New analysis by Cotality has shown that there is a profound mismatch between who is actually living in our homes and the kinds of homes that are being built.

Currently, 60% of Australian households are made up of just one or two people, yet the bulk of our housing stock is built for families.

The “Great Australian Dream” of a family with kids in a 3- or 4-bedroom house does not match the data in reality.

Couples without children and people living alone make up the majority of households, raising the question about how well our housing market is servicing real demand. While families are an extremely important consideration for our housing system, demographic data from the ABS reminds us that there are different kinds of households and housing needs.

Data would show that, in fact:

• Only around 30% of households are families with dependents
• 31% are couple families without dependents
• 27% are people on their own, 40% of whom are over 65.

Based on the above, there is a clear mismatch in terms of housing by bedrooms, given that the highest share of households are 2 people; however, the highest number of bedrooms is 3. One-person households are at 27%, however one one-bedroom and studio homes make up only 6% of Australian homes.

There is nothing inherently wrong about a dwelling having more bedrooms than people. With the rise of the home office, the desire for in-home care later in life, and space for hobbies and visitors, having additional bedrooms is potentially very attractive. It is also reasonable to assume that many couple family households without dependents have more bedrooms because they are planning to have children. Larger homes have also attracted higher capital growth than smaller dwellings. 

New houses have also generally become larger over time, one explanation being that as we have moved out from larger centres we seek more within the home- eg, space for a gym and home theatre.

It was noted that in the past decade, to June 2025, ABS data has shown that dwellings other than houses now made up about 40% of approvals, up from 37%- a shift towards units.

Is there a solution to this mismatch?

Governments could look at making it more expensive to have more housing than you need and cheaper to live in smaller housing. Reforming taxes to abolish stamp duty (cheaper to move between housing as needs change) and replace it with a broader land tax ( higher the more land you own).  This may incentivise older people to move and downsize.

On the supply side, developments to establish well-located apartments in larger cities that can accommodate smaller households. Incentives may be required to ensure uptake of these smaller homes.