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You can only add family members in the same steam store region.
Yeah this has been a sticking point since the beta, they never responded to the thousands of comments complaining about it. It's pretty bullshit and makes this feature useless in many circumstances.
Unfortunately over here it seems to be doing IP-based location as I'm not able to add my brother who lives in a different part of the same town.
just have him login to your computer, then log him out, then add him as a family member, steam will see both use the same ip/computer, and bam, your good