New Zealand will need to build another 40,000 homes if households continue to get smaller.
Shrinking, fragmenting families are a hidden driver of the housing crisis, forcing new solutions from government.
Housing Minister Megan Woods says it would be wrong to blame immigration for demand for housing – the forecast reduction in household sizes will be just as big a factor in the next few years.
“Household composition is just as much a pressure on housing as immigration,” she told the Local Government NZ conference. “So to tell you how sensitive the model is, moving from an average number of people in a household of 2.7 to 2.4 will result in the need for 40,000 more houses.”
She joked that the best thing thing lawmakers could do was legislate against relationship break-ups. But more seriously, both Kainga Ora and private developers needed to be building houses that addressed those changing needs – whether smaller apartments for smaller families, or big four- or five-bedroom houses for multi-generational living.
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Speaking afterwards with Newsroom, she emphasised she wasn’t advising families to pack more generations into their homes – “that is down to people to decide how they compose their households” – but she was concerned that landlords be responsive to those social changes.
It was important to understand that demographic impact on the need for housing in the future. “We know that we have an ageing population, we know that those people are staying in their homes longer, and that certainly within our Pākehā population, there’s less inter-generational living.
Housing agency Kainga Ora was already looking to replace existing home with four or five bedroom homes in South Auckland, where she said there was a real lack. The Government had changed the First Home Grant so people – including parents and their adult children – could club together to buy a home.
“People who have adult children, who themselves have never owned a home, might have some KiwiSaver and their kids might too, and collectively they might be able to access a First Home Grant and be able to buy a property,” she said.
“So we’re certainly thinking, how is it can we enable different ways of living?”
One family doing just that is Meagan and Simon Lee and their children, from Marybank in Whanganui.
First, their daughter Georgia moved back home for three years, with her baby son Hugo, now aged 7. Then their younger son James, 21, moved back home with his son Jack, who is now aged two. When Jack’s mum also found herself struggling for accommodation, they invited her to move in too.
The family own a 240sqm house; upstairs are three bedrooms and a bathroom; downstairs are two bedrooms, a den and a bathroom, with separate access.
“It’s actually quite lovely, because we get to form really strong relationships with our grandchildren,” said Meagan, 50. “We see them every day and have really valuable, precious time with them.
“When we were children, we had our nana living with us too, so it does feel like a normal thing to do. We wouldn’t have it any other way.
Real Estate Institute figures show house prices in Manawatū-Whanganui have increased 35.6 percent in the year to June 2021. “They’re not in a position to buy a house,” Meagan said. “Even finding a rental is really tough, and finding a good rental that is warm and dry – they’re not in the ballpark for that at all.”
One in nine children under the age of five lived in a household with more than one family at the time of the 2018 Census, and more than one in four in communities like Māngere-Ōtāhuhu and Ōtara-Papatoetoe. Multi-family households tended to be larger, with two-family households having an average of 5.6 people, and three-or-more-family households averaging 9.0 people.
Inter-generational living also brings benefits in childcare and, ultimately, in eldercare. “With childcare for the little ones, it’s always that someone’s around, ‘do you mind looking after them’?” And, she laughed: “I would certainly hope that with the role model we’re setting, they will be happy to look after their mum one day.”
But the flipside is the average household size is getting smaller, and that’s projected to continue. In some districts, like Buller and Thames-Coromandel there are already fewer than 2.2 people per household.
Statistics NZ projects the number of one-person households will increase to 599,000 in 2038, and the average size of households to decrease to 2.51 people by 2038 – but already those projections are looking four years out of date. The number of families is projected to increase from by 433,000 to 1.68 million in 2038.
Economist Shamubeel Eaqub agreed with Woods that it wasn’t correct to blame migration for the housing crisis.
“Let me answer it in two ways: we’ve had record house-building, zero net migration, and a 30 percent increase in house prices – so it turns out we don’t need foreigners to push up house prices, we can do it all by ourselves,” he said.
“And we know the problem for the construction sector, without immigration, is we won’t have the workers.”
The Ministry of Housing and Urban Development says demand for housing has changed. “Over the past few decades housing development has largely been predicated on the basis of a nuclear family concept, which has contributed to a lack of housing typologies to meet different family needs and ways of living.”
So the $400 million Progressive Home Ownership Fund aims to increase home ownership rates by assisting households that would not otherwise have bought a home to become home owners.
These are individuals and whānau who are unlikely to buy a home without a reasonable amount of support, both financial and non-financial, or who can afford mortgage payments but are constantly ‘chasing the market’ in terms of saving a deposit, or families who can get a small deposit together but are not able to afford the ongoing costs of a mortgage at current house prices.
To be eligible for assistance from the fund, household income must be less than $130,000 before tax per annum. However in recognition that multi-generational households are likely to require a higher household income to afford a suitably sized home, there is flexibility around the income cap for multi-generational households.
Local Government NZ passed a remit at the weekend, put forward by Queenstown Lakes District Council, calling for the Government to conduct an urgent review of the WINZ Accommodation Supplement system zones in partnership with territorial authorities. There is concern these zones don’t keep up with the changing market, so often there are no rentals available in the designated areas. Councils are seeking an ongoing two-yearly review of the accommodation supplement system.