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https://help.steampowered.com/en/faqs/view/054C-3167-DD7F-49D4
You now no longer authorize computers for sharing but accounts.
You create a Steam Family and then invite others to it, a family can have up to 6 members and everyone in the family automatically shares all their games with every other member.
There are also no longer any restrictions to play games from the same library at the same time but there are now much stricter regional restrictions.
You can only share with people from the same country and who have the same Steam Store region as yourself for example.
Yes.
Do it all from the same PC.
Thought as much, he can't even accept my family invite, he's in the same town as me - does this sound right?
Yeah, that can happen since Steam really wants to limit this to "same household family members". And if your friend never logged into Steam from the same location as you or very close to it the invitation may be declined with a " not same household" error.
There is a workaround though. You both need to login to the SAME PC with your Steam accounts right after each other.
First your friend, then they log out and then you log into Steam with your own account.
Then send out the invite again. It will now work since for Steam your last login location was the same.
After they joined the family it does not matter from where they login to Steam as long as its the same country, its just this initial invitation thats a bit of a pain.