How much does raising a child add to housing costs?

Unaffordable housing impacts on children’s education and health outcomes

Last updated 16 May 2018

A new report by the Australian Institute of Family Studies investigated the costs associated with bringing up children and found that ‘the largest single contribution to the overall family budget in all cases was housing costs’.

What happens when housing costs get too high for a family?

AHURI research has identified that when housing costs get too high, families have to make difficult choices such as moving to lower quality or shared housing, or reducing spending on food, clothing and health care. While the connections between housing and childhood development are well recognised in the international literature, the empirical evidence in Australia is less comprehensive. A review of American studies found reduced levels of affordable housing increased children’s educational and health problems, including asthma and respiratory diseases, chronic illness, injuries, homelessness, and malnutrition.

Overcrowding and frequent, forced residential moves can also badly affect a child’s education. Research shows children who changed schools frequently were three months behind their peers by the end of grade four, while those who repeatedly changed schools over a six-year period fell behind by a full year.

When families move from unaffordable or crowded housing to affordable public housing children’s education outcomes benefit greatly. Parents identified a number of reasons why their children did better at school including that children now had more quiet space and could do their homework without being distracted by siblings or others watching television.

How much does raising a child add to housing costs?

Using real estate data from Dandenong (a suburb in south-east Greater Melbourne with rents that are lower than the Melbourne median) we can see that a couple (or single person) can rent a single bed unit for $245 per week (median value in April 2018). However, with the arrival of a child the household will need to move to a two bedroom unit, which rents for $291 per week, a $46 or 18.8 per cent increase in housing costs. If the household wants to rent a house so as to have some outdoor play space for their child then that will cost $320 per week, a $75 or 30.6 per cent increase from the one bedroom unit rent.

Should the household want to buy a two bedroom property so as to provide long term tenure stability for the family (especially for being able to stay in the same primary school), their housing costs will increase even more. Loan repayments on 80 per cent of the purchase price (i.e. paying a 20% deposit) of a median priced two bedroom unit ($340,000) or two bedroom house ($460,000) will be $300 per week (unit) or $405 per week (house).

Costs for an additional bedroom for a second child (assuming the children can’t or won’t share a room) are also included in the following table.

Table 1: Sample median rent and mortgage costs, Dandenong Victoria, 2018.

  Rental costs Increase from 1 bedroom unit rent Mortgage costs* Increase from 1 bedroom
unit rent

1 bedroom unit

$245 p.w.


2 bedroom unit

$291 p.w.

$46 p.w. (18.8% increase)

$300 p.w. (+ $68,000 deposit)

$55 p.w. (22.4% increase)

2 bedroom house

$320 p.w.

$75 p.w. (30.6% increase)

$405 p.w. (+ $92,000 deposit)

$160 p.w. (65.3% increase)

3 bedroom unit

$390 p.w.

$145 p.w. (59.2% increase)

$414 p.w. (+ $94,000 deposit)

$169 p.w. (69.0% increase)

3 bedroom house

$350 p.w.

$105 p.w. (42.9% increase)

$552 p.w. (+ $126,000 deposit)

$307 p.w. (125.3% increase)

Source: RealEstate.com.au, viewed April 2018.
*Loan repayment over 30 years at 3.99%. Stamp duty, conveyancing and bank loan fees are not included in purchase costs.