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Our houses;
must they be so big, so luxurious and so expensive?

Created about December 2003, modified 2010/02/06
Feedback welcome; email daveclarkecb@yahoo.com


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Main headings on this page

What is needed in a house?
Number of people per house
Cost of land
The anomaly
Wages and housing costs are interdependent
A shack or no home at all?
Costs of heating
Greenhouse cost
Houses on hilltops
Index

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Shipping container house

Our houses

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 debt. 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?

Cost of a house

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 four shipping 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 the kids? If the latter, then perhaps we should get our local governments to set aside some areas where more basic housing is allowed.


What is needed in a house?

Shed-house
Shed-house
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.



 
Solar and wood water heater
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.
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:
  • 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 family room;
  • 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 desired;
  • Probably a small garden;
  • A rubbish disposal service;
  • Television, Internet, Hi-Fi sound system, etcetera.
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 be built.) Of course housing was then much more affordable.

 
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 mains power.
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.
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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 self-sufficiency.

Number of people per house

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.

Cost of land

 
Shepherd's hut
Shepherd's hut
This was probably used by a shepherd in the nineteenth century. Very small, but big enough for the purpose. Rural South Australia
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.

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.






 

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 necessarily so.

Wages and housing costs are interdependent

Housing is one of the major costs that we all must bear. Some 2001 median weekly rents from the REIA are:
  • For a two bedroom flat or unit, Sydney $265, Adelaide $130;
  • For a three bedroom house, Sydney $235, Perth $162.
Therefore the 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 of living. 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.
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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 areas.

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 cities.

The anomaly

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.

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.




A shack or no home at all?

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 at all. 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?




Costs of heating

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.

USians have their central heating systems, and I suspect, have little control over which parts of their houses are heated.




Houses built on hilltops in rural areas

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:
  1. Who would want to climb a hill every time he goes home at the end of a day's work?
  2. You have to get a water supply to a house, getting it to the top of a hill is more work.
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.
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Index

On this page...
A shack or no home at all?
Cost of a house
Cost of land
Costs of heating
Greenhouse cost
Houses on hilltops
Number of people per house
Our houses
The anomaly
Top
Wages and housing costs are interdependent
What is needed in a house?