[+] Build-to-Rent, Innovation: Firing Up Affordable Housing

Affordable housing is rapidly becoming the industry’s most talked about sector as the cost of living increases, population growth continues and housing supply dwindles. A National Housing Finance and Investment Corporation report earlier this year suggested that there would be a shortfall of 106,300 homes during the five years to 2027, and often it is the lower end of the market most adversely affected by such shortfalls. But the shape and form of affordable housing are changing rapidly—and so are the opportunities this presents. Founder of social and housing company My Bella Casa Tamika Smith spoke at The Urban Developer ’s Urbanity 23 conference last week. “The property development industry in Australia can be incredibly innovative … it will navigate and find solutions,” she said. “There are so many roads that we can go down, but even though there isn’t one size fits all, it shouldn’t deter us that this situation is so complex.” ▲ My Bella Casa's Tamika Smith (second from left) was a panellist at The Urban Developer’s Urbanity conference last week with The Urban Developer’s managing editor Taryn Paris, Dr Tom Alves from AHURI, Carolyn Viney from Super Housing Partnerships and Andrew Welsh from Wel.Co. The “affordable” label now covers a whole host of housing types, from emergency and transitional housing to homes for key workers. Group chief executive of Haven Home Space Andrew Cairns heads up the affordable and social housing development and support company. “In Australia, we look at things beautifully vertically,” Cairns says. “We look at homelessness, then crisis housing, then social, then affordable, then into the private market. But what we’ve had is this expectation that people should invest across the whole continuum, and they don’t. “Now, we have to look at where the market is failing. “We have the resources, we just need to deploy them in a different way of thinking with correct risk weighted outcomes, while involving community in the strategy.” Build-to-rent’s role Affordable build-to-rent is the next stage of the growing trend which has focused on more lucrative, high-end build-to-rent projects. In the private residential sector, build-to-rent is still relatively small albeit accelerating trend, and could be one that investors understand as a major opportunity in the affordable space. “One of the things driving Australian super fund’s interest in build-to-rent, and affordable build-to-rent, is their exposure to all other assets they own around Australia that need people on low and middle incomes to operate them,” Tamika Smith says. “There is no point spending 10 years building a hospital if there is no-one to work there, not just doctors and nurses, but people to clean the corridors, disinfect the instruments. “There is a level of sophistication in the investment mandate saying actually, with all these other assets, I need a defensive play that makes sure I have key workers in that geography to run that [operation].” ▲ Andrew Cairns was a banker with Bendigo and Adelaide Bank for 20 years before moving into the social housing support and development sector. But, much like aged care , the build-to-rent model is not new for the social and affordable housing sector, according to Andrew Cairns. “Haven Home Safe was established by trade union groups in central Victoria who wanted to provide housing for union members who were finding it tough, so we’ve been in the build-to-rent model for 40 years ... our whole model is build-to-rent. “There’s a market for that concierge build-to-rent version, with a stockbroker in their apartment in South Yarra, but that is not our model. “While people are moving from build-to-sell to a build-to-rent model, we’re actually looking at how we can get from build-to-rent and leverage the build-to-sell model, with different outcomes. “These could be increased skillsets through to intergenerational investment, and there’s also a market for long-term intergenerational build-to-rent. “But then how do you define the modelling required to do that?” Making the sector attractive The perception has historically been that affordable housing was not necessarily lucrative for investors or developers. “[Investors/developers might not] get into affordable as defined by government, because they can’t get the returns in there,” Cairns said. “But in affordable, you can get near market returns, not sub-market returns.” ▲ Haven partnered with the Victorian government, private property group Riverlee and construction company Hacer Group on its $60-million Epping project. One of these growing niches is worker accommodation— already an area of interest for cutting-edge developers and hard-pressed employers—according to KPMG economist Terry Rawnsley, who identified key workers as a major mover in the “non-private” home space, soaking up international workers as Australia’s borders reopened. “We’re seeing worker accommodation make a comeback,” Rawnsley said. Last year, for instance, the owners of the $120-million Hotel Continental project in Sorrento on Victoria’s Mornington Peninsula acquired a vacant aged care facility to ensure that future workers would have accommodation close to their place of employment. “The biggest risk to them isn’t customers coming in the door, it’s ensuring they have workers such dishwashers, chefs, baristas, people who cannot afford to live there and provide them with cheap accommodation, shorter term maybe at a subsidised rate,” Rawnsley said. ▲ The New Epping precinct achieved an integrated mix of social, affordable, key worker and mid-market housing outcomes, Haven said. In the general affordable housing landscape though, government subsidies and financial support for affordable housing is attractive to investors, but there is a suggestion that growth should be coming from the industry itself. “Governments need to start to think about how to use their balance sheet differently, rather than just providing grants or loans, because that will be finite. The problem is too big to just write a cheque,” Cairns said. “Housing providers need to stop asking for grants and be in a position where can use our balance sheets better, be agile and play across the whole housing continuum, and use our strengths to be able to support housing supply. The future of affordable “Markets only change as a result of the introduction of a new technology or government intervention, whether that is positive or negative; a levy or an incentive,” Cairns said. “But the government is looking at making new market participants and how to mobilise existing participants.” State governments are stepping in at the social end of housing—the Queensland government recently announced the transformation into social housing of a disused retirement home in Toowoomba it bought for $10.6 million. But social housing is part of what Cairns called an “ethical contract” which the government has with society, while “affordable” is a much more elusive concept. This then begs the question, what do we mean by affordable, and what does this mean to governments and investors? “We do need to renegotiate the term ‘affordable’,” Cairns said. “All of them [governments, investors and developers] will have a different definition of affordable and what it actually is, and what returns they can expect from it.” ▲ My Bella Casa is one of the developers working with modular homes, built offsite with short lead times, to plug the housing gap. However, things are changing at all levels, according to My Bella Casa’s Smith. “The visibility around [affordability and housing stress] is more widespread now and by extension and there are actually votes in social and affordable housing to the extent it wasn’t previously.” Cairns suggested that we talk about housing affordability, but the conversations will shift towards obtainability and accessibility. “Our purpose as an organisation, we believe in better futures; that everyone should have a better future than today. “Whether that is someone who doesn't know where they are sleeping tonight that now has somewhere to sleep, someone that wants long term access to a home, or that aspires to own, we should help people get a better future, our vision is very simple. “So what are we doing to help people get a home?” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Build-to-Rent, Innovation: Firing Up Affordable Housing

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