Few issues generate as much heat in Australia as housing. The focus tends to revolve around who possesses the assets and what one generation owes the next.
Earlier this year, we published an article titled '13 million spare bedrooms: Rethinking Australia's housing shortfall'. The piece challenged conventional thinking about housing affordability, suggesting that the issue is not simply a shortage of dwellings but the way existing housing is distributed.
The assertion is based on 2021 Census data which shows millions of rooms sit unused across the country, largely in homes occupied by older Australians. If housing is scarce and spare capacity exists, the argument naturally follows that perhaps better utilisation of existing housing stock should form part of the solution.
Should people take in boarders? Should vacant dwellings be brought back into the market? In practice, the debate almost always circles back to one group and one idea - downsizing.
For years, policymakers and property developers have anticipated a great downsizing wave. The expectation was that as baby boomers moved into retirement, they would gradually trade large family homes for smaller properties, freeing up housing stock in the process.
A recent finding suggests the downsizing wave may be far smaller than many expected. Most older Australians appear remarkably attached to where they live. Rather than embarking on a mass migration to apartments and townhouses, many are choosing to remain in the homes they've occupied for decades.
This doesn't surprise me. I think the downsizing argument raises a deeper question. At what point does a person's home cease to be simply their home and become a public policy asset?
We don't often lament over the size of people's gardens, nor do we question whether someone is driving a vehicle larger than necessary. Yet housing has become different because of its scarcity. The existence of millions of underutilised bedrooms has led some to view older homeowners as custodians of a resource that should be allocated more efficiently.
Viewed purely through an economic lens, perhaps the argument has merit. But this is only part of the story. Behavioural finance tells us that people rarely assess such decisions objectively. We become overly attached to what we own and feel losses more acutely than equivalent gains. Some forms of value cannot be easily quantified.
In this sense, economists, policymakers and homeowners are talking about entirely different things. The economist sees an asset. The policymaker sees housing stock. The homeowner sees something else altogether.
Besides the financial and administrative burden of downsizing, the family home (no matter the size) carries an extraordinary amount of emotional capital. Perhaps that is why the debate feels so fraught. It asks one generation to surrender something deeply personal in order to solve a problem created by forces much larger than itself. Perhaps that is why the great downsizing wave remains more theory than reality.
Simonelle Mody
Also in this week's edition...
Reversionary pensions have long been a staple of SMSF estate planning, Meg Heffron is back to discuss whether they are still the best option.
Rising age dependency is frequently treated as a warning sign for economies, but Cameron Murray argues the ageing crisis will not happen.
The 4% rule has long been retirement's gold standard. Amy Arnott suggests a more conservative approach.
Most Australians gear into property but ignore shares. Alex Cousley from Russell Investments explains how a moderate level of gearing can support retirement goals.
Matt Reynolds from Capital Group shares four charts that expose market concentration risk.
Australia has just hit $1 trillion in debt. Ashley Owen evaluates whether this may create challenges.
For decades, GDP has been the benchmark for economic success. Tony Dillion asks whether this has made us materially happier?
Curated by Simonelle Mody and Leisa Bell
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