Better use of existing land and housing can help address the housing crisis

Making better use of existing land and housing, particularly in well-located areas with space for greater density, is key to addressing Australia’s ongoing housing shortage.

The shortage is largely driven by increasing population, reductions in the average number of residents per dwelling and a housing supply that has not kept up.

Better regulations for ‘granny flats’ or ‘tiny homes’, multi-family dwellings, using spare bedrooms, subdivision requirements and a review of downsizing implications could all provide more housing in existing areas.

Granny flats and tiny homes

Allowing Accessory Dwelling Units (ADUs) – secondary or additional dwellings, granny flats, garage conversions or ‘tiny homes’ – on suburban lots is one option to improve housing availability.

These units benefit from access to services, transport and infrastructure that already exists, rather than requiring new services to be built, as is common for housing built on greenfield sites. Urban infill or ‘gentle’ density allows for better use of space and increased density in already serviced areas.

Most Australian states allow the construction of granny flats or ADUs, however current regulations require a connection to “same household” members or “dependents” of the same household. These regulations should be reviewed to allow for people without a connection to existing residents to occupy or buy the home.

In the US state of California, ADUs can already be rented or sold to people who are not connected to the original dwelling. The state has made significant strides in increasing the use of existing residential land, introducing regulations in 2019 to ease the process of building ADUs. There has been further easing of regulations since then. In 2023, ADUs accounted for 20 per cent of housing construction in California.  

In Australia, Esperance Shire Council, on the south coast of Western Australia, was the first local council in Australia to permit permanent tiny homes. The NSW Government introduced a two-year moratorium for flood-impacted areas to allow tiny and mobile homes for people displaced by the floods. 

Better utilising spare bedrooms

Despite the housing shortage, there is also a growing number of unused spare bedrooms in Australia. This suggests some people are living in homes that are larger than they require, and reflects a continuation of the traditionally large site areas (blocks) in Australia for housing.

While the block size of new houses has been decreasing over time to an average of 432m² across Australian cities, it is still significantly larger than in most developed nations. Approximately, 70 per cent of all residential housing in Australia consists of standalone houses.

The 2021 ABS Census reported millions of houses across the country with two or more spare bedrooms, and more than one million unoccupied dwellings on Census night. The ABS estimates approximately 1.3 per cent of dwellings across Australia are entirely unused, with a further 9.7 per cent of dwellings serving as a second residence. Older Australians are more likely to occupy larger houses with spare bedrooms, and this trend is increasing over time.[i]  

Multi-family dwellings

Governments could also look at revising residential regulations to allow for ‘dual-key’ or multi-family dwellings. 

Further work on multi-generational housing could enable family members to live with older Australians, increasing the occupancy rates and freeing up other housing. This approach could also provide support for ageing family members, alleviate isolation, enhance social capital in the community and increase housing stock availability. Older Australians typically have long tenure in their homes and connections to their neighbours and community, which has important well-being, safety and security benefits for them, that helps to reduce reliance on a number of government services.

Providing greater flexibility for subdivisions

The National Housing Supply and Affordability Council has identified improving efficiency in the land use and planning systems as a key priority to improving the housing system.   

Dwelling regulations are determined at a local council level, resulting in a lack of uniformity across the country. Local council regulations can determine:

• Maximum dwelling size (site coverage)
• Location of dwelling on the land (setbacks)
• Height of dwellings (number of storeys)
• Floor-space ratios
• Floor-to-ceiling ratios
• Maximum number of dwellings permissible, or minimum lot size for new developments (density)
• Building separation distances
• Property access (driveway and parking)
• Subdivision size
• Whether multi-family dwellings or additional structures are allowed.

Globally, some strategies to improve council regulation and increase housing supply have been successfully enacted.

In Auckland, New Zealand, the local council removed zoning restrictions, allowing for higher-density development to be built across the city. ‘Up-zoning’ was introduced in 2016, more than tripling ‘consents’[ii] (approvals) for dwellings in Auckland within six years. In higher density, ‘terrace housing and apartments zones’ new builds can be five to seven storeys, while in the medium density, mixed housing urban zones and mixed housing suburban zones, new builds can be up to three storeys and two storeys respectively, with a maximum of three dwellings on each parcel of land. House prices have continued to rise, but at a slower rate than in other major New Zealand cities. Rents have also grown at much slower rates than in other New Zealand cities.

Construction growth has been predominantly in townhouses, terraced housing, duplexes and units. Multi-story apartments (capped at seven floors) have experienced growth, though not as substantial. Over the past four years since upzoning was introduced, the overall number of townhouses, duplexes and other units approved has been more than three times that of apartments in multi-storey buildings.

Australia’s housing crisis is caused by a range of factors and it will require many solutions if we are to adequately address it. That includes learning from international experience and improving the way we use existing homes and land to help reduce some of the strain.