If individuals occupy habitats in a way that maximizes their fitness, if they are free to occupy the habitats they choose and if fitness declines with population density, then their abundance across habitats should follow an ideal free distribution. But, if individuals are genetically related, this simple fitness-maximization mechanism breaks down. Habitat occupation should obey Hamilton's rule (natural selection favours traits causing a loss in individual fitness as long as they result in an equal or greater gain in inclusive fitness) and depends more on inclusive fitness than it does on individual fitness. We demonstrate that the resulting inclusive-fitness distribution inflates the population density in habitats of poorer inherent quality, creating pronounced source sink dynamics. We also show that density-dependent habitat selection among relatives reinforces behaviours such as group defence and interspecific territoriality, and that it explains many anomalies in dispersal and foraging.