AcasetodisrupttheTraditionalDeveloperMulti-UnitHousingDeliverymodel
Thedensificationofcitiesisaheretostaytrend.Itmakessenseaspopulationsgrowandtheutilisationofexpensivepublicinfrastructuredemandsthatthosewantingtobenearjobsandtheirsocialnetworksarerequiredtomakechangestotraditionalsuburbanlife.Butisthecostandnatureofmulti-unitmeetingwhatAustralianhouseholdswantorcanafford?Itstimetoconsiderwaysthatfuturemulti-unitsupplymaybeenabledthatchallengesthecurrentdeveloperdeliverymodeltodobetteror,bowtoalternateproviderswhocare.Thepracticalitiesofpushingthenewurbanfringefurtherafieldarebeingtestedasgreenfieldlandinsuitablelocationsisbalancedbythedemandandviabilityofthisnewstock.Itisnottheendoftraditionaldetachedandattachedhousingbutthosewithdeepinterestsinthismarketaresufficientlyconcernedthattheyarenowtakingfuturesub100,000newdetachedhousingstartsseriously.Thehousingindustry’sHIAanticipatesthatthepeaklevelofcombineddetachedandmulti-unitcommencementsof210,000in2014/15willretracetoapproximately175,000combinedstartsin2017/18.Datapointstomulti-unitprogressivelymakinguphalfofthenewhousinglandscape.Thetraditionaldevelopermodeldominates.Governmentshavebeencomplicitindrivingthecostofnewmulti-unitprojectstonewlevels.Mostgovernmentshaveinheritedfinancialstatesofaffairsthathavenecessitatedthewholesalesellingofthestate’ssilvertobalancebudgetsandfundpressingdeficitsinnewinfrastructure,assetmaintenanceandservices.Theyhavebeendriventocapitulatetothedemandsofaninsatiablemulti-unitdevelopmentindustrythatpressesforhigherdensityandurbanscapesthatarebecomingalientoAustralianlife.Themulti-unitskyscrapersnowredefiningcityskylinesarechangingthewaypeopleonthegroundexperiencetheirneighbourhoods.Moreimportantlytheretailpricesofurbanmulti-unitarebecomingbeyondthereachofmany.TenthousanddollarsplusperM2isthebenchmark.Butisa60squaremeterapartmentfor$600,000theanswerforfutureurbanliving?Mostdevelopersseethecostofnewmulti-unitsimplymoderatedbysmallerandsmallerunittypographiesandmoredensity.Almostanyonecanbeamulti-unitdeveloper.Therearefewconsequencesforsomeofthepoorqualitymulti-unitstocknowhittingthemarket.Anddesignershavealsotakentheopportunitytoweighinwithhigh-browarchitecturethatflourishesinthenewpickmeeconomywithlittleinterestinthepracticalityorcostoffutureownershipandmaintenance.Mostdesignersgettodotheconceptsfornewapartmentdevelopmentsaswilddeveloperpromisesaremadeaboutacommitmenttogoodplace
makingandhousingaffordability.Increasinglymanynewlyconsentedapprovalswillneverbebuilt.Theyarenotviable,asconsentauthoritiesbecomedisenchantedoverthecommunityflacktheyhavetaken,oftentonoavail.Wherearethecranes,theysay?Governmentshavebecomeweddedtotheeconomicstimulusofabuoyanthousingindustryastheyfloundertorepurposethenationseconomythat,untilrecentlyhaslackedleadershipandanarrativeaboutwhatthefuturemayhold.Butthatstimulusisnowontenderhooks.Thestimulusisalsoveryexpensiveasitdrivesupthelevelofownermortgageswhilethecostofnegativelygearedinvestmentpropertyattacksthebudget,andwhentheinevitablemarketcorrectionoccursthewritedownoftheseinvestmentsisleveragedtominimisetaxorsimplyshakesthosehouseholdsjustholdingin,outofthemarket.Allthewhilethestampdutyrevenuesflowirrespectiveofanupordownmarket.Governmentsarealsoweddedtounimaginativeassetsaleandprojectformationmodels.Theyareriskadverseandtheyaretransactionsensitive.Theprobityindustryhasalottoanswerforaswell.Theyhavesoblockedupthebowelsofgovernmentthattheirabilitytoreimaginealternativehousingdeliverymodelsisconstrainedbythescarsfromtraditionaldeveloperexperiences.Surplussite,assetsalesaredrivenbyalotterywherethehighestperceivedvaluecanonlybecreatedbyatenderprocessthattestsnewpricelevels.Thisconditionisthelanguageofapropertyadvisoryandrealestateindustrythatfeedsoffclippingtheticketforeachtransactionwithnoothermotivationthan,getitwhileyoucan.Thetraditionaldevelopermodelsalsodefinehowlocalgovernmentstransactstrategiclandholdingsintheircommunities.Theydefinethetransactionalmodelsthatunderpinurbanrenewalandreshapingoldpublicandprivatehousingestatestoincreasedensity.Theresultisthatconsiderablevalueleakageoccurstotraditionaldeveloperswhowantitalltheirway.Itseemstobeagoodtimetostandbackandlookattheoptions.Someoftheseinclude;
• Re-imaginingthepotentialofadaptingthetraditionalprojecthousingindustrybusinessmodelandproducttomulti-unit,
• Consideringthepotentialofsmallerscaledmulti-unitinthesecondaryneighbourhoodcorridors,servedbylessintensetransport,butnonethelessbenefitedwithimportantsmallerscaledneighbourhoodcentresandamenities,
• Evaluatingthegrowingpotentialofthenot-for-profitsectortoexpanditssupplyfootprintintothemainstreammulti-unitmarketplace,
• Exploringnewhousingformationinnovationsthatcouldemergefromthenewcollaborativeeconomybyfacilitatingthefirstdemonstrationprojects,
• BecomingseriousaboutthepotentialoflargerscaleresidentialrentalinvestmentorganizationssimilartothoseintheUnitedStateswhoplayaprofitablebutimportantroleindeliveringefficient,wellmanagedandtenurestablemulti-unitacrossthefor-profitandnot-for-profithousingsectors.
Inallofthesescenariosgovernmentswillneedtobecomemorehandsonandoutcomesfocused.Governmentsexercisethemostpotentialtoachievemoreforless,becausetheycontrolthekeyassetsthatcouldbebetterdeployedtofacilitatealternatedeliverymodels.
Thereisalotofdiscussionaboutthepotentialforolderhouseholdstostartfreeinguptheexistingurbanhousingfootprinttocontributetonewhousingsupplies.Thisstockisripeforrecycling.Muchisover40yearsoldandunderutilised.Andevenifonly10percentoftheexisting9.5milliondwellingsinAustraliaweresuitableforsmallerscalemulti-unitredevelopment,thenayieldofatleast4timesthatnumberofdwellingscouldbebroughtintoplay.Themainbarriertothisisthatswappingoutofthesehomesandneighbourhoodsisazerosumgameforhouseholdswholookingfornew,smallermulti-unitalternativesnearby.Apartfromtheeconomics,hereareafewotherdissatisfactionsconstrainingthemove;
• Alackofchoiceandpersonalisation,• Developmentsareoftenpoorlydesignedandlackempathywiththeirlocation,• Smallerdevelopersareassociatedwithpoorqualityconstructionanddefects,• Developersarenotownersanddonotmakechoicesownersmaymakeifable,• Alldevelopmentseemstodisrupttheneighbourhoodlongerthannecessary,and• Purchasershavingtorushintobefirstservedondevelopmentswhicharestillonthe
drawingboard,withoftenyearsbeforecompletion.
Thesearenottheconditionsthatwillmotivateexistinghomeownerstotradedownandfreeupimportanturbanlandwithpotentialtobepartoffuturesupply,tomobilise.Thereareoptionstoovercomesomeofthesebarriersbutgovernmentmayneedtotonedownthenoisefromtraditionaldevelopersandgiveotheroptionssomeairtime.Ifthetraditionaldetachedhousingindustryisunableembracethenewmulti-unithousingfuture,thenotherswhomayshouldbeencouraged.Thenot-for-profithousingsectorhasexperienceinmulti-unitprojectformation,deliveryandmanagement.CommunityHousingProvidersdonotjustoperateinthesocialhousingspace;theyareattheforefrontofdeliveringhousingforkeyworkerssuchasnurses,teachers,policeandotheressentialservicemembersofthecommunity.CommunityhousingschemesareineffecttheforerunnersofthetrendsnowemerginginthecollaborativeeconomysuchasUber,AirbnbandPeertoPeerlending.
Therearemanyemergingdisruptionshappeningacrosstheeconomyascommunitiesbecomedisenchantedwithexistinginstitutionsandwhatseemtobenootherchoice.Thebanks,insurancecompanies,energyutilities,educationandhealthindustriesareallrespondingtodisruptionstotheirbusinessmodelstheydidnotseecoming10yearsago.Governmentshavehadtoshiftfromstandinginthetrencheswithlaggardindustrialbastionsofthestatusquo,torealisethattheytoohavetomovewiththetimesanddeliverabetterdealtotheirelectoralstakeholders.Theymarchtoamuchmoredynamicbeatthesedaysasnewmediaandsharperwaysofmakingthemaccountabletakehold.
Sothereisthecasetoconsideralternativedevelopermodelsinthemulti-unitfuture.Thisconversationisnotananti-capitalistrant.Iamallforprofitmotivatedbusiness,butonlywhenthosebusinesseshaverecalibratedjustlikeotherstodeliverabetterdealtotheircustomers,first.And,governmentscanhelpbuyrecalibratinghowtheysellthesilver.
DavidChandlerOAMConstructionandHousingIndustryPractitionerwww.davidchandler.com.auNovember2015
