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Some Random Ideas on Housing Affordability

Posted by On Aug 21, 2014 In Ideas Tags , , , ,

Recently I attended a project initiated by SOUP Labs (Strategic Open Urbanism Platform) to discuss and explore ideas for making housing more affordable for young adults (18-35 years). It’s a wonderful ongoing project culminating this Saturday 23 August in the SOUP LaunchPad (we recommend going if you can). They provoked us to ruminate further on housing affordability and some potential solutions. We have, therefore, scratched down a few random thoughts and idealistic suggestions, with specific regard to apartments. These notes are by no means exhaustive, fully resolved or entirely original, it’s more a brain dump of a few propositions.

So what are some of the drivers of the cost of apartment buildings in Australia and in an ideal world what approaches could we take to address them?

Land Cost

You don’t necessarily need to hang out around the BBQ on a sunny Sydney weekend to know that real estate is generally crazy in these parts. Exorbitant prices paid for unliveable dumps or for potential developments sites are headline news. Keeping an eye on these things is an occupational hazard. We’ve run the tape over a few potential development sites and are regularly astonished that some prices paid still allows for profit following the design and construction of the apartment building. Bottom line here is that the high land acquisition costs are passed on to the apartment purchaser.

Random Ideas
Land owners such as Local or State Government, embracing the need for more affordable housing, should form joint venture partnerships with owner occupiers to develop and construct apartment buildings. By doing so, rapacious over-bidding for land could be circumvented. In this proposition, the local Council (for example) would retain ownership of the land, with the land effectively their financial contribution to the project. Naturally there are many contractual niceties to resolve in such a joint venture, but it should be with the aim of neutralising some of the land costs and giving back equivalent value to Council. We’d cheekily suggest that Council (in this example) could also facilitate the development approval process, but clearly this would attract probity concerns & isn’t legal… although, ICAC is pretty busy at the moment, perhaps they wouldn’t notice. Local Council’s can nevertheless further their role in contributing to generating housing affordability, with some other suggestions to follow.

ADDENDA: I should also mention that the more dwellings that can be placed on the land the less the land-cost per dwelling, it’s simple maths. This has many many implications & consequences, too broad to address here, it suffices to say that generally this is a discussion best left to a case by case basis.

Apartment or Dwelling Size

A lot has been written about the fact that Australians live in the biggest houses (on average) in the world, but it is less well known that our apartments are typically much larger than our counterparts back in Ol’ Blighty (ie England) and many other countries. Where we may typically recommend that the minimum size for a two bedroom apartment should be in the order of 80m², in England it’s 70m². It’s a considerable difference and it naturally follows that the bigger the dwelling the greater the cost.

Random Ideas
Whilst it is unreasonable to argue that 80m² for a two bedroom apartment is far too big, it is nevertheless reasonable to reconsider apartment size as well as the design of apartment buildings and the facilities included. As with student housing, perhaps it is time to contemplate providing more common facilities, such as shared home office spaces, entertainment areas, media rooms, laundries, etc. All with the express goal of reducing the internal accommodation requirement for individual apartments to cater for all manner of uses and in doing so, make smaller apartments more realistically achievable. This wouldn’t suit everyone, but may be a compromise many would be willing to make in the pursuit of a more affordable home and in all likelihood a more communal building.

Construction Costs

There are two factors in the cost of construction, labour and materials. It is probably best to avoid politics here, short of saying that it is a good thing that we are required to pay all workers a fair and decent wage. The consequence is that by comparison with many countries, Australian labour costs are relatively high. It is fair to say this is a significant factor in the cost of construction in Australia.

With regard to material costs, the construction industry is pretty good at finding economical ways of construction, you just have to study project homes to appreciate how ruthlessly efficient they can be in terms of construction systems, materials and costs. In doing so, however, it should be noted that buildings are layered up, with mess or unattractive rough finishing hidden behind sheet materials with a more presentable finish. Layering takes up space and may, but not necessarily, increase costs. Material costs in Australia are not inconsiderable, especially metals and imported raw materials and products. Delve into more exotic materials and finishes and the costs can rapidly escalate.

Random Ideas
Chilean architect, Alejandro Aravena, came up with an elegant solution to the problem of construction cost in the Elemental housing projects. The solution is to only build as much as you can afford and build more when you can afford to do so. The Elemental housing has been expressly designed to accommodate this approach (look it up by following the Elemental hyperlink). A direct translation of this approach to the Australian market is unlikely to attract many people, but what if we modified it? Don’t apply all internal finishes and build enough to be habitable, but if tiles, carpets, ceilings, timber surfaces, etc, are required, maybe do them when they can be afforded at a later date. An extension of this would be to build smarter, stop lining floors, walls, ceilings, with other materials, stop spending money hiding plumbing, wiring, ventilation ducts, etc. All these extra layers add cost. Build less, build neatly and only build structural and enclosing fabric and with a view to this being the final surface finish. Building neatly can add cost, but also save cost by not building certain elements at all.

Basement Car Parking

What is the cost of digging a hole in the ground and then making sure it stays a hole in the ground, not to mention ensuring that the neighbours don’t also end up in your hole? I don’t know exactly, depends on how deep, what it’s dug in and if it’s likely to turn into a swimming pool without waterproofing. Suffice to say a lot, potentially a real lot (technically speaking). This is a big cost to the building, you can’t see it, you can’t even live in it. It’s a bit crazy.

Random Ideas
No car parking on site. In many cities building basement car parking is neigh on impossible (in the Netherlands for example) and instead they build low rise local community car parking above ground and car owners walk from the local car park to their home. These local car parks do not need to be be an eyesore, they can be enclosed by other building uses; residential, commercial, community, etc. They work, there’s evidence. I admit it’s a hard sell to some when we have become so complacent with car use.

Apartment buildings without car parking should have a large ground floor store for bicycles, as at The Commons in Melbourne. Car Sharing should also be available on street and within the local community car parks. Car share membership would be a part of the purchase of each apartment, thus reducing the need for private car ownership. Public transport… that’s a whole other conversation, but at least we’ve now made a start on negating the need for a basement.

This is one solution local Council would really need to be on board for, both to approve buildings without dedicated car parking, as well as to facilitate local community car parks… don’t tell us… we’re dreaming, right?

Marketing and Sales

Like a block buster film, when a swanky new apartment building is released for sale it comes with all manner of marketing materials and bling. Then there’s the smug real estate agents who can make more from a day of sales than the architects earned in the three years working on the project (but we’re not bitter). From our perspective, or any I can conceive of, it’s hard to see this as added value, just additional cost.

Random Ideas
Instead of selling apartments off the plan, or following construction, potential buyers/owners would form a property collective and would be involved from the outset of the project, negating the need for the sales team. The buyers are the developers, there are many models for this, but here’s a taste of how it works as an investment model: This could be equally applied to owner occupiers and has been done so on occasions, I’ll leave the rest of that research to you.

Any other comments or thoughts, we’d love to hear them, I’m sure SOUP Labs would too.

1 Comment

  • Angelo Korsanos on Aug 22, 2014 Reply

    Hi Michael,

    Before publishing this article you asked me if there was anything else I could think of that contributes to housing affordability. I must have been completely absent minded when you asked the question given the machinations with utilities companies during the course of one our current project, but this is a pattern which is becoming increasingly prevalent.

    UTILITIES; Electricity, Water supply, stormwater in particular are adding great and increasing costs to development. Gone are the days where it was expected that these would be a public service. Here’s what I mean:

    • It is expected that a owner/developer will provide a substation on site to supplement electrical demand for even modest developments on tight urban sites.

    • It is expected that an owner/developer will provide expensive on-site pumps to increase the available water pressure for fire fighting purposes because the pressure in the network is being reduced to counter maintenance. A pump required and provided at the owners expense will likely stay dormant for its entire ‘working’ life apart from fleeting moments when it will be turned on to provide the mandatory testing and servicing imposed upon it for fire safety purposes. It is provided by the owner/developer effectively compensating the utilities companies for not replacing infrastructure to keep up with demand and increasing urban density.

    • It is expected that a stormwater detention tank (one that does not hold water beyond a rain event) will be provided with each and most developments to reduce the load on tired infrastructure.

    These costs add considerably to any development and do little to improve the amenity of the development itself. They add little value beyond an expectation that these utilities will be provided but they add substantially to the bottom line which the developer will inevitably have to recoup.

    My random thought is……

    …that the utilities entities should provide utilities of utility (by definition ‘the state of quality of being useful’). Historically utilities were provided by governments as an essential public service, paid for by our taxes but not exploited for profit. A return to such a model where the costs were contained in our taxes would be a far cry better than the pervasive “user pays” approach which is reaped for profit and adds considerably to development costs and ongoing maintenance which are passed on to the final owners/occupant’s.

    ….but I know!

    ….I’m dreaming!

1 Comment

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