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1 million empty homes will never solve Australia’s housing shortage

Composite image of an empty room in a home and townhouses.
More than 1 million homes were registered as vacant on census night, 2021. (Source: Getty)

A lot has been made of the recent census results showing there were 1,043,776 unoccupied dwellings on census night 2021.

That seems like a lot of houses - out of the total 10.852 million dwellings in Australia.

It is assumed by some people hoping to tackle the housing shortage, high house prices, oppressive rents and homelessness that at least some of these houses could somehow be utilised to meet these demands.

Unfortunately, such thinking is a flight of fantasy.

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The vast bulk of these dwellings are vacant for very good reasons, and to ask or encourage the owners to make them available for other purposes is mostly nonsensical.

In 2017, SGC Economics & Planning prepared some insightful research on vacant dwellings after the 2016 census asked respondents why their house was empty.

Pete Wargent, co-founder of BuyersBuyers and a property guru in his own right, has on many occasions highlighted these findings when analysing dwelling supply, demand, rents, interest rates and prices.

Around 10 per cent of dwellings are always empty

In every census from 1981 through to 2021, around one in 10 dwellings was registered as vacant or empty on census night.

At the low point, it was 9.2 per cent of dwellings in 2001, with the peak being 11.2 per cent in 2016.

The 2021 census confirmed 9.6 per cent of the dwelling stock was vacant, which was the third-lowest proportion recorded.

The question about why a property was vacant was not asked in 2021 but the trend over prior censuses suggested there were good reasons why a dwelling was unoccupied on census night.

Using data from the SGC Economics & Planning research, the main reason a house was vacant was that the usual occupier was away.

It is as simple as that for a large proportion of vacant houses.

In 2016, 43.6 per cent of dwellings were vacant because the usual occupants were on holiday, away on business, at their holiday house [see below], in hospital or care or simply just not home that night.

If the same percentage prevailed in 2021, the 1,043,776 vacant dwellings would have fallen to 588,695.

A further 5.0 per cent of dwellings - or 52,188 - were empty because they were listed for sale.

It is likely the owners had moved elsewhere and were merely awaiting the sale and settlement of their property to conclude before, presumably, the new owners moved in or the property was put up for rent.

Clearly this is helping, not hindering, the objectives of greater home ownership and lower prices.

Furthermore, and importantly for the broad housing debate, not all dwellings available for rent are occupied. This forms the basis of the estimate of the rental vacancy rate.

Properties available for rent accounted for 10.6 per cent of empty dwellings. These 110,746 dwellings were again not part of the problem but part of the solution to housing pressures.

Indeed, the advocates for improved rental affordability would welcome an even higher number of empty properties available for rent because it would drive rents lower and provide more choice to those in the market for a new rental property.

Residential home interior with insulation and plasterboard.
Roughly one in 10 homes were vacant due to renovations or the property being newly completed. (Source: Getty)

A further 9.8 per cent of vacant dwellings were reported to be newly completed or undergoing repair and alterations.

Quite clearly, these were not available for occupation even though they were part of the overall dwelling supply. They were very likely to be occupied when the finishing touches saw the owners of the new or altered dwelling move back in.

That’s a further 102,388 dwellings that, while vacant, were accounted for by their owners.

While seemingly small, 1.5 per cent of vacant dwellings were awaiting demolition. Presumably the owners were rebuilding or redeveloping these sites, which would add to new housing supply when completed.

On census night, 15,716 dwellings were in this category.

At this point, when the above factors are taken into account, we are down to a total of 307,657 vacant dwellings on census night, not the 1 million in the headline.

The census showed that 22.8 per cent of vacant dwellings were holiday homes. These 237,981 empty premises are the proverbial sea change or tree change dwellings that are likely to be part of a lifestyle choice that is a reasonable thing.

It is impossible to think of a case in which these dwellings can be used to tackle housing problems.

This means there are really only 69,932 vacant dwellings, which are empty for “other” reasons. It is not clear what these reasons are.

Suffice to say, it is more a shortage than a glut of unoccupied dwellings.

To fix housing problems, the answer is clear – more properties need to be built than are needed from population demand.

We actually need to see more and more vacant dwellings available for sale and rent as this will put downward pressure on prices and rents.

Economics 101 works every time.

This remains a problematic issue and, in the meantime with international borders being reopened and new construction only moderate, there is likely to remain a structural shortage of properties rather than a mass oversupply, as the census numbers implied.

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