A very important part is that Steam requires that all accounts in a family have the same country in their account (the one used for store restrictions and for payments), AND (!) be from the "same household". For the latter they seem to be actually checking login history to see, I don't know how granular that check is (city/state), but it's still very interesting. So even if two people have the same country set in their Steam account, it doesn't mean they can make a Steam family.
And that exclude long distance relationships and the case when one of the family members is studying abroad. And this is a realistic scenario not a hypothetical one.
I wouldn't really call a long-distance relationship or studying abroad the same household, so I don't think this is a good argument against the system.
That’s the case for every family feature ever though. Family is always short term for household. You can’t add your grandparents, cousins and uncles to your Spotify family either (if they don’t live in your household). And I don’t think anyone hearing about a family feature which allows sharing subscriptions expects otherwise.
Hopefully it uses long term data and doesn't kick you out if you log in at another location a single time. I was assuming you can't make a family if you are consistently somewhere else relative to the rest of the family members.