’s interest in this issue was sparked by a new study by the Grattan Institute, The Housing We’d Choose, on the housing preferences of residents of Sydney and Melbourne. It shows that more than half of households in these cities would rather live in a multi-unit dwelling in the right location than in a detached house in the wrong location.

This presents a serious problem for policy – the existing stock of housing no longer matches up with resident’s changing preferences. The Institute finds that a whopping 59% of Sydneysiders and 52% of Melburnians would prefer some form of multi-unit living. Yet this type of dwelling makes up only 48% and 28% respectively of the existing housing stock in the two cities (see first exhibit). Moreover, in Melbourne, developers are continuing to under-provide medium and higher density housing, leaving households with little choice other than to live in sub-optimal locations, albeit in a detached house.

I must admit I was disappointed with the Grattan Institute’s first report in its Cities series, The Cities We Need, so I wasn’t expecting a lot from The Housing We’d Choose. It’s not that there was anything technically wrong with the first report, it’s just that it seemed a curiously pointless exercise – as I noted here, it’s so high-level it didn’t take the debate on urban issues anywhere or advance the cause of better policy.

This time however the Institute has applied all those brains and resources to a meaty and relevant issue and, moreover, gone about it in a logical and determined way. While The Housing We’d Choose has some flaws, it shows up the limitations of the research being churned out by some of our local universities and lobby groups. This is the kind of study they should be examining closely.

The headline finding – that people are prepared to trade off dwelling size and type for greater accessibility – may seem self-evident, but the Institute has attempted the important task of measuring this preference. The researchers sought to simulate real life. They gave a sample of households in the two cities a range of real location, housing type and dwelling size options and asked them to make trade-offs in order to arrive at their preferred combination. The smart thing is the trade-off was constrained by real-life prices and the real incomes of respondents.

The outcome of the simulation, using Melbourne as an example, is shown in the second exhibit. There are four housing types – detached, town houses (curiously, the report calls these semi-detached), 3 storey apartments, high rise apartments – and four geographic zones, which are essentially concentric rings. The exhibit shows clearly the shortfall in multi-unit dwellings – 52% of the Melbourne sample say they want to live in this form of housing but it comprises only 28% of the existing stock (note that rounding means the totals might differ a little from the cells).

That’s clear enough, but this exhibit also reveals some interesting points about location that aren’t discussed in the report.

Preferred dwelling type compared against existing stock, Melbourne

First, there is more total housing stock in Zone 1 than people who say they want to live there. This is an important finding because Zone 1 is quite extensive – as well as the inner city, it includes some middle ring suburbs like Brighton, Malvern, Box Hill and Waverley West. Conversely, more people want to live in the outer reaches of Melbourne than there is dwelling stock to accommodate them.

Second, while there are differences in type, the overall stock of multi-unit dwellings in the central area of Melbourne (Zone 1) pretty well matches people’s preferences. Most of the aggregate shortfall is in the middle to outer suburbs – Zones 2, 3 and 4.

There are multiple conjectures that might explain these findings but there isn’t enough information in the report to be very confident about any of them. To my mind, these numbers suggest a possibility that needs to be investigated further: do a significant number of households favour multi-unit housing for reasons of affordability rather than accessibility?

Another explanation could be that the methodology is being asked to do too much. This is an area where, for all its strengths elsewhere, the study seems a bit weak. I’d certainly need more information than is provided to persuade me that a sample of 572 is large enough to reflect the complexities that this study asks of it in relation to two cities the size of Sydney and Melbourne. Some of the cell sizes in the second exhibit are bound to be ridiculously small. I note that the number of respondents in the 18-24 years category is just 8 persons, covering both cities.

I also worry that the apartment options offered to the Melbourne respondents are unrealistically attractive. The study assumes one bedroom apartments are 85 m2 and two bedroom apartments are 115 m2. That’s much higher than the average in the inner city and even projects at suburban Doncaster — like the Madison, The Pinnacle and The Arcadia — have one bedrooms in the 50-60 m2 range and two bedrooms in the 70-80 m2 range. I’d be less concerned if the prices put to respondents were correspondingly inflated but I’m not sure that is the case.

While I have some reservations about technical issues, this is an interesting and valuable report. There’s lots more to it than I’ve mentioned and I’ll return to it shortly.

6 Comments on “What type of housing do we prefer?”

  1. Chris Curtis says:

    I found the methodology of the report very strange indeed. At one level we can’t always have everything that we want, but at another level one would like to understand the specific whys in each case. Most people would prefer a detached house. The obstacles are location and cost. So the survey in the study overrides the preferences for detached housing by including these realistic constraints. Perhaps there ought to be some discussion on reducing the costs. Location is a more difficult thing to change. There are, after all, only so many square kilometres within a set radius of the CBD (e.g., 314 in a 10k-radius, and that ignores the bay). However, perhaps a multi-centred metropolis is the way to go. Then there is good old decentralisation. Instead of having one city of eight million in this state we could, in theory have two cities of four million each, or one of four million and four of one million each.

    I note also that the “big” house in the survey was on a “big” block, but the “big” block was only 500 square metres. I do realise that blocks are getting smaller, but there is no way that one of 500 square metres can be described as “big”. Blocks where I live are typically 800-1,000 square metres and many are larger.

    • Alan Davies says:

      Actually the Institute does look at the effect of some price changes (p 23) but the options they choose are curious – (1) town houses 30% more expensive (2) all four housing types 30% cheaper, but only in Zone 4, and (3) detached houses 30% cheaper.

      But they don’t do the most useful scenario of all IMO – what would happen if town houses and apartments cost x% less, particularly in zones 2 and 3? This could throw some light on the contention that there are households on the fringe who would prefer more accessible locations if the market could throw up smaller but more reasonably priced housing options.

  2. jack horner says:

    You can frame the tradeoffs however you like.

    1. (most commonly heard) Most people prefer a detached house, but are constrained by location and cost.
    2. Most people prefer a good location, but are constrained by housing types available there, and cost.
    3. Most people prefer to spend less rather than more, but are constrained by the lesser quality/ location that that would involve.

    The way you frame it tends to give prominence to the first named element.

    1. implies that people give high priority to detached house, and are willing to compromise the other matters to achieve it. The logical response is fringe development.

    2. implies that people give high priority to good location, and are willing to compromise the other matters to achieve it. The logical response is to pay more attention to the urban design matters outside the house lot needed to create good locations. This may involve higher density up to a point [note 1], since that makes the related public infrastructure improvements more affordable.

    3. implies spend less on housing. Some people are willing to live in smaller houses and spend their savings on other things.

    We should resist the temptation to use frame 1 automatically. Frame 2 may be equally valid for a proportion of the population which it is important to know.

    Note 1: up to the point whether further increasing density starts to degrade quality of life because of crowdedness.

    • Alan Davies says:

      The report says very clearly that “at the aggregate level, the preferences across groups were consistent with previous research. Most households – although not all – aspired to live in a large, detached house,,,,,the importance of interior space was repeatedly emphasised…..having a detached house was frequently nominated as an aspiration….equally, people expressed a range of concerns about apartments” (p10).

      I think I followed the Institute in framing it another way – most people want both a large detached house and high accessibility (as Hugh Stretton said, Australians want to live in Government House!). Some can get both in the outer suburbs because that’s where they work or they can train to the CBD. Others seek smaller, medium density dwellings with a garden (e.g. townhouses) in more accessible locations. The problem is there’s not enough suitable housing in these locations. Of course if you want to live in the CBD then a detached house simply isn’t an option.

  3. Simon says:

    One issue that strikes me is that it is detached houses that cause the location/accessibility problem. People want accessibility (ie, closeness to other people), but that aint gonna happen if everybody is in a detached house. Choosing space over accessibility doesn’t just negatively affect your accessibility, it negatively affects it for everybody else.

  4. […] So the Grattan Institute is putting its corporate head on the line with the solutions-oriented Getting the housing we want. It’s a follow-up to the Institute’s earlier report, the impressive The Housing we’d choose. The earlier report established that there’s a significant mismatch in Melbourne and Sydney between where many people actually live and where they’d like to live (see my earlier discussion of this report). […]

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