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. Read the rest of this entry »