Is there a better way to utilise Australia’s 13 million spare bedrooms?

Recently, the Australian Bureau of Statistics (ABS) released its latest Survey of Income and Housing. One interesting piece of analysis looked at the number of spare bedrooms around Australia.

The ABS didn’t peek into everyone’s homes to work it out but rather utilised the Canadian National Housing Standard.

Broadly speaking, the standard sets out that no more than two people in a household should share a bedroom and single people over 18 years should have their own bedroom.

Australia is overall well supplied with spare bedrooms.

Although four per cent of households didn’t have enough bedrooms, primarily those with multi-families residing in the one property, more than three quarters of households have a spare bedroom.

In comparison, 12.5 per cent have more than three spare bedrooms.

Overall, there are around 13 million spare bedrooms across the country.

Australia has a shortage of suitable homes in well located areas but it certainly doesn’t have a shortage of bedrooms.

While there are a lot of spare bedrooms, it isn’t easy to utilise them to ease the current affordability challenges.

The majority of spare bedrooms (two-thirds) are in households with a couple only, or a single person and most of them own their homes.

There are hardly any spare bedrooms in multi-family households, or in homes of single parents. A redistribution of all these people is not realistically an option.

What is an option however is to get people into homes that are more suitable for their stage of life.

A big challenge with getting older people into smaller and presumably cheaper homes is financial.

Many downsizers risk losing some of their pension – the family home is exempt from pension assets test but any home equity unlocked by downsizing is not.

Paying for stamp duty is likely to be a deterrent. Finally, earnings from the cash released are taxed, whereas capital gains on the home are not.

The downsizer scheme introduced in 2018 looked to alleviate at least some of these financial deterrents by allowing for non-concessional (after-tax) contribution into their super account of up to $300,000 from the sale proceeds of their family home for people aged 65-plus.

A decent housing related policy put forward by the Liberal party was to lower the age of this scheme to 55 years if they won the most recent election, which of course they didn’t.

While the downsizer scheme doesn’t free up all bigger homes for those that need them, it certainly went some way to addressing the financial obstacles.

Financial reasons aren’t however the only thing keeping people in their big homes when they no longer need them.

Many want to stay in their neighbourhoods and there aren’t suitable smaller homes available to them.

This could be addressed through ensuring developing suitable smaller homes in neighbourhoods with a large number of ageing households.

What can’t be addressed however is the emotional attachment people have to their homes and the difficulties many face in the disruption that downsizing creates.

We may have a lot of spare rooms but there certainly is no easy solution in getting them better utilised.

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Nerida Conisbee

Nerida Conisbee is the Chief Economist at Ray White.