Households Under Pressure

Household formation is not just a function of population growth. It is a product of affordability, opportunity, and confidence.

While Australia’s population has surged, the formation of new households has been recently showing signs of strain. Analysis of household ratios across age groups reveals a clear shift. Younger Australians are pulling back from independent living, while older age groups remain steady. Household formation is slipping out of sync with population growth, a divergence that carries significant implications for housing demand, affordability, and policy.

Household ratios as a window into household formation trends

The ratio of household reference persons to the total population within each age group offers a valuable lens into household formation patterns. Tracking trends in this ratio shows the rate at which people in each age bracket are becoming the reference person in a household, essentially, forming independent living arrangements.

Quantify Strategic Insights has estimated these ratios using data from the Australian Bureau of Statistics Labour Force Survey. Tracking these across time highlights four key phases: the pre-COVID period (to 2019), the pandemic era (2020), the post-COVID reopening (2021–2023), and the migration rebound (2023 onwards). The trends vary by age group, reflecting different social, economic, and housing market pressures.

COVID and its aftershocks

At the onset of the pandemic in 2020, household formation retreated sharply, particularly among younger Australians. Many returned to the family home, with students and casual workers, most prevalent in the 15–24 age group, disproportionately impacted by job losses and instability. Lockdowns also created a strong social incentive to be close to family, rather than living alone in isolation or in share houses.

As restrictions eased through 2021, household ratios began to bounce back. A rare window opened. Low rents, record-low interest rates, and strong employment gave many the opportunity to form or re-form independent households. Younger adults in particular (15–34 years) saw improving household ratios during this recovery phase.

But this resurgence was short-lived. From 2022, surging rents and rising interest rates started to erode the gains. By 2023, the ratios were turning downward again. Across all cohorts aged up to 44 years old, household formation has been declining, with many groups now sitting below their pre-COVID levels. In contrast, those aged 45–59 year old have largely maintained their ratios, and household formation among the 50+ age group has actually been increasing.

Pulling the threads together

A clear picture is emerging. Household formation is slowing relative to population growth. This is the net effect of more people cramming into a more limited supply of dwellings.

Since peaking in early 2023, the ratio of households to population across the adult population (15+ years old) has been steadily declining. The steepest drops are among people aged 15 to 44, suggesting that younger and middle-aged Australians are facing mounting barriers to forming independent households.

Meanwhile, household formation among older Australians is stable or even increasing, reflecting more entrenched housing positions and less exposure to current affordability pressures.

A range of structural drivers is contributing to this divergence:

• Rental affordability has deteriorated, leaving younger people unable to afford to live independently.

• Rising interest rates and property prices are delaying home ownership, especially for middle-income earners.

• The migration rebound has placed additional pressure on the rental market, intensifying competition for limited stock.

• Multi-generational living is on the rise, with more families pooling resources or delaying the transition to independent living.

Quantify’s analysis suggests that Australians aged 15–34 have collectively formed around 40,000 fewer households over the past year than they otherwise might have had household ratios in this age bracket remained stable. Overall growth in household numbers is now being driven almost entirely by population growth and household formation among older cohorts.

Implications for the housing market

A partial decoupling of household formation from demographic readiness is emerging. People cannot form households just because they’ve reached the ‘right’ age. They are forming households when they can afford to, and when the housing system makes space for them.

This shift has deep and far-reaching consequences:

• Dwelling demand is likely to underperform population growth in the short term (and potentially longer) as fewer people form independent households.

• Housing stress is becoming increasingly generational, with young Australians disproportionately locked out.

• Government housing policy must go beyond boosting supply. It must also address affordability and accessibility, particularly in the rental market and for first-home buyers.

If current pressures persist, there is a real risk that suppressed household formation becomes entrenched, with long-term consequences for economic mobility, gender equity, and social wellbeing. Unlocking more affordable and appropriate housing, especially rental stock, is critical to restoring the connection between population growth and household formation.

Quantify can undertake demographic modelling and household demand forecasting to meet your needs. If you need to know more about the impact of demographic change on housing demand, contact Angie Zigomanis at [email protected] or Rob Burgess at [email protected]