Created about December 2003, modified
must they be so big, so luxurious and so expensive?
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I live in Australia. This section is based on what I have seen in
Australia, but I suspect that at will apply to other developed (wealthy)
nations as well.
Buying a house is something many, perhaps most, Australians hope to do some
time in their lives. It is becoming less and less a practicality.
In order to buy a house a person, or a couple, will usually go deaply into
In 2007, and again in 2008, it was announced that housing affordability
in Australia was at a record low level.
In early 2010 it was announced that the affordability of housing in
Australia was the lowest in the world.
Need it be so?
Median house prices in Australian mainland capital cities range from
$331k ($331 000) in Adelaide to $526k in Sydney (2007).
It is quite possible to build a very
liveable cottage/shack, including insulation, all plumbing, simple solar
and wood-fired water heating, second hand electric stove, second hand
refrigerator, wood stove for space heating, simple evaporative air
conditioning, connection to electricity and floor covering for a total of
$30k (about 2008 prices).
I have estimated that a house based on
containers could be built for about $40k.
In most council districts in Australia, I suspect, there would be
laws against people living permanently in a shack/cottage/home
such as those mentioned above.
There would be concerns about any area where buildings like that were
allowed becoming slums, and many people would not like to have homes like
that built in their street; they would believe (probably rightly) that it
would lower the resale value of their own houses.
Perhaps we, as a society, need to reconsider our priorities; is it better to
live in a street of big and pretty houses and for both parents to
have to work to keep up big mortgage payments, or would it be better to lower
our housing standards a bit and live a more relaxed and family oriented
lifestyle where one parent would be able to stay at home and look after
If the latter, then perhaps we should get our local governments to set aside
some areas where more basic housing is allowed.
It appears that this rural home started as a shed and is gradually being
converted into a house.
The veranda would have been added after the shed itself was built, and now
it looks like another room is being added at the back.
This seems to me to be eminently sensible;
start simple and improve as you can afford to.
Obtaining building permission to do this in an urban area in Australia would
probably be impossible.
When I was young (as I write this in March 2007 I am 61 years old) some people
lived in very simple housing, especially in rural areas.
Now people expect to have a house with:
A simple and cheap hot water system|
The hot water comes from the solar panel in the warmer half of
the year and from the wood-fuelled heater in the background when the sun is
not shining; no fossil fuels needed.
A generation or two ago many of these things were not expected.
(Water suppy, disposal of rubbish and effluent handling were the
responsibility of the home owner, not local government.
Services provided by government must be paid for one way or another,
often the cost of getting services such as sewerage, power, roads,
and curbing is added to the cost of the land on which the house is to
Of course housing was then much more affordable.
- Several bathrooms;
- Several toilets (WCs, latrines);
- At least three bedrooms;
- A dining room separate from the kitchen;
- A lounge room;
- Probably a general purpose room; it might be called a rumpus room or a
- Electricity available at all times;
- A pressurised, piped mains water supply;
- A laundry;
- Hot water whenever required, just by opening a tap.
Hot and cold water are expected to be available in the kitchen, laundry, and
all bathrooms; cold water in all toilets and outside in the garden;
- Connection to a sewerage system;
- Access to a road that is passable in all weather;
- Heating and cooling of either all or part of the house whenever
- Probably a small garden;
- A rubbish disposal service;
- Television, Internet, Hi-Fi sound system, etcetera.
When I was young it was very unusual for a house to have two toilets;
except in the case when there was an old outside toilet that had largely
been replaced by a newer inside toilet.
Now, in rural areas, many people do not have all the above features in their
homes; it is common for people in rural areas to have to arrange
their own water supply and their own sewage disposal; a few do not have
While the average house is bigger than it was fifty years ago, it is on a
block of land that is much smaller. It is not unusual now for a
house to occupy by far the greatest part of the land on which it is
situated. Fifty years ago it was common for the block of land held
by a typical home owner to be around 1000 square metres, now 300 to 400
square metres are usual for new homes.
This, of course, means that the space available for a garden is greatly
reduced, with a consequent great reduction in the potential for
In early 21st century Australia the average number of people living in each
house is between one and two. Fifty or so years ago it was about four.
So our houses are much bigger than they were, much bigger than we need
most of the time (it is useful to have those extra bedrooms when we have
visitors), but fewer people live in each one, so the cost of housing per
person is much higher.
Given all of the above, you might think that the main reason modern houses
are so expensive is because of the size of the houses and all the features
that they contain. This is only a part of the reason. The cost of the
little bit of land that the houses are built on is also very important.
While land in farming areas might sell for $3000 to $10 000 per
hectare, in the suburbs of a major Australian city you could expect to pay
$2 500 000 per hectare (say $100 000 for a 0.04ha block),
quite probably more.
This was probably used by a shepherd in the nineteenth century.
Very small, but big enough for the purpose.
Rural South Australia
Why should land in the suburbs cost 500 times as much,
per hectare, as rural land? I can only suppose that there are two reasons:
first is the cost of the necessary infrastructure in the suburbs, the
closely spaced streets, the sewerage, the electrical supply,
the water supply, the park lands, etc. The second, and major,
reason would be that this is the price because this is what the sellers can
get and this is what the buyers are willing to pay.
Why then do people not buy a tenth of a hectare in some rural area for $1000
and build a house there? Because rural land-owners are not allowed to
sell 0.1ha blocks without providing the above infrastructure.
Is this reasonable? It is at least partly reasonable. In some places
it might be possible to develop your own water supply (a well
or rainwater) and
hygenically dispose of your sewage on a 0.1ha block, but in many areas
there would not be suitable groundwater available or there would be problems
in disposal of sewage on small blocks of land. The cost of getting
mains electricity onto such a block would probably be at least $10 000
(although if a number of blocks were developed at one time this cost would
be less for each). Disposal of sewage on one 0.1ha block would not be a
problem if it was surrounded with farm land, but if it was surrounded with
other 0.1ha blocks each with its own house there might well be a problem.
And then a 0.1ha block of land is of very little use if you cannot access it,
a road to it must be built.
By the time all the infrastructure that people expect is supplied, the
price of a 0.1ha block of land goes up to $30 000. This is still
only a third of the price of land in the city, but one does not have
access to such a great choice of employment in a rural area as in a city.
How much can a first time home owner afford, $300 000 or
$40 000? Of course this is an extreme example, but the principle
is there. It is, in principle, possible for someone to live in
a first home for around $40 000.
Having obtained that,
he/she/they could save up and buy something better in time, as they can
afford it, rather than paying crippling rental or mortgage fees.
Jobs and wages
People need jobs and business owners need employees. To be
socially just, a job should provide a wage that is sufficient
for a comfortable lifestyle. What is a sufficient income
is very dependent on the cost of living, and housing can be
a very large part of the cost of living; although, by my
example of the $40 000 house one can see that it isn't
Housing is one of the major costs that we all must bear.
Some 2001 median weekly rents from the REIA are:
wages that are paid must be sufficient in relation to
the local cost of housing
if people are to be able to live with an acceptable standard
In an area where the median house price is $300 000 wages should
be higher than where a house can be had for $100 000.
- For a two bedroom flat or unit, Sydney $265, Adelaide $130;
- For a three bedroom house, Sydney $235, Perth $162.
From the employers perspective
Looking at the relationship between cost of housing and wages
from a different angle consider the following scenario. A new
business that will employ many people, perhaps a telephone call
centre, is to be set up. So long as the communication lines
are available the main constraint in its location is the
availability of labour. Considering the rental prices above,
would such a company be wise to set up in Sydney, or in
Adelaide or Perth where rents are much
more affordable? In fact, wouldn't such a business be wise to
set up in a provincial city where accommodation costs for its
potential employees would be even lower? It would be able to
pay minimum wages and still attract and hold a stable workforce.
All other factors being equal, a business can be more competitive
in an area where wages can be lower. Wages can be lower and still
be sufficient for a comfortable lifestyle where housing costs
are lower. It follows that, over a period of time, businesses
will move away from high cost housing areas to low cost housing
Many Australian businesses have moved 'off-shore' to access lower
wage costs, they might equally well consider smaller moves to
smaller or provincial cities where the cost of housing is lower.
The unrealistically high price of housing in the big cities will
eventually cause the stagnation and economic decline of those
If the interest rate on a home loan is 7% then on a $300 000
house weekly repayments must be over $400, just to cover
the interest; it follows that weekly repayments on a $40 000
loan need only be about $54.
$400 per week is a huge bite out of a modest wage.
In Australia those who cannot buy or rent a home and cannot get, or don't
want, accommodation from a charity must 'live rough' without a home
In third-world nations such people can build crude shacks - this is
tolerated by the authorities.
This is beginning to happen in Australia; there are, for example,
semi-permanent tent-villages in at least one part of the Adelaide park land.
If we are not to see the development of slums in first-world nations
perhaps we should consider a limited and controlled system of much simpler,
more modest, homes than those we have become accustomed to?
One objection to this would be that it would lead to the perception of
areas occupied by second class citizens; but aren't homeless people
already second class citizens?
Obviously, and all other factors being equal, the larger the house the
greater the cost of heating it.
Not only will the financial cost be greater, but, again, all other factors
being equal, the cost in greenhouse gasses released into the atmosphere
will be greater for a big house than for a small house.
There are ways of limiting the costs of heating a large house.
You can heat only the rooms that you are in at any particular time.
You might choose to not heat your bedrooms at all in a climate like that
of Australia, but most people who live in a climate with cold
winters will probably want to heat all of their house to some extent.
have their central heating systems, and I suspect, have little
control over which parts of their houses are heated.
A late twentieth century phenomenon is the popularity of building houses
on hilltops. People do it for the view. It wasn't done fifty years or
more ago, I suspect, for two main reasons:
Energy is cheap at present. Very few people walk home from anywhere; they
drive their car. Getting water to the top of a hill is no problem if you
have an automatic electric pump to do it for you. Plastic piping is
cheap to buy and cheap and easy to lay because it can all be done by
machinery. Very few people consider the damage done to the atmosphere by
the cheap energy that they consume.
- Who would want to climb a hill every time he goes home at the end of
a day's work?
- You have to get a water supply to a house, getting it to the top of
a hill is more work.