In the next 20 years, several demographic changes will shape the future housing demand in Australia. One of the factors forcing the difference is the general aging of our population; specifically, the Baby Boomers (1946 and 1964) entering retirement. Although there will be a slowdown in overall population growth, relative to current numbers, the proportion of people aged 65 or older will grow dramatically. This increase will account for about two-thirds of net population in the coming decade.
Following the Baby Boomers, Generation X: (1965 and 1978), are a critical demographic for the future health of the housing market. However, the biggest concern is over future housing market conditions when Generation Y (1980 – 2000) or the Millennial generation enter the housing market. The increasing cost and market values in Australian’s major cities have made housing unaffordable and out of their reach. This has had the greatest effect on Generation Y in terms of delays in forming independent households, getting married or forming partnerships and having children.
Setting generational patterns aside, the housing affordability factor will drive the way future housing will be designed and constructed in Australia. In addition to design, planning and construction methodologies, there will be a shift in the way housing will be delivered in the form of cooperative and co-housing models linked with intergenerational living where communities can thrive. Furthermore, with the introduction the National Disability Insurance Scheme (NDIS) promoted by the Federal Government, the tenure and financial structures will shift if these programs are included as part of the housing mix.
With the generational and demographic changes together with the current housing affordability problem in Australia, there are already signs of new design and planning trends starting to emerge. Some of these trends are already in place and will continue to develop while others are still in the early stages of adoption.
In addition to the above, other factors will have a major influence on how homes are designed over the next decade. Government new standards in design and regulatory issues, new technological breakthroughs, and consumer preferences for new housing features and materials will further influence home design.
In Australia, the demand for affordable housing has caused developers, architects, builders, engineers etc. to seek new building materials and construction methods. With the need to save costs, these developers together with their professional development team have come up with some interesting housing innovation construction methods in recent years.
One of the key focus areas of innovative construction methods is OSM (off-site manufacture), where parts of or whole buildings are manufactured in a factory away from the actual construction site. These Individual parts or modules are then transported to the site on specialised trucks and trailers.
The off-site construction process reduces project construction time as the buildings are manufactured concurrently with site preparation. In addition, the amount of site disruption is decreased as less work is performed on site. As most of the work is performed in the factory, manufacturing efficiencies can be gained, and materials purchased in larger quantities. Due to higher accuracies that can be achieved in the factory-based manufacturing process, higher sustainability levels can be achieved. The types of products that can be manufactured in OSM process include
|Prefabricated Building Components
Pre-fabrication started over 100 years ago and gained popularity in the 20th century. The most widely used form of prefabrication in buildings is the use of prefabricated concrete and prefabricated steel sections in structures where a part or form is repeated many times. Prefabricating steel sections reduces on-site cutting and welding costs as well as the associated hazards. Prefabrication techniques are used in office blocks, warehouses and factory buildings.
Transportable buildings or homes have been around in Australia for some time. These buildings are built in a factory and then transported onto sites mainly in regional areas where skilled trades are not available. The homes are like standard suburban homes expect they are built in sections of width and length so that they be transported by conventional trucks to the site.
Flat-pack buildings are factory produced building components broken down into smaller elements and package together, delivered to site and assembled by the various skilled and unskilled tradesmen. In simple terms, it can also be described as the IKEA format of building. Although the lightweight steel frame and main components are standardised, the designs are not. This allows buyers the ability to design their building.
|Volumetric Modular Buildings
Volumetric modular buildings are similar in concept to Transportable Homes except they are mass produced modular units designed for apartments, hotels or mining camps where there is a repetition of the same module. It is essential to make the production of the cost of the module effective, and there should be a critical mass of a similar product. The modular units may form complete rooms or parts of rooms which are six-sided boxes constructed in a factory, then delivered to site.
|Bathroom and Kitchen Pods
The concept behind the prefabricated bathroom pod has evolved over the years and has led to the prefabricated kitchen pod as well. The pod is like the volumetric module except that they only house the bathroom or kitchen unit. As with any residential development, the most expensive part of a building is the kitchen and bathroom areas compared to other areas of a house or apartment.
OSM construction is fast becoming the world’s preferred building technique that has been proven over 30 years and is continuously evolving. The benefits of using OSM in development are:
While there are many advantages in using OSM construction, developers should also be aware of the risks involved with using anything new in their projects.
Most of the risk mentioned above relates to the market’s reaction. However, if there is a cost saving, then developers should lower their prices to reflect this as it will give them a competitive edge over their competitors.
In addition to OSM, several systems are coming into the market such as lightweight concrete bricks and panels and lightweight steel frame structures that are easily assembled. One of the more recent innovations is 3D printed buildings. 3D printing, also called additive manufacturing involves creating a solid object by layering thin slices of material including plastic, metal and ceramic. The technology has been in industrial use for at least 20 years.
More recently with the drive towards sustainability, timber buildings have come back in vogue as timber is widely recognized as a carbon-neutral building material. Another sustainable material that is making great strides in the construction industry is hempcrete. Hempcrete is a mixture of hemp hurds (shives) and lime.
|3D Printed Buildings
Printed buildings refer to technology that use 3D printing to construct buildings. The advantages of this would be quicker construction, lower labour costs and less waste produced. 3D printing has recently emerged as tech’s topic with the greatest expectations. Technically, 3D printing, or additive manufacturing, refers to the process of creating almost any three-dimensional object with various materials such as plastic, metal, or carbon fibre.
|Tall Timber Construction
By 2050 the global population will add another 2.5 Billion people to its cities. This pace of growth is not sustainable, so it is essential that we find another solution to steel and concrete structures. The answer is to look at timber construction which is renewable and with the advancement of cross-laminated timber it allows these structures to go as high as 30 storeys or more.
Hempcrete is a biocomposite building material, made up of a mixture of hemp hurds (shives) and lime. The result is a lightweight insulating material ideal for most climates as it combines insulation and thermal mass. Hempcrete has been used in France since the early 1990s to construct non-weight bearing insulating infill walls. With the restriction removed in growing hemp in Australia, there is increasing interest in hempcrete construction. It won’t be too long where we see hempcrete being used in 3D printed buildings
From a social level, another trend that will start becoming more noticeable will be Intergenerational Living. Intergenerational Living is the establishment of a community with traditional family values. This type of community has been established since the start of humankind. It is where younger and older people live together harmoniously according to the traditional concept of respect.
As society has become more self-sufficient, boundaries have been created, and family members have been segregated. For example, we create retirement villages and new sprawling suburban areas for younger families, separating grandparents from their grandchildren and not allowing daily interaction.
The concept began in Europe about three decades ago with people aged in their 50s and 60s wishing to explore new living options. They wanted to find a ‘third way’ that avoided the disadvantages of either living alone in independent units or living exclusively among other older people in a retirement village. They saw that traditional support institutions such as the family, neighbourhood, community and church had weakened and felt the need for new solutions that would foster connections and a sense of belonging.
In an IGC complex, people of different ages live together in apartment blocks or separate houses. Units may be rented or privately owned, with separate titles. Each individual or family have their own self-contained space complemented by communal facilities and gardens. Depending on the community’s needs, the communal spaces can be used for meetings, shared meals and for workshops or hobbies. In larger complexes, there might be a café which is open to the public, a laundry, a child-care centre, areas for youth activities, special care apartments with professional care, and guest rooms for visitors.
Generally, the average complex will have 30 to 50 units and 60 to 100 residents. In some cases, complexes would have 200 or more units, but this will depend on the availability of land, and generally, they would be located in an urban environment. Ideally, one-third of the inhabitants (families, singles, solo parents) will be younger than 40 years, one third 40 to 60 years and one third older than 60 years. All residents should show a willingness to embrace neighbourly co-operation by way of offering each other mutual support. For example, help with driving, shopping, administration, technology, paperwork, child supervision and neighbourly help through illness and emergencies.
In an IGC people live in a wide range of residential settings. Without going into detail, some types of housing include:
There could also be specialised types of housing in an IGC, such as:
The financial arrangements in an IGC can vary as much as the physical housing itself. The financing to develop and IGC can come from federal, state, or local government, from quasi-public housing corporations or partnerships, from social agencies, or purely private developers. Banks can supply loans on various terms. On the other side, residents of affordable housing units may be partly or fully subsidised by the direct government or private subsidies or loans.
The success of IGCs has been well documented in projects such as Humanitas, a Retirement Village in Deventer, Netherlands, 2013 where university students live rent-free alongside elderly residents. Students can come and go as they please. Students contribute 30 hours/month of activities such as watching sports, celebrating birthdays, offering company when seniors are ill, etc.
It is important for everyone, irrespective of their age, to have a community supporting them through the various stages of their lives. Intergenerational Communities bring together people of all ages fostering relationships, understanding and improvements in health and wellbeing. Children, teens, adults, and seniors coexist within a built environment, creating richness in these relationships, which supports a real sense of family and community.
Seniors who work with children and the youth live longer and boast better physical and mental health than those who do not, and those in IGC arrangements experience many benefits, including:
While the benefits of IGCs are clear for seniors, there are also proven benefits for the youth:
Furthermore, IGCs benefit the entire community:
For Government there are benefits as well:
However, for these communities to be thriving, they must be well-planned and designed to create social interaction among people. Through the implementation and management of clearly defined guidelines, residents of all ages within the IGC thrive.
In America, Housing Cooperatives play a significant role in their housing market and represent 40% of their housing stock. John Lennon was a member of one. Former President Richard Nixon and Madonna were rejected by one. When you buy a home in a housing cooperative, you don’t purchase real estate, but you purchase shares in a company, whose only asset is the property. This company owns the home you live in, and you hold no parts of the building like any other member. You secure the right to occupy it through what’s called a “proprietary lease” or occupancy agreement.
A cooperative is essentially a non-profit company, complete with a board of directors. All the members of this cooperatives purchase shares in the corporation and are labelled as shareholders. Cooperative owners each own a cooperative interest as follows:
To be part of a cooperative requires two significant costs commitments. Initially, the resident is required to pay a one-time share cost which can be considered as a deposit. This initial cost is quite substantial, and instances are between 20% to 35% of the value of a cooperative housing unit. After paying this initial cost, members are required to pay a monthly fee and charges (levies). The monthly levies cater to the maintenance and other expenses associated with running and operating the cooperative.
Since its inception, housing cooperatives have evolved, and many groups have created their structures. Below are the more common structures under this model:
One of the attractive benefits of cooperative ownership is the tax advantages. Tax payments for the premises are shared by the cooperative, so as a member and shareholder you don’t receive an individual tax account. Instead, your portion of the tax is included in the maintenance or levies you pay to the cooperative monthly. In addition to the tax benefits and low occupancy, cooperatives have other benefits:
Depending on the size and complexity of the housing units in a housing cooperative, there are two options in which a housing cooperative is managed.
A housing cooperative is established to meet the needs and visions of certain groups of people such as people from low-income households, people of a specific ethnic or religious background, artists, people with disabilities, or environmentally conscientious groups. There are several types of cooperative housing, often called “intentional” housing, including:
While there are instances of dissatisfaction, generally members develop a sense of pride and belonging, help their neighbours, and are supported by a close community of people with shared values. Cooperative housing addresses many issues arising from Australia’s housing crisis, including affordability, environmental impact and a stronger sense of neighbourhood.
Well led, effectively managed, and adequately financed housing cooperatives with committed members maximise the advantages of housing cooperatives. They have the best chance of growing into viable and stable cooperatives that can create many benefits for members.
The cohousing concept originated in Denmark in 1960s and today there are cohousing communities in many other countries around the world. Cohousing is an intentional community of private homes clustered around shared space. The development of a Cohousing is initiated by a group of like-minded people coming together to build their individual homes under a community structure, whereas Cooperative Housing is undertaken by a developer or a small group of individuals and then offering homes to the broader public.
Each household is private and has its independent income but work collaboratively and jointly to manage communal activities and shared areas. The legal structure can fall under a Body Cooperate of a Housing Cooperative model.
Most cohousing arrangements have certain features in common:
Cohousing communities can range from 8 to 60 individual homes, but most average between 20 and 30. A typical community can house a wide range of households, including single people, childless couples, parents with young children, and retirees. Specific types of cohousing include:
There are many benefits of being part of a cohousing community which include:
Despite the many benefits of living in cohousing, there are specific cons as well.
Below is a list of items needed to be undertaken when starting a cohousing community from scratch:
The National Disability Insurance Scheme (NDIS) is an Australia-wide scheme to support people with permanent and significant disability which will replace the current disability support system.
Through the NDIS, people with disability will be able to access the reasonable and necessary supports they need, to live the life they want and achieve their goals and aspirations. Currently, there are around 410 000 Australians with a significant and ongoing disability that would need long-term care and support.
The Commission appointed by the Government proposed that the NDIS would include the following features:
The NDIS is a significant and highly complex reform in funding disability care and support. The NDIS represents a significant new area of Commonwealth responsibility and expenditure. The estimated annual cost (nearly $14 billion) is around the same amount spent on the Disability Support Pension which is more than the current annual cost of the Pharmaceutical Benefits Scheme ($10 billion), and not substantially less than the current annual cost of Medicare ($18 billion). Currently, the states and territories provide around $4.7 billion for disability services, while the Commonwealth Government provides around $2.3 billion.
The Government has provided incentives for developers to deliver NDIS accommodation as it cannot deliver the type of accommodation on its own. However, there are some key aspects to consider:
The world is continually evolving and so are the banking and financing sectors. With the demand for new and affordable housing, alternative funding methods have been created by both private entities and Government. Below are some examples of these alternative sources of funding in both debt and equity.
Socially responsible investing, or social investment, also known as sustainable, socially conscious, “green” or ethical investing, is an investment strategy which seeks to consider both financial return and social good to bring about a positive change. Recently, it has also become known as “sustainable investing” or “responsible investing”. There is also a subset known as “impact investing”, devoted to the conscious creation of social impact through investment.
Our built environment is responsible for half of all global energy use and half of all greenhouse gas emissions. Buildings consume one-sixth of all freshwater, one-quarter of world wood harvests and four-tenths of all other raw materials. The construction and later demolition of buildings produce 40% of all waste. It, therefore, no wonder that new buildings are coming under scrutiny, and “green” rating tools are the primary method for measuring this.
In Australia, we have NABERS (National Australian Built Environment Rating System), which is an initiative by the Government to measure and compare the environmental performance of buildings and tenancies. Ethical funds are willing to invest in new projects that have a “green” rating and comply with several ethical and sustainable criteria.
“As an example, a developer is building and owning a mixed-use site for $50m. We consider the design and energy-consuming technologies for the site (i.e. lighting, solar, metering/embedded network, thermal insulation, glazing performance, energy efficient white-goods, hot water, HVAC). Varna assesses the ongoing lifecycle cost of these technologies. We then create a package outlining which products have an attractive return on investment based on the predicted energy costs. For this example, $5m is taken out of the capital cost of the project and funded using green bonds (at a meagre rate). This will reduce the developers Capex and Opex, improving cash flow and returning profit. This reduction of $5M (or 10%) contributes to reducing the project’s development finance LVR without using additional equity.”
Social Impact Bonds (SIBs) also known as pay for success financing, a compensation for success bond, social benefit bond or merely a social bond, is an innovative approach to financing social service programs that combine outcome-based payments and market discipline. They are designed to raise private capital for intensive support and preventative programs which are suitable to be funded by the government on an outcome basis.
The steps involved in the process include:
The National Housing Finance and Investment Corporation (NHFIC) is a crucial part of the Australian Government’s Reducing Pressure on Housing Affordability plan, announced in the 2017-2018 Federal Budget. The aim is to provide finance for housing from those struggling to put a roof over their head. It targets those in affordable housing, private renters and first home buyers.
To help provide better solutions for registered community housing providers, NHFIC operates an Affordable Housing Bond Aggregator (AHBA). The AHBA aims to provide cheaper and longer-term secured loan finance for community housing by issuing bonds in capital markets.
What is a bond aggregator?
The NHFIC is designed to aggregate and source large amounts of capital from the bond market to provide lower interest, long-term loans to not-for-profit Community Housing Providers (CHPs) developing housing for lower-income households. The intention is that money would be raised efficiently with reduced financing costs rather than in an expensive one-off transaction such as when borrowing from a bank.
What are the benefits of a bond aggregator?
The benefits are that it is relatively transparent and straightforward as it minimises the impact of debt on government budgets, draws on the successful experience and expertise of other countries and provides lower cost finance to community housing providers.
National Housing Infrastructure Facility (NHIF)
In addition to housing finance, NHFIC operates a $1 billion facility, known as the National Housing Infrastructure Facility (NHIF) which offers concessional loans, grants and equity investments to help support eligible enabling infrastructure projects. These projects include the infrastructure to support new housing, particularly new affordable housing and would cover electricity — water, sewerage and transportation. The facility is only available to Government entities and registered community housing providers.
Crowdfunding is an internet platform of funding a project or venture by raising small amounts of money from many people. Through social media outlets like Facebook, Twitter and LinkedIn it reaches out to an audience of potential investors. The strategy of crowdfunding is that more people are willing to invest a small amount of money in an area of their interest which opens doors for businesses/start-ups to investors they could never have reached otherwise.
The current crowdfunding model
Opportunities to purchase properties via crowdfunding platforms in Australia are currently limited to residential and rural properties. Most real estate crowdfunding deals involve equity investments. In this scenario, the investor is a shareholder in a specific property, and their stake is proportionate to the amount they have invested. Returns are realised in the form of a share of the rental income the property generates, less any service fees paid to the crowdfunding platform. Investors may also be paid out a percentage of any appreciation value if the property is sold. On the property development side, equity is often one of the most difficult to obtain for newer, or smaller developers. Property crowdfunding platforms can be a benefit to property developers looking for further sources of capital from qualified Investors.
Crowdfunding and Blockchain
The problem with the currently established crowdfunding platforms is that they are centralised bodies, charging high fees and influencing the projects. The alternative is Blockchain-based crowdfunding which can be a game changer because it decentralises the funding model from current models. Some existing crowdfunding platforms charge 5% of the total funds received, with an additional 3-5% going towards expensive payment processing. With blockchain’s distributed ledger, there is the potential to remove this third party, which will save a considerable amount of the fundraising costs.
So how does Blockchain Crowdfunding work? It is like the current crowdfunding platform, with the creators posting their project and then soliciting funds from a community of interested people. The difference is that the Blockchain platform will be able to generate the cryptocurrency or tokens to sell to potential backers. These cryptocurrency tokens will be accounted for and kept track of by the blockchain, which makes it immutable and impossible to forge. The tokens represent shares in the project, and just like ordinary shares in the stock market, they have the potential to go up in value.
Blockchain crowdfunding for property investment or development can work by allowing a crowdfunding platform to create their digital currencies which are sold to potential investors. This allows the platform to raise funds from early investors, while the investors also have the potential to make money if the value of their cryptotoken share increases.
Some advocates consider this a purer form of crowdfunding because it removes any intermediaries between the backers and the platform. It also has the potential to boost new blockchain platforms, because it will give the blockchain community a new way to fund its projects.
The Future of housing in Australia requires vision and innovation beyond the status quo and understanding of emerging needs and trends. The mix of the concepts explained under this section is a potential solution towards housing affordability that can have a social impact upon Australian communities. Developers with vision should start looking at adopting Intergenerational Living based on a Cooperative Housing model in their new developments. Furthermore, with climate change, they should pay more attention to the design of their development and ensure ecologically sustainable factors are considered. By adopting these principles, they will be creating a better environment for future generations.