Housing policy built on shaky foundations

Household sizes are critical to housing policy. For a given population they dictate both the number of housing units and the type of houses that we need. In Ireland the average household contracted from four to 2.73 persons between 1966 and 2011. Many explanations have been offered for this, including increased provision of social housing, higher marriage rates and a shift away from agrarian living. However, by 2011, despite 45 years of continuous decline, Irish households remained much larger than the European norm.

Given the sustained downward trend it has been glibly assumed that Irish household sizes would eventually converge with the European Union average of 2.4 persons. Indeed this is factored into official thinking. Rebuilding Ireland – the Government's action plan on housing – notes declining household sizes as part of the context for its work. Similarly the Housing Agency's latest supply/demand statement makes reference to the long-term decline in household sizes and predicts that the proportion of smaller households will increase over the coming five years.

The thing is, however, Irish household sizes actually stopped falling seven years ago. Quarterly national household survey data shows that the average persons per household bottomed out at 2.71 in the first quarter of 2010 and has been edging up since then.

Census figures

This finding is confirmed by census figures which also contradict the notion that that the proportion of smaller households is increasing. In 2011 one-person households accounted for 23.7 per cent of the total. By 2016 this number had slipped to 23.5. One- to three-person households accounted for 70.6 per cent of the total in 2011. By 2016 this had fallen to 69.5 percent.

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So, is this a temporary pause, or has the long-term decline in household sizes run its course? To answer this we must unpick the reasons for our return to bigger households.

Starting with demographics, there has been a 35 per cent decline in the number of 20-29-year-olds since 2008, and Ireland now has fewer twenty-somethings than at any time since 1979. Intuitively we expect young adults to form smaller households as singletons or cohabiting couples.

Indeed, this is confirmed by the statistics: the average household headed by adults under 30 contains 2.53 persons, compared with 2.76 for households headed by over-30s. Logically, if under-30s form smaller households, and if this group accounts for a declining share of our population, we should expect the average household size to rise.

In addition to there being fewer twenty-somethings, this group’s propensity to establish independent households has been hit by tight mortgage lending, rising house prices, sluggish earnings growth and increasing rents. Again, the census is instructive. The “headship rate” for 18-29-year-olds – that is, the proportion of this age group who identify themselves as heads of a household – plummeted from 24 to 19 per cent between 2011 and 2016.

So, if they are not setting-up as singles or couples, where are these young people living? Seemingly in the family home. In 2016 there were 215,088 working adults living with their parents – up 19 per cent on 2011. Critically, this arrangement is associated with bigger households – 56 per cent of households where parents and children live together have four or more members.

The rebound in household sizes also reflects birth patterns. Between 2008 and 2013 we had a baby boom with more than 70,000 births annually. But 85 per cent of children live in families of three persons or more. So this has also contributed to bigger average households.

Long-term trend

Looking ahead, household sizes may, eventually, resume a downward trend. A pick-up in earnings and housing completions could facilitate increased household formation by young adults. A return to inward migration might also contribute downward pressure on household sizes as migrants are both younger and more likely to establish independent households.

But, for the foreseeable future, larger households will be the norm. Ireland’s population of twenty-somethings will remain depleted until 2022 and this pushes against any tendency towards smaller households. Similarly, the children of our baby boom will continue to live as dependants in larger family households for another decade.

Household sizes determine the number of units needed to accommodate a given population. Current housebuilding targets are predicted on a belief that Ireland’s households will get smaller. If this assumption turns out to be wrong there is a real danger we could actually be ramping up to build too many properties over the longer term. It seems unthinkable given today’s chronically undersupplied market but, in time, bad planning could create excess supply, rising vacancy rates and falling values.

Equally, incorrect assumptions about smaller households could lead to the wrong mix of properties being built. By all means we need good-quality small dwellings in the right locations – in urban settings, close to public transport. But we must balance this with a realistic understanding of the ongoing need for bigger apartments and family homes that suit the living arrangements of real people.

John McCartney is director of research at Savills