There’s a danger in having an insight you think might be novel; there’s a tendency to fall in love with it and to try to bend all other factors to fit in with your self-perceived wisdom.

There’s been a touch of that in the way the Reserve Bank mandarins talk about the housing crisis.

In looking for reasons for the shortage of housing despite sharply reduced immigration this time last year, assistant governor Luci Ellis highlighted the impact of the pandemic encouraging people to leave the family home or the share house in search of more personal space while working from home.

It was and is a neat insight. COVID-19 encouraged the size of the average household to shrink. Not by much, but when you’re dealing with a very large number – 10 million households – a little shrinkage still ends up as a large number.

As it has turned out, the RBA now regularly reckons our slightly smaller households have resulted in demand for an extra 120,000 or so dwellings, pretty much counteracting the lack of migration during the worst of COVID and contributing to our present shortage.

There are many other reasons for the crisis. For mine, the most important is the culmination of decades of state and federal governments letting public housing stagnate as our population grew, trying to outsource shelter responsibilities to “the market” when the market’s private landlords can’t solve the problem of people too poor to pay market rates.

But RBA commentary on housing tends to start with Dr Ellis’ insight and then swing into the usual developer lobby excuses without touching on the public housing disaster. The RBA has plenty of company in that.

Being a little blinded by the insight means the RBA governor has taken comfort in “the market” solving some of the crisis by forcing the kids to move back in with the oldies or reform the share house. That’s still avoiding the bigger issues.

Generational factors

I claim to also have had an insight some years ago into our housing problems, one that has contributed to the decline in home ownership particularly among younger people.

It would be wrong to consider it one of the main causes but it does contribute, just like the RBA noticing the COVID/working-from-home factor.

Back in 2017 when the usual housing focus was on the plight of first-home buyers – the ones politicians at least pretend to care a little about – I suggested there were more generational factors at work than hipsters’ love of expensive smashed avo on toast.

Source: Australian Institute of Health and Welfare

It was not just a matter of we Boomers exploiting the tax system and being lucky to have had relatively cheap housing when we were younger, thus enabling us to buy in our early-to-mid 20s.

In comparing Boomers’ home ownership rates and that of Gen Y, what everyone seemed to overlook was the dramatic difference in educational attainment and the resulting number of years in the workforce.

As I wrote in 2017 when there were shock-horror headlines about the lower percentage of 25- to 34-year-olds buying their own home, the education arms race, greedy universities, the gap year (or years) and job snob millennials played a role.

Your typical Baby Boomer was a full-time worker in his or her mid-teens. In 1971, Australia’s year 12 retention rate was just 30.6 per cent with a yet smaller cohort continuing to tertiary education. The “gap year” hadn’t been invented.

Long education span

Now, with gap years, universities stretching out courses, pushing double degrees, and the education arms race turning honours and masters into what year 10 and year 12 once were, it’s commonplace for young Australians not to leave “school” until their mid-20s – a decade later than many of their parents.

No wonder they are slower to start families and for the nesting instinct to kick in with the desire to own a home.

COVID and the present labour shortage have mucked around with our work and study percentages but in 2020, 90 per cent of people aged 20 to 24 had completed Year 12 or a Certificate III or above.

More than 80 per cent of people aged 15 to 19 are studying – a bit of a contrast with less than a third of Boomers finishing year 12.

In 2021, only 24 per cent of people aged 15 to 24 were primarily engaged in full-time work. Their Boomer parents (or perhaps grandparents) would have been close to the opposite of that.

More education – a smarter, better-qualified workforce – is what the nation needs. The education arms race will continue.

Yet the inevitable fallout is that people can only start saving towards a deposit much later and nest later.

The point is obvious: The earlier people start working full-time and saving, the better chance they will have of acquiring real estate.

Just as the “miracle” of compound interest means early superannuation investments pay off in a big way later, the opportunity cost of not investing is magnified later on.

That gap year can end up being more expensive than whatever it might seem to be at the time.

But repeating the point made earlier: This trend to beginning full-time work later is only part of the housing problem. The real crime remains massive government policy failure by not maintaining our investment in public housing.

But that’s another story.