0:09

Hello and welcome to CBRE's Talking

0:11

Property Podcast, where our team of experts,

0:14

our clients, and industry specialists share

0:17

insights into the way we live, work, and

0:19

invest through the lens of commercial real

0:21

estate. I'm Kathryn House, CBRE's

0:24

Australian Communications Director, and

0:26

I'm your host for this latest Talking Property

0:29

episode. Today we'll

0:31

be discussing social and affordable housing,

0:33

which has made up of only about 1%

0:35

of the homes that have been built in Australia over

0:38

the past decade. With the

0:40

country in the middle of a rental crisis, it's

0:43

an area that needs urgent attention as

0:45

a growing number of people experience rental

0:47

stress and homelessness. We've

0:50

seen some steps towards this, including the

0:52

Federal Government’s Housing Australia Future Fund,

0:55

which will enable 20,000 social

0:57

dwellings to be built by 2029, as

1:00

well as the establishment of the National Housing Accord

1:02

between the Commonwealth states and territories,

1:04

local government, institutional investors

1:06

and the construction sector. But there is

1:09

still much to be done. Affordable

1:11

and social housing is also a market sector that

1:13

offers considerable potential for investors,

1:16

providing stable, long-term revenues.

1:19

But it's an area that's misunderstood by

1:21

many property players despite the

1:23

sector's growth potential. So,

1:25

to discuss the current landscape and how

1:27

investors and developers can get involved, I'm

1:30

joined by Wendy Hayhurst, CEO

1:32

of the Community Housing Industry Association

1:36

(CHIA), Nicholas Proud, CEO of Power

1:38

Housing Australia, Gavin Salt,

1:41

Residential Lead at i2C Architects

1:43

and Steph Harper, Valuation &

1:46

Advisory Services Director for CBRE's Living

1:48

Sectors business. Thanks for joining me.

1:52

So, Steph, going back to basics,

1:54

can you talk us through what social and

1:57

affordable housing is? Because I understand they're

1:59

two quite different things?

2:01

Yes, I guess social and affordable

2:03

can often get lumped in together to some

2:05

degree, which is true. They do

2:07

have similar elements to them. But when we're referring to

2:10

social housing, we're talking about

2:12

those that are very unlikely to be

2:15

able to afford private rental market rents.

2:17

They're usually on very low

2:19

incomes and the households are usually

2:22

likely to be receiving some form of

2:24

government benefits. Affordable is a

2:27

little bit broader than that. So, we're talking more

2:29

very low to moderate income earners. But at

2:31

CBRE, our Valuations team does

2:34

have a little bit of a broader definition around what

2:36

that is, a bit more of an umbrella definition. And

2:38

that's really accommodation that doesn't

2:40

represent market prices or below

2:43

market rents. It's usually delivering accommodation

2:46

to a particular cohort, and

2:48

it's usually linked to some form

2:50

of income. But that broad-based definition really

2:52

captures some of the different

2:55

models that we've been working on and allows for the

2:57

delivery of diverse product. And we need

3:00

diversity in our affordable housing sector.

3:04

Yes, absolutely. So, Wendy,

3:06

you've worked in the social and affordable housing space

3:08

for most of your career, including your

3:11

current role at CHIA which is the peak

3:13

body representing not-for-profit community housing

3:15

organisations across Australia. Can

3:17

you tell us about some of the benefits that social

3:20

and affordable housing can deliver? I

3:22

was reading some Swinburne University of Technology research

3:24

that was commissioned, which estimates

3:26

that new social and affordable housing being

3:28

delivered under the Future Fund and the new Accord

3:31

will create a $4.4 billion benefit

3:33

over the next 40 years?

3:35

Yes. So, if we think about who's

3:38

being housed, they're people who are formally homeless

3:41

quite often, or they're in rental stress.

3:43

So, if we provide them with

3:46

stable secure accommodation, it

3:48

usually makes it far, far easier for

3:50

them to thrive. So, what I mean

3:52

by that is that they'll

3:54

be in a better position to get a job. So

3:57

they're more likely to make an

3:59

impact on the rest of the economy by paying higher

4:02

taxes, if you like. So those

4:04

are some of the benefits. If people

4:06

are homeless, so often - in

4:10

inverted commas - consuming health services more

4:12

than they would do, they're

4:15

also more likely to experience the

4:17

criminal justice system as well. So,

4:20

the work that we've done is

4:22

to look at what the impact would

4:24

be on other public

4:26

sector budgets. So we've looked

4:28

at peer reviewed research to make sure we're

4:31

not exaggerating that, and we've also looked at

4:33

what it means for individuals who've

4:36

had more money left in their pocket to

4:38

go out there and spend as well. And we also

4:40

build homes that are generally energy

4:43

efficient. So people are often saving

4:45

on bills, higher bills, perhaps

4:48

in the private rental sector. So when you add

4:50

all of that up, yes the community benefits are

4:53

$4.4 billion over 40 years. But for individuals there's

4:55

a much, much bigger benefit

4:57

for them. And lower income people

4:59

tend to spend the extra money

5:02

that they have in their pocket. They don't have

5:04

the scope to save. So, if we

5:06

invest in this, we have

5:08

to balance the cost of doing

5:10

so with the benefits that come as

5:13

well. If we don't treat it like infrastructure, it becomes too

5:15

hard, I think, for governments.

5:19

Yes. And I think that's a really good way to look at it, treating

5:21

it as infrastructure and it's probably not the way

5:23

that it has been looked at in the past necessarily.

5:26

Absolutely.

5:27

So Nicholas, Power Housing Australia, you facilitate

5:30

a national network of 37 growth

5:32

and tier one regulated community housing providers

5:35

who develop and manage affordable housing across

5:37

Australia. What are the current challenges

5:39

that you’re seeing in the delivery side of things? And I

5:42

know I've heard you discuss planning as an ongoing issue.

5:44

So I was interested to read the

5:47

New South Wales government has flagged to plan to allow property

5:49

developers to exceed existing height

5:51

limits on apartment buildings by 30% in

5:54

some circumstances if they set aside

5:56

at least 15% of new projects for

5:58

affordable housing. Can you sort of

6:00

talk us through, I guess, the challenges including planning and

6:03

what you think is going to make this delivery easier in

6:06

the longer term?

6:08

Well, as a country, we've failed to

6:10

plan for housing. So slightly different use

6:12

of the word plan, but we have seen

6:15

a situation where for the last decade

6:17

what we've thought was going to happen

6:19

hasn't happened. And when we thought something is going to happen,

6:23

we exceed it by a lot. So

6:25

we saw in the mid part of the last

6:27

decade, we saw foreign investment take housing

6:29

starts from about 170,000 homes

6:32

to about 230,000 homes

6:34

unexpectedly in 2017

6:36

in one year. So, 60,000

6:39

extra homes built in one year. You'd

6:41

hope that would've taken the pressure off pricing, it would've

6:43

made things easier. And by the time

6:45

we got to Covid, then, four or five

6:47

years of building at that level really took a

6:49

bit of the edge off the pricing. But we hit

6:52

Covid, thought we'd drop the build rate by half.

6:54

What happened, we started building record supply. Some

6:58

of that was stimulus. We've seen

7:00

in recent times, we've seen that the

7:03

net overseas migration has come off a very

7:05

low base during that Covid period, to the

7:08

point where in the March quarter this year, the latest numbers

7:10

we have, we've seen somewhere

7:13

around 137,000 net overseas

7:16

migration in the numbers. If

7:18

you annualise that out, that's

7:21

about 600,000 net overseas migration. If

7:23

you go back to the

7:25

budget last year in May, the original budget,

7:28

or the last budget from the last

7:30

government, we're looking at about 180,000 for the whole

7:34

of the financial period ending June 30. So

7:36

if one quarter is actually 137,000

7:39

and the previous estimate

7:41

was 180,000 for the whole year,

7:43

and it's likely it'd be more like 600 or

7:45

about 530,000 it would be, net

7:48

overseas migration, not 180,000 as May last

7:50

year we were saying, or or

7:52

the Federal Treasury was saying, we're not really planning

7:54

for what's actually happening. It

7:58

keeps happening. What we do have is the

8:00

Federal Government's committed to a national housing plan. We

8:03

have now two pieces of legislation, or a

8:05

legislative package, I should say, that has

8:08

the Housing Australia Future Fund, it has a

8:10

National Housing Supply and Affordability Council.

8:13

We have finance and money

8:15

that's being put aside by the government to

8:17

build tens of thousands of homes. So,

8:20

20,000 social, 10,000 affordable, and then

8:23

another 10,000 in that national

8:26

Accord. So, 40,000 homes over a five-year period.

8:29

It's a very good start. It'll see CHPs

8:31

involved deeply in the equation like we

8:33

have been for decades. We've been

8:36

here doing this for a long time, we’re the original Build to

8:38

Rent in this country. But it's good

8:40

to see that developers and planners are thinking

8:43

about how they can create affordable housing

8:46

and if a bonus of, an extra

8:49

30% in that development assessment allows for

8:52

15% social and affordable and

8:55

that wasn't there before, well that's obviously a

8:57

good start, that there's actually thinking about social and

9:00

affordable into the planning of those large developments.

9:02

And so, bringing it to

9:05

the front of the equation is really important, planning is now

9:08

seeing across the country a focus where affordable housing

9:10

is part of the planning schemes

9:13

and that there is mandated requirements in planning

9:15

schemes. We're starting to take it seriously, maybe

9:17

a little bit too late, but

9:20

at least at the Federal level downwards, we

9:22

have a national plan, we have a structure

9:25

that's rolling through every level of government, and CHPs

9:27

and charitable housing organisations are ready to do

9:31

this work.

9:34

Yes it's interesting you say the original

9:36

BTR I'd never thought about it like that, but it's,

9:38

it's really true. And to your point,

9:41

obviously it would've been great if this could have

9:43

been kickstarted a lot earlier, but great to see that there's so

9:45

much, you know, focus on this. So, you know,

9:47

many levels of government and in industry. It's

9:50

probably a good segue, Steph, to talk about

9:53

that investor perspective, you know,

9:55

and that whole idea of the original BTR was

9:57

social and affordable housing. We're seeing

9:59

a lot of interest in that BTR sector at the moment. What needs

10:02

to happen to get investors to look more at

10:04

social and affordable. I know when we've

10:06

chatted before, you've sort of talked about there

10:08

needs to be a little bit more education potentially about

10:11

the benefits, you know, the returns that

10:13

could be expected. Perhaps you

10:15

could talk us through the types of investors that are

10:18

starting to look at this sector, the returns

10:20

they can expect, and how can we attract more

10:22

investor interest in this market?

10:25

Yeah, to say that there's sort of one size fits

10:27

all for the investors is unrealistic.

10:30

And the idea is that, with the variety of different

10:33

models that are floating around for social and affordable

10:35

housing, there's usually some form of

10:38

different risk attached to that and different return profile

10:40

as well. But models really are looking

10:43

at different stakeholders. And that could

10:45

be having multiple roles for stakeholders,

10:48

different built form outcomes. So when you're talking about investing

10:51

in, you know, an entire building or portfolio,

10:54

a fund or versus dwellings

10:56

and house and land packages, it might have a combination

10:58

of those, restricted and unrestricted use.

11:01

So whether it's required on planning,

11:04

timeframes and investment terms,

11:06

exit strategies, if there are any targeted

11:09

cohorts, subsidies, if there's

11:11

mechanisms for an uplift, an incentive

11:14

model, all of those combined together really

11:17

bring a delivery model and they

11:19

have different risks attached to them. So, an

11:21

investor can really play anywhere on that continuum.

11:23

And that continuum is really from a

11:26

pure infrastructure play all the

11:29

way up to something that's probably more aligned with the

11:32

market fundamentals or the private

11:34

market. And there's a variety of

11:36

different models along that continuum that investors can essentially

11:39

play in. Appetite for those different

11:42

models is really going to depend on the

11:44

investor. So again, no one size

11:47

fits all

11:48

And a bit more of a long-term investment play

11:50

than some of the traditional sectors that

11:53

investors might have been looking at.

11:55

Yes. So, if you sort of take Build to Rent, know

11:58

that the investment term thesis can range from

12:00

seven to 10 years and then when

12:02

you're looking at more of an infrastructure play, it

12:04

can be anywhere from 20 to 30 years. So a

12:06

very different profile.

12:08

So, Wendy and Nicholas, I think,

12:11

a lot of people would be interested in some of the partnership

12:13

opportunities there. And I know Wendy, when we were

12:15

chatting, you were talking about partnership being

12:17

a really good option for people who are looking at

12:19

the sector. What would you recommend is

12:22

the best starting point for groups wanting to

12:24

get involved in social and affordable housing?

12:27

Well, I mean I think the first

12:29

thing is that it's

12:32

going to very much depend on the type of

12:34

the segment of the market that people are

12:36

interested in. So, I think it

12:38

was interesting that Steph was talking about

12:40

really two main types. You've

12:43

got that affordable housing space,

12:45

which is perhaps targeted at key workers

12:48

where it can be provided for

12:51

a relatively short space of

12:53

time because the people that we're

12:55

housing in there perhaps just need

12:57

accommodation that's sub-market rent

13:00

for a short period of time. But

13:02

then you've got that long-term investment that

13:04

we require for people in the social housing

13:06

and probably low-income households who

13:09

might be working, but you know, they are probably

13:12

not realistically going to be able to get

13:14

a home in the private sector. So, we've

13:16

seen a lot of partnerships in that first

13:18

type already. Some of it,

13:21

really, with very little government subsidy

13:23

going in, basically often just the charitable

13:25

concessions that a CHP could

13:28

bring. Because that's what I'd like to get over to

13:30

some of your listeners. Because we're

13:32

charitable, we do have GST

13:35

concessions on development, which can make a big

13:37

difference, to making a project work. We're

13:39

used to doing multi-tenure as well. So,

13:42

we've been used to providing social

13:45

and affordable housing along with Build to

13:47

Sell. It's a very easy transition to

13:49

also include market Build to Rent.

13:52

So, I think looking at institutional investors

13:54

who are prepared

13:56

to work with us over the longer term,

13:58

and we've seen opportunities with an

14:01

investor Super Housing Partnerships, Assemble Communities

14:04

and Housing Choices, one of our members,

14:06

where they're providing long-term housing

14:09

in blocks, which are a mixture

14:11

of market, social and affordable

14:13

- 60% market and

14:15

40% social and affordable housing. So that

14:18

to me is a type of arrangement that

14:21

we'd like to replicate elsewhere, it

14:23

won't solve all of our problems. What

14:26

I would say with partnerships is, and what

14:28

Super Housing Partnerships have proved, is that if

14:31

you agree to form

14:33

a partnership, the long-term

14:36

nature of it is going to make it work.

14:38

So those organisations know each

14:40

other, they trust each other, they'll go forward

14:43

as well. So, I

14:45

say, meet someone, get to know

14:47

them and agree to do this for the long term.

14:49

Because it'll reduce the transaction cost. We know that investors,

14:52

and I'm sure Steff you’ll say this as well, the

14:54

first time they do any investment, it just takes

14:56

ages to set something up, doesn't it? You know, the

14:59

due diligence that it takes and everything. But

15:01

you don't have to do that once you've got your partner.

15:04

So Nicholas , what are you seeing on that partnership

15:06

front?

15:08

Well, we were in London three

15:10

weeks ago. We met with Australian

15:13

Super, IFM Investors,

15:16

Moody's. We did the same trip to

15:18

Times Square last year in New

15:21

York, meeting with Morgan Stanley, Pension

15:23

Real Estate Association and the major retirement fund

15:27

and pension fund investors. They look

15:30

at our sector, and they've already been doing

15:32

that in the States and the UK for a long time, but they're

15:35

looking at Australia as being a new opportunity. It's

15:37

a little bit smaller than what they're

15:40

used to, but they know that it’s long term, safe, government-backed,

15:43

guaranteed yield. CHPs and community

15:48

housing and housing associations across the

15:50

world are becoming more well known as being

15:52

a safe place to invest in. And what's

15:55

really quite critical is that the investment

15:58

is going to ride through recessions. It's going

16:01

to ride through the ups and downs of market cycles

16:04

just because of those subsidies that

16:07

have been mentioned already. Those things

16:09

come and stay with us for a

16:11

long period of time. And the beauty about a

16:13

lot of the work that's been done by the Federal Government, as

16:15

a Future Fund, its there to ride through

16:17

not just economic periods and cycles,

16:20

but changes of political colours.

16:22

And so, from our

16:24

perspective, we see that as being a great

16:26

opportunity for those investors abroad.

16:28

But we're also saying

16:31

to those locally, it's time to

16:33

get, into the conversations, have the meetings and

16:35

form those relationships that Wendy's just

16:37

mentioned, the collaborations. The next three

16:40

to five years will be the ones that will be there in five to

16:43

10 years, 20 years from now. And I think

16:45

that's the exciting time we've got ahead of us.

16:48

It is a really exciting time to be in this

16:50

market space. And Nicholas, you mentioned

16:52

you'd been overseas recently. Gavin, I

16:54

know your background, you've got a strong background in

16:56

social and affordable housing and have worked overseas.

16:58

Can you give us

17:01

a feel for how the design of social

17:03

and affordable housing is shifting and what does

17:06

good affordable housing look like?

17:09

I think just to jump

17:12

into what Wendy and Nicholas are both saying here,

17:14

we're seeing partnerships spring up.

17:16

And a lot of our Build to Rent

17:19

clients that we've had on board previously are looking at

17:22

providing community housing as a space

17:25

that they can lean into knowing that community

17:27

housing is the original Build

17:29

to Rent. I think that is, that's one that they're

17:31

definitely seeing is a piece there. And what does good

17:33

affordable housing looks like, for us,

17:35

good affordable housing is housing that really

17:38

takes care of that deep energy

17:40

piece. So, we're seeing a lot

17:42

of lean into, some of Wendy's comments there

17:45

around, you know energy use and energy

17:47

poverty. So, energy poverty is a problem that

17:50

a lot of social housing

17:52

residents can have. So, we're seeing a lot of our

17:55

clients that are really keen to make

17:57

sure that they have a retrofitted or are

17:59

designing their properties in an energy sensitive

18:02

manner.

18:07

And I know a lot of the work that you've done has been

18:10

in markets where affordable housing is a bit

18:12

more mature as a sector. How does

18:14

our market compare and is there anything that we

18:16

should or could be doing better here, do you think?

18:19

I think, to lean into your original point

18:22

at the start of this, we have 1% of all residential

18:24

properties in the last decade have

18:27

been social and affordable properties. We need to

18:30

do more. I think there's been a chronic lack

18:32

of investment and funding in this piece.

18:34

And I think that's really what we need

18:37

to be doing here in Australia. I think if we

18:39

think about the typical, social and affordable housing typology

18:41

here in Australia, it's probably

18:43

something from around the 1960s, seventies,

18:46

you probably envisage a tower block. You

18:49

know, we need to move that existing

18:51

asset on. We need to change the script

18:53

on that. A lot of the work that I

18:56

did in a previous life was, the regeneration of

18:58

existing 1960s and seventies assets, getting involved with

19:00

residents at the

19:03

front end and working through

19:05

the transition process with them.

19:08

Because these are people's homes. People live

19:10

in these spaces. We're all very house proud. It's an Australian identity, isn't it, to be proud of where you live and proud of your house. And social and affordable residents are no different. So, they're very, very keen, and very proud of where they live, and they should be. So, you know, we need to build communities in spaces. I think if you look at everything that we talk about when we talk about Build to rent and we talk about social and affordable housing, it’s about building communities and building places where people feel comfortable, happy, and healthy. We really need to look at lessons learned from overseas. Scotland in particular, Scotland and Canada are leaning into, passive house as a way of making sure that they're building quality, highly energy efficient buildings. And that's government mandated, that's government backed. This was the passive house piece. I'm talking biasedly here, I’m a passive house designer, is that passive houses are a process that has been tried and tested since the 1980s. It's not a fly by night piece. So there's thousands of projects around the world that have gone through that process. It's a design process, but it's also a post-construction process as well. These properties get tested post completion. So really what I see there is a nice, clean set of design guidelines, but then also a quality assurance piece post construction that you can come back and hit an international global standard that assures quality.

20:45

Mm . And which doesn't mean that in eight

20:47

to 10 years time, you're having to think about how you actually

20:49

repurpose these , um, these projects. That's

20:53

Absolutely right. And what that allows you to

20:55

do is, is just design for longevity.

20:58

When you've got investors, they want that longevity asset

21:00

there. But also, you know, we are going

21:02

through a climate crisis at the moment. We're all

21:05

trying to figure out what that looks like and what

21:07

the world will be in, you know,

21:09

10, 20, 30 years’ time. So, you

21:12

know, if we can get that right now, then we should,

21:14

I think we are going through a

21:16

process of building an awful lot of social and

21:18

affordable housing here. So, we need to get it right at this moment.

21:22

Hmm, absolutely. I love too what you

21:24

said about, so changing the script on how

21:26

people view social and affordable housing and,

21:29

and also that whole idea of building communities. Going back

21:32

to, you know, how we can actually get

21:34

more affordable and social housing. Wendy, Nicholas,

21:37

do we need more incentives? We've talked a

21:39

little bit about this already, but is there more

21:42

we could do on the incentive front to encourage additional development?

21:47

Well, one of the things that we're arguing for, which

21:49

isn't always popular with our colleagues

21:51

in the property industry, is

21:54

thinking about Mandatory Inclusionary Zoning.

21:56

So, Nick was saying that he was over in

21:59

the UK, and I think he went to

22:01

visit the Elephant & Castle, where one

22:04

of our Australian developers Lendlease

22:07

have redeveloped an estate.

22:09

I used to work on, actually in the Elephant & Castle,

22:12

so very close to the centre of London, two tube

22:14

stations, lots of buses. And when they

22:17

redeveloped that estate, they had

22:19

to create a certain amount of

22:21

social and affordable housing over a much

22:24

larger footprint than the actual estate that was

22:26

demolished. So around about 30%. And

22:29

yeah, there were issues around

22:31

that because it was one of the first

22:33

projects that Lendlease had done where there was

22:35

that, in inverted commas, inclusion rezoning,

22:37

because we've got a slightly different way of describing

22:39

it over in the UK. But it did mean

22:42

that we could regenerate that area but

22:44

know that we were going to get a decent amount

22:46

of social and affordable housing, more units than

22:49

were there before. What

22:51

we'd like to see in Australia is that Mandatory Inclusionary

22:54

Zoning comes in on all residential developments

22:56

with the protections for land that's

22:59

already owned by developers, but new

23:01

land that's built that we require a

23:03

proportion of that accommodation that they

23:06

build there is social and affordable housing. And

23:08

what it is, is a line on their feasibility

23:10

study so that when they're buying the land, they know the

23:12

obligations there, so they pay less for

23:15

land. Anyone who's looked at any charts,

23:17

anyone who's in the development industry knows

23:19

just how much land values have gone up in good accessible

23:22

bits of our cities. So, the landowner, yeah,

23:24

they'll take a bit of a hit, but they're still going to

23:27

make a profit. Because we need

23:29

so much social and affordable housing, I think it's

23:31

absolutely essential because matched with

23:34

government investment, that will really

23:36

attract institutional capital as well and

23:38

it certainly will help us get to that total.

23:40

So that's something that we will definitely be

23:43

arguing for over the next few years.

23:45

And Nicholas , any thoughts from you?

23:47

Yeah, well we know that this has

23:49

been something that's been normalised across

23:52

other parts of the world. Some

23:54

of the developments we've seen, so Battersea

23:57

is an iconic 1930s power

23:59

station, coal fired power station. It's

24:01

now a vibrant hub in London

24:04

that seven years ago was a

24:06

desolate industrial wasteland. It now has

24:09

social and affordable housing as

24:11

a component of the delivery. Barking River to the

24:15

east along the Thames has

24:17

also got a significant redevelopment, with train stations

24:21

and tube going to it. And what

24:23

you can see in those parts of the world

24:25

is an approach that's a little bit more advanced and mature

24:27

and the financing that sits behind those

24:29

types of deals is significant. But what

24:32

it does say is it can

24:34

be done. And what needs to be seen here

24:36

is this next stage of our Federal Government, state

24:38

government, local government collaboratives. And

24:44

we haven't seen what we've got coming up in

24:46

some time if ever. Post-war 1940s and

24:50

fifties we saw that Federal Government, at

24:52

the central perspective realised it

24:54

needed to invest to solve a

24:56

crisis, which was a lot of people

24:58

coming here. And I think those net overseas migration numbers

25:01

I said before aren't quite post-war migration and

25:04

refugees. We certainly have,

25:07

if not, warlike challenges in affordability,

25:09

here today they're coming

25:12

by every interest rate rise and

25:15

by every household that's coming off

25:17

fixed rate mortgages, from twos and three

25:19

percents up to five, 6%.

25:21

And we're seeing that pass through to renters

25:24

where that's an investment loan at a higher

25:26

interest rate. So, we're seeing that overseas solutions are

25:28

needed fast, at least we

25:31

have structures in place coming through with a legislative

25:33

package that's been approved. But realistically there's

25:36

a strong message that there

25:38

is an opportunity to invest in

25:41

redevelopment in knocking down old one, two-star

25:44

energy homes that are contributing up

25:46

to 20% of the carbon footprint

25:49

in this country to put brand new seven-star, livable

25:51

passive house design solutions that have cradle to

25:54

grave living. You

26:01

can live in a home near your school,

26:04

near your job, near the health services, near

26:07

the retail, and you don't have to go

26:09

another 30-40ks out on infrastructure that doesn't exist. So,

26:11

we're getting more mature in our

26:14

discussion. I think it couldn't have come soon enough.

26:18

One final question I had, and it goes

26:20

back to what you said mentioned about financing to

26:22

an extent, but there are some new

26:25

funding opportunities that have come out of

26:27

these new government agreements such as loans and

26:29

grants. They're going to be made available through Housing Australia.

26:31

What's the interest been like

26:34

in those new initiatives and how important is

26:36

this do you think for getting more housing up and

26:38

running?

26:41

Well, Kathryn, without government

26:43

investments really it's impossible to do social

26:45

housing. You know, the gap between

26:47

what people pay in rent and what

26:50

it costs to build and then maintain it. It's

26:52

just unachievable. So, if we just

26:54

go back to the UK, I mean

26:56

if we think about Scotland, there they've

26:59

had, not just a program at the

27:01

moment, they've had a program historically every year.

27:03

They know the Scottish government is going to come

27:05

up with some money to invest in social

27:08

and affordable housing. It's just a

27:10

pipeline of projects they've got. What

27:12

we've got is the beginnings of that. But

27:15

we need that, because there's so much interest

27:17

in it, it's going to be far over,

27:20

it's going to be oversubscribed 10

27:23

times easily. What we need to do is

27:26

to say, yep, that's a great start, but

27:28

let's not stop when that

27:31

40,000 that Nick mentioned has built. Let's just carry

27:33

on year after year after year

27:35

and we'll start to catch up again. We reckon

27:37

with the modeling we've done, we really need

27:40

at least 10% of all housing in

27:42

Australia. So it's 4% now, at

27:44

least 10% to be social and affordable housing.

27:47

We're not asking for the earth, you know, the

27:49

UK, Scotland is over 20%

27:51

and even in England it's still

27:54

17 to 18%. We know

27:56

that's probably a bit too ambitious for Australia,

27:58

but 10% is where

28:00

we want to go. And then those investors know

28:03

that they can invest today and they'll

28:05

be able to invest next year and the year after and the

28:08

year after. And it becomes an asset class that we

28:10

really need it to be. So please,

28:13

all of us need to

28:16

get that national housing and homelessness plan right.

28:19

And Gavin will be able to, provide some

28:21

further numbers to this, but we have gone

28:24

from, as I said before, about 230,000 commencements per

28:27

year and even, straight after Covid

28:30

we bounced back up to similar sort of levels

28:32

to very high activity levels with building

28:34

approvals down to 170 below

28:36

170,000’s, which means we'll only build

28:39

155 to 160. We need to

28:41

be building about 230 to 240,000 homes

28:43

a year just for population needs.

28:46

By virtue of that equation, I think it

28:48

was economics 101 a long time ago,

28:50

not in post-grad or any of the other

28:53

economics that can be done. You do

28:55

it at the very first, first classes as

28:57

if your supplier's not keeping up with demand. The price

29:00

is going to be going in

29:02

directions that aren't helpful. And so,

29:04

a component of demand, as Wendy's saying if

29:07

it was 10 or 20%

29:10

of demand being captured, which is what's required,

29:12

there's at least 30%

29:15

of all housing starts should be at

29:17

least affordable. They're

29:24

not. The market has this

29:27

huge component of purchase behavior

29:29

that could be taking place in

29:32

the near future. This affordable housing asset class

29:34

can cater for 10 to 30,000

29:36

homes being built a year that support

29:38

the low cost and

29:41

those that are on affordable incomes. That

29:43

10 to 30,000 homes is going to

29:46

support builders and tradespeople

29:48

that are finding it very, very difficult in

29:50

the near future because the activity has dropped

29:53

so much. So really, just re-entering as a component

29:55

of demand, it's going to be vital to

29:58

those businesses to see there being

30:00

a stable flow-through of that pipeline of social

30:03

and affordable housing. Because it is jobs,

30:05

it's 43 trades and sub trades in

30:07

every new house that's built

30:09

and that's critical for the economy. And keeping

30:12

that stability of construction workforce is

30:14

going to be vital to keeping

30:17

costs relatively much, in line in the

30:19

equilibrium. So, it's a component of

30:21

stability, of economic importance that

30:23

will also be an outcome from the investments

30:25

being made.

30:26

So perhaps to wrap us up in a bit of a call

30:29

to action if you like, maybe I could ask each

30:31

of you, what do you think is one thing that could really

30:33

push this forward going ahead.

30:35

Perhaps Wendy, I could start with you.

30:38

Well, I'd like to go back to the partnerships

30:41

and really encourage investors

30:43

or property developers out there to

30:45

think about partnering with the CHP,

30:48

making friends with the CHP, do

30:50

an expression of interest because what we

30:52

need is long-term partnerships where people

30:55

get to know each other, set some criteria and

30:58

let the sector respond to that.

31:00

And you'll find, I think, that if

31:02

you have those long-term partnerships cut the

31:05

transaction costs, we've got

31:07

the demand out there, we can source you plenty

31:10

of renters as well. So that would

31:12

be my number one.

31:15

Yeah, like I'll just

31:17

agree there with Wendy on partnership. But

31:19

also just looking, I think a lot

31:22

of your CBRE listeners will be asset holders. And

31:24

maybe just thinking about diversification

31:26

of assets. You know, retail clients

31:29

that potentially have the ability to develop some

31:31

residential. You know, reach out

31:34

to Wendy or Nicholas, and potentially some of their CHL

31:37

partners there. Start that conversation as Wendy says.

31:39

And I think there's definitely

31:41

opportunities there on existing retail assets. You know,

31:44

you've got existing land there,

31:46

so, potentially diversification and densification there.

31:55

Thank you. Yes we have, so Stockland's

31:58

the nation's largest developer. They're members of

32:00

Powerhousing. CBRE have come on recently

32:03

as partners, which we're proud to say. Working

32:05

with organisations that really are the

32:08

room where the conversation takes

32:11

place. There's a lot of noise that'll happen

32:13

in the next period. Get into that quiet conversation. We have

32:16

about 500 in our conference in

32:18

Canberra in three weeks’ time. We

32:20

can't fit anymore in the Great Hall

32:23

of Parliament, but get in those rooms and have those,

32:26

in those loud rooms, get into the quiet conversation,

32:28

sidebar engagements and, and all of the, the

32:31

relationships are being formed, have

32:33

been formed and are forming now.

32:35

So get involved, get close, have the discussions

32:37

with CHIA, talk to Powerhousing, talk

32:40

to Housing Australia in particular.

32:42

They're brand new, they're fresh. They've been

32:44

running for a bit over five

32:47

years as National Housing and Finance

32:49

Investment Corp. But talk to them, and most

32:51

fundamentally, as Wendy would say, have a chat

32:54

to those CHPs themselves and find

32:56

out a little bit more about them.

32:58

They're getting pretty busy, so, you might want to

33:00

book a time in the diary, but look, there's

33:03

always time for the growth that's about to

33:05

happen and we've been preparing for this for some time.

33:07

So we look forward to having that conversation.

33:12

And lucky last, Steph.

33:14

I'm probably stealing everyone's recommendation

33:16

ideas here, but education is

33:19

really important around this sector and the

33:22

reality is when we talked about Build to Rent five

33:24

or six years ago everyone said it didn’t work

33:26

here, it wasn’t going to work, and here

33:29

we are with an evolving market per se. But I

33:31

suspect that in five to

33:34

10 years’ time we’ll be looking back on

33:36

this affordable housing sector and saying the same thing,

33:38

which I think is really exciting. But education

33:41

is really key because it is

33:43

a complex sector and it’s not something

33:45

you can go and just get

33:47

advisory on. It is about talking to various individuals and

33:49

groups and talking to Powerhousing and CHIA

33:51

and i2C around the design elements of that.

33:54

Bringing in different stakeholders together is also the

33:56

other one around collaboration. We’re talking

33:58

about bringing CHP’s together, developers,

34:00

investors, government and everybody needs to

34:02

see each other’s point of view

34:05

and everyone needs to

34:07

give a little bit and if we

34:09

can get somewhere that works and get a partnership that

34:11

works, we will have an affordable housing sector that

34:14

evolves quite quickly, hopefully.

34:21

Absolutely. It's great to see that it is heading

34:23

in the right direction. And thank you so much

34:25

for your time, Wendy Nicholas Caven and

34:28

Steph . There's clearly an urgent need

34:30

for more social and affordable housing and

34:32

some positive steps are being made as we've discussed

34:35

today. But there still is much to be

34:37

done with a huri research estimating

34:39

that over 1.1 million social dwellings

34:41

will be needed by 2037 up

34:44

from just 350,000 in 2021.

34:47

There's also some significant potential

34:49

for developers and investors in what

34:51

could be one of the country's biggest property

34:53

growth sectors. Thanks for tuning

34:56

into this latest episode of Talking Property with

34:58

CBRE. If you like the show and

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Until next time.