Australia’s spare bedrooms could fix the housing affordability crisis

Much needed housing is tied up in unused spare bedrooms.

Much needed housing is tied up in unused spare bedrooms. Photo: Getty

Australian homes have thousands of surplus bedrooms, and tax reform to encourage home owners to downsize could put a sizeable dent in the housing affordability crisis.

Based on the 2016 census data, as much as 49 per cent of Australia’s existing housing stock could be ‘under-utilised’ – meaning they have two or more spare bedrooms – and that number has likely increased in the past 12 months according to Adam Rigby, the founder of fixed-fee real estate company Upside.

“We have 100,000 under-used houses in NSW and Victoria alone, and there’s more than 2000 six-bedroom homes across Sydney and Melbourne occupied by just one person,” Mr Rigby told The New Daily.

“These figures are alarming, considering we are in a housing crisis.”

EY estimates that there are 600,000 unused bedrooms in Sydney alone, which hypothetically translates to 190,000 dwellings – more than enough to put a roof over the 60,000 heads on waitlists for public housing in the city.

Difficulty downsizing

Andrew Price, EY managing partner for Sydney, told The New Daily that many of the owners of under-used homes haven’t downsized due to the financial strain of selling and moving to a more appropriately sized dwelling.

“The way stamp duty and the tax and benefits system works effectively discourages people from downsizing,” he said.

Retirees face a particular problem in this regard, as family homes aren’t included in the assessment criteria for pension entitlements and moving to a smaller property could also mean a reduced pension size, given the sudden influx of money from the sale of the larger property.

“If they’re on the pension, chances are all they’ll do is save the taxman some money,” he said.

But trying to push any kind of reform through to address that issue would present “political challenges” – as would any attempt to replace stamp duty with a land tax system; a change that Mr Price said make downsizing more attractive to home owners.

“These are thorny political issues but as housing affordability and accessibility continues to be a challenge, these are the sorts of things governments need to think about,” Mr Price said.

Mr Rigby also pointed to costly stamp duty as one of the major reasons people in under-used houses choose to stay put.

“People have a variety of reasons for wanting to stay in these larger dwellings, such as sentimentality and space for in-laws, however the reality is that high agent fees and stamp duty make the cost of transacting a high barrier to downsizing,” he said.

“In fact, an Australia study revealed that 33 per cent of seniors reported stamp duty as a discouraging factor when considering downsizing.

“By decreasing the cost of transacting property, the barrier to moving is much lower and it becomes easier for everyone to live in the correct-sized home.”

Calls for stamp duty to be replaced with more appropriate tax instruments have intensified in recent months, with Productivity Commission chair Michael Brennan recently adding his voice to the growing chorus.

Strengthening tenant rights

With downsizing out of reach for many, Mr Price said Australians will need to start looking more seriously at long-term rental options, but the rights of tenants will need to be reinforced to make this a viable option.

“In other places around the world where it’s more prevalent for people to be long-term renters, tenants rights are more evenly balanced with those of the landlord,” he said.

“They also have access to pets, and particularly as we see growth in single-person households, pets become an important social aspect – for people living alone, having a pet adds significantly to their quality of life.

“Being able to do that in a rental, as opposed to feeling like you need to own something to have that flexibility, is an important factor.”

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