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Supply & Demand: Why Dual Occupancy Homes are Essential for Communities

Supply & Demand: Why Dual Occupancy Homes are Essential for Communities

With a rapidly rising cost of living and housing unaffordability reaching peak levels, the supply of housing must increase in order to meet the skyrocketing demand. Dual occupancy homes can benefit communities by increasing housing stock and providing comfortable living spaces for owners whilst also providing the benefit of renting out one or both units to tenants to generate rental income.

The Housing Shortage and Affordability (Or, The Lack Thereof)

It should be remarkably clear that as of 2023, Australia’s housing shortage and the rapidly growing population are already having a profound effect on property prices and availability. Federal, state, and territory governments have ambitiously set a target of 1.2 million new homes over the course of the next five years to alleviate the massive shortage.

Steep rises in demand for housing, either for purchase or for rental purposes, are already raising the cost of housing markedly and making many urban locations simply unaffordable for many.

Supply and Demand for Housing

As with many products and services, the fundamental economic principle behind the real estate market is supply and demand. All other things held equal, housing prices are generally determined by the equilibrium between supply and demand. Shifts in supply and shifts in demand can affect these prices, and both supply and demand can shift dynamically and at the same time.

The main supply side factors for housing include new builds and residential development projects, remodelling existing homes to increase capacity, and individuals or families vacating properties to move elsewhere. Dual occupancy homes fall within the first two of these categories.

The main demand factors come from a growing population, interest rates, and mortgage borrowing costs.

Generally what is happening now is that demand is growing quickly, outpacing supply, thus shifting the equilibrium point (housing prices) ever higher.

Dual Occupancy Homes as a Solution to Mitigate Housing Affordability

Much of Australia’s urban housing stock is either already dense residential tower blocks in CBDs or sprawling suburban areas with (many) post-war homes built during a time in which land was relatively plentiful, families tended to be larger, and homeowners wanted a lush green lawn carpeting their property.

Social trends have changed a lot since then, but many of these homes are now underutilised compared to decades past. These types of properties tend to be ideal for conversions into dual occupancy homes, which provide housing for smaller families yet just enough privacy for the inhabitants. Dual occupancy homes effectively double the land use and extend supply, which on a macro scale lowers that equilibrium point.

Dual occupancy homes might not solve Australia’s housing crunch all on their own and indeed it will likely require a concerted effort to increase supply on multiple fronts, but the popularity of dual occupancy homes can certainly have an effect on improving affordability.

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