How do we get urban density ‘just right’? The Goldilocks quest for the ‘missing middle’

Elek Pafka is Senior Lecturer in Urban Planning and Urban Design at the Faculty of Architecture, Building and Planning - University of Melbourne. His research focuses on the relationship between material density, urban form and the intensity of urban life, as well as methods of mapping the 'pulse' of the city. He has participated in research on transit orientated development, functional mix and high-density living. He has co-edited the book Mapping Urbanities: Morphologies, Flows, Possibilities (2017, Routledge), and co-authored the Atlas of Informal Settlement (2023, Bloomsbury)

What would Goldilocks do if given the chance to pick the “just right” density for our cities? Depends who you ask.

Debates over densities in our cities divide between advocates of low-rise detached housing and supporters of higher-density towers. Both offer little diversity. In Australian cities, but also in North America, we see a clear contrast between ground-scraping suburbs and clusters of CBD skyscrapers.

The combination of these two patterns of development has produced largely car-dependent cities. Commute times are long and carbon emissions high. Options are limited for those who wish to live in a neighbourhood with corner shops, short walking distances to a local centre, communal green space and public parks.

Neighbourhoods like this are enabled by mid-rise (three to seven storeys), mid-density housing. This form of building has been dubbed the “missing middle”. Decades of planning for urban consolidation has made little difference – medium density is still missing in many of our cities.

Lack of clarity bedevils density debates

In debates about urban density, there’s often a confused mix of different conceptions and measures of density. For example, the widely used measure of dwellings per hectare conflates building and population densities, capturing neither with precision. Often such debates don’t consider basic distinctions such as those between building and population densities, residential and job densities, internal and external densities (inside and outside buildings), measured and perceived densities.

A census can easily capture residential night-time population densities. However, fluctuating daytime densities cannot be measured accurately. Building densities can be accurately measured as floor area ratio (FAR, the total floor area of buildings divided by the total site area) but this is rarely applied.

Metrics are often heavily biased by inconsistent reference areas. What spatial scales matter for which desired outcome is seldom questioned.

For example, a reference area of about 1 square kilometre is relevant for a walkable neighbourhood. Our perceptions of densities depend on the spatial reach of our senses, mostly up to 100 metres. These include the visual sense of enclosure, the diversity and quality of the public-private interfaces, street layouts, trees and other vegetation.

If experts are unable to accurately measure urban densities, how can we expect everyone else to understand?

Buzzwords don’t solve the problem

With confusions persisting, the stigmatisation of urban density, meaning for many “too dense”, persists. This tendency has been often countered through linguistic attempts to reframe the term.

For example, in Vancouver, Canada, the urbanist Brent Toderian has been calling for “density done well”. This term has been adopted in Melbourne too. Other terms include “Goldilocks density” – “not too high, not too low, but just right” – “optimal-quality density” and “EcoDenCity”.

But these are vaguely defined terms that can mean many things to different people. Our research shows that planning professionals in Melbourne associate “density done well” with neighbourhoods as different as North Perth, Western Australia, and Friedrichshain in Berlin. Their gross floor area ratios range from 0.7 to 4.3.

Put simply, “good” density is not limited to ratio of buildings to space. And it’s prone to change over time.

Getting density right depends on local contexts

The “missing middle” is sometimes exemplified by the three-to-seven-storey perimeter block. The block is formed by attached buildings aligned with the streets with a large communal courtyard in the middle. It’s common and well understood in Europe (Friedrichshain is an example above), but less so in Australia and North America.

David Sim describes this building type in detail in his book Soft City. He links it to nine quality criteria, including the diversity of buildings and open spaces.

Research testing these criteria for Melbourne shows only five larger pockets come close to meeting them, with floor area ratios of 0.6-0.7. These are inner-city suburbs built along tram lines and with diverse building types. Their buildings include two-storey terrace housing, three-storey walk-ups and occasionally taller apartments. None of these are perimeter blocks, which are largely absent in Australia.

We argue that well-meaning discourses about “good” densities risk masking divergent desires through linguistic tactics. Rather, we need a better understanding of the different conceptions and metrics of densities and how they relate to people’s everyday experiences. This will require increased urban density literacy, through formal and informal education, as well as public deliberation, so we can build cities as diverse as our societies.

Goldilocks confronted very simple challenges with very simple means. But cities are made of diverse people with different tastebuds. None would have to burn their tongue if they were more aware of the knowledge and tools we have at hand.

This was published on Architecture AU. Read it here.

Could Tasmania become Australia’s Finland and end Homelessness?

Rob Pradolin is a qualified engineer and has been active in the property industry for over 30 years, most recently as General Manager of Frasers Property Australia (formally Australand). He is the founder and Director of Housing All Australians, Board member of Summer Housing, and Salvation Army Housing. Rob was previously on the Board of Advisors for the Property Industry Foundation (Vic), past Board member of the Property Council of Australia (Vic), Residential Development Council, HIA (Vic), UDIA (Vic), Liveable Housing Australia and the Heritage Council of Victoria.

I am a capitalist! But it does not mean I do not care about vulnerable people.

In fact, there are many businesspeople in Australia that share the same value. This is why Housing All Australians was established as a private sector voice, looking at housing and homelessness through an economic and business lens.

Homelessness is the canary in the coal mine to a much more substantial issue throughout the housing continuum, which is currently playing out with unaffordable rentals and escalating house prices.

In July 2022, Housing All Australians published a report called "Give me Shelter," which quantified the long-term costs of undersupplying public, social, and affordable housing in Australia reaching an additional $25 billion per annum  by 2032 and growing.

The size of the housing problem confronting Australia was calculated by federal government actuaries as $290 billion and was presented in the 2021 Chris Leptos' review of the National Housing Finance and Investment Corporation (NHFIC).

So, why haven't we used this number to develop a long-term housing strategy that would create the essential housing infrastructure needed for a prosperous Australia? Why are governments so averse to setting meaningful and ambitious goals like this? The sheer magnitude of the problem, and the realistic solutions, intimidates politicians from all sides, making it seem too daunting and unattainable. As a result, we never take the first step. The can just gets kicked down the road and the problem gets worse, leaving an economic and social time bomb for future generations to face.

Governments at all levels are now realising we need to increase housing supply. But even if everyone agrees to do this today, it will take several years to bring new supply to the market, and decades for it to have real impact. That is why we need a national housing strategy with short, medium, and long term goals.

At Housing All Australians, we do not have all the solutions, however, together with our growing list of value aligned corporate partners, we are taking action in the following ways:

Short term:

Let’s make use of the vacant buildings that are waiting for their development approvals. This is not a long term solution, but an immediate way to use “existing infrastructure” while we build the homes our country needs. Currently, Housing All Australians has close to 150 rooms, in several empty buildings, in both Melbourne and Perth either completed or under refurbishment. There are 1000’s of empty buildings lying vacant across Australia that can be used as a short term solution, let alone some of the 1.3 million empty rooms across Australia that can also be used for short term shelter, while we build the new homes our country needs.

Medium term:

We have created our own affordable housing model that uses the NRAS governance principles to allow qualified people to apply for below market rents. As part of this model, we are developing a digital Affordable Housing Register with one of our value aligned corporate partners, PEXA, that will allow local government to monitor compliance of all stakeholders. The creation of this Register will unlock private sector capital to drive affordable housing.

Long Term:

If the figure of $290 billion seems overwhelming, and we can put aside our parochial sentiment, perhaps we can be bold and target to end homelessness in one state and use that as a pilot for Australia and measure the resulting benefits to help shape future housing policy. It is not impossible. What about Tasmania?

Tasmania is the only state that is about to have a Housing Strategy that acknowledges the solution rests in addressing the entire housing continuum.  Tasmania is already in a unique position as the government has committed to constructing 10,000 homes by 2032 while the public housing waiting list stands at around 4,500. No other state is in this position.

With the assistance of the federal government, ending homelessness in Tasmania is possible and could pave the way to examine and measure the economic and social benefits of ending homelessness. Tasmania already serves as a testing ground for various products in the business world, so why not test housing policies there?

However, it's crucial to understand that there are no quick fixes. Finland declared its ambitious goal of eradicating homelessness back in 2008 and is now well on its way to achieving it by 2027.

Australians are growing tired of the political games in Canberra and are yearning for real action. Let's be bold. Let's step outside our comfort zones. Let's establish an audacious goal that we can all support and give it our best shot. The only thing we have to lose is the future we want for our grandchildren.

Robert Pradolin

Founder and Director, Housing All Australians and a Board member of Homes Tasmania.

Bid-rigging is rife in Australian construction, but the process itself is partly to blame

Geoff Hanmer is an Adjunct Professor of Architecture at the University of Adelaide, an Honorary Professional Fellow at UTS and is also the Managing Director of ARINA, an architectural consultancy. He is an Architect and a writer on construction history.

Earlier this year the Federal Court found ARM Architecture and its then managing director Tony Allen were guilty of attempting to rig bids for a tender relating to a $250 million building project at Charles Darwin University.

The Court ordered ARM Architecture to pay a penalty of $900,000 and Mr Allen to pay $75,000.

In a public statement, Mr Allen said he had made

a very serious mistake by attempting to induce the other firms to engage in bid-rigging, and this has had serious consequences for me. I have lost my position, my reputation, and my involvement in a profession that I love.

Allen had sent an email to at least eight other architecture firms that were members of the Australian Institute of Architects Victorian Branch Large Practice Forum prior to the close of bids:

Our request to you is simple. Please do not submit a tender as we are relying very heavily on continuing with this project to keep our practice alive throughout the remainder of this strange and difficult COVID time.

He had followed it up with this second email:

We have received very positive responses from Architectus and JWA. We would greatly appreciate a short note from you to let us know of your intentions either way.`

The biggest fine for architects so far

Although colluding in bidding for contracts is rife in the construction industry and materials supply industries, this is the biggest fine so far for an individual professional services firm.

In Australia, the Australian Competition and Consumer Commission managed to successfully prosecute Cement Australia Pty Ltd in 2017 for anti-competitive practices resulting in a fine of $20.6 million.

And in the United Kingdom, so many construction firms were involved in massive bid-rigging scandals uncovered in 2008 and 2020, that the UK government had to warn its agencies not to blacklist them because it would “limit choice”.

Fees used to be fixed

In the supposedly more genteel design professions, submitting tenders for fees is relatively new. Until about 40 years ago, architects and engineers normally worked on a fixed-fee basis, and often made deals to divide work between them.

The Royal Institute of British Architects, founded in 1834, was set up primarily as a cartel to maintain a schedule of fees and prescribe educational standards for those who wanted to use the term “architect”.

Although fixed fees are likely to upset economists on principle, they have the advantage of not encouraging architects to shortcut their professional responsibilities in order to compete on price.

This might be why the law allows medical professionals, lawyers and pharmacists to set fees for their services. Few people would be tempted to select their surgeon on the basis of price.

Until about 1980, the Royal Australian Institute of Architects also attempted to fix fees. When the government gently pointed out that this was illegal under trade practices law, the Institute began a long, slow retreat and eventually stopped publishing a recommended fee scale, much to the chagrin of many members.

Competitive tendering is typically seen as the “gold standard” for getting value in construction, but tendering processes have become so onerous and convoluted that the costs of tendering in relation to the potential gains may now be reducing rather than enhancing competition.

This is especially significant for design consultants such as architects and engineers whose profitability is typically well below average for the industry.

Bidding processes convoluted

The Charles Darwin University project is a case in point. ARM was selected to design what was to be an “iconic” building, but documentation of the design was to be the subject of a second tender, which was the subject of ARM’s emails.

This two-stage process, devised by a project management firm, was self-defeating.

Charles Darwin University wanted a highly-awarded architect to deliver an iconic building, but much of the design ARM contributed has been lost.

The images of the new building, produced by another firm, do not resemble the original ARM design and are not the stuff architectural icons are made of.

The original Charles Darwin University design. ARM Architecture

ARM and Tony Allen have paid a very high price for their folly in asking other firms not to tender, but the project management firm that devised the expensive and ultimately unproductive double tender process has not been subject to any public scrutiny or criticism.

If we are going to have fee tenders, we need a transparent system with enforceable rules sufficient to stop public clients needlessly adding costs by wasteful convolutions, as happened with the Charles Darwin University double tender.

The updated Charles Darwin University design. CDU

Maybe there’s a better way

Alternatives should to be considered. It ought to be possible for the client to nominate a reasonable fee, and then select consultants who will accept the nominated fee based purely on their merit.

Another possibility is a two-envelope system, where the fee and the quality of submission are assessed separately, with the fee envelope only opened when an evaluation of the quality of submissions has taken place.

Other than that, we could do worse than revert to a fixed percentage fee and reap a huge saving in the effort, time and money put into selection processes. Free-market economists might like to think about how much competitive tenders actually cost.

This article was originally published on The Conversation. Read it here.

Inside the Opera House’s journey to 6 Star Green Star

Jarrod Reedie is the Assistant Editor of Architecture & Design's digital and physical publications. Since joining the masthead in 2021, the budding writer has penned a number of articles on defining residential, commercial, cultural and education projects both at home and abroad. Reedie was recently given exclusive access to Moreau Kusunoki and Genton's Powerhouse Parramatta project, recognised as the biggest cultural project to be built in Australia since the Sydney Opera House.

A couple of months ago we reported that the Sydney Opera House had received a 6 Star Green Star rating. An incredible achievement for all involved. 

Recognised as a paragon of sustainability across the globe, the Sydney Opera House’s journey has been decades in the making. The creation of the institution’s Environmental Sustainability Policy and subsequent Environmental Action Plan put them on the path, with a number of pioneering initiatives (more on that later) resulting in the certifications.

Working closely alongside the Green Building Council of Australia, the Opera House created a pilot performance tool, which sought to measure the performance of an existing building. The Opera House’s Environmental Sustainability Manager, Emma Bombonato (pictured below), explains.

We're looking at performance against ourselves rather than compared to another kind of cultural institution or performing arts venue. It's really important because it sets the trajectory,” she says.

“Four star Green Star was achieved, followed by Five Star Green Star three years later. Our big ambitious goal for our 50th year was to achieve a Six Star Green Star rating. 

“It laid the foundation for what we were looking for, but we had been working on it for over 10 years. So, in terms of us being able to get there, it's been a long time, but it's really been something that the whole organisation has known about and has been committed to since 2010.”

The Environmental Action Plan, or EAP for short, is broken up into a number of focus areas, including engagement and experience, building performance and community engagement. Eight hero goals are contained within the report, which is to do with the likes of building performance, energy consumption, water consumption, and increasing waste targets. Bombonato says the goals set were extremely ambitious, but each has been carried out.

“We wanted to achieve an 85 percent recycling rate, ensure all construction waste was diverted from landfill, eliminate single-use packaging, and embed sustainability in performances and outdoor events to align with international best practice. The objective is to achieve sustainable event management compliance with the international standard.”

2018 saw the Opera House reach carbon neutrality, with a major part of this certification attributed to the adoption of renewable energy. Despite the fact that you can’t exactly place solar panels on arguably the most recognisable building in the world, the Opera House team found a way.

“Renewables on-site are not a possibility for us, but we looked at a new model that was becoming more commonplace,” Bombonato continues.

“With the renewal of our electricity contract, we started thinking about the benefits in terms of reducing carbon emissions over time and contributing to New South Wales' transition to renewable energy. We've now procured 100 percent renewable energy, demonstrating that various models can achieve this goal.”

Arguably the most intriguing project that assisted in the achievement of 6 Star Green Star is the creation of an artificial reef at Bennelong Point (pictured above), which has boosted local ecosystems. Bombonato says she inherited the project when she joined the Opera House, but regards it as her favourite to date.

“We received a grant from the New South Wales Environmental Trust, collaborating with UTS. The project involved installing structures along the sea wall to create habitats, about 28 little pods in groups of three. They are designed to mitigate the decline in natural habitat caused by the artificial seawall," she explains.

"With that, in 2017, the reef structures were installed and over time, they became crusted with plant and materials like kelp, creating a habitat for juvenile fish species. Baseline surveying was done before installation, and post-installation surveys now show around eight additional species being surveyed around the site, proving the success of this type of project. 

“Recently, the white seahorse, an endangered species, was discovered on the site, making it a significant achievement for the project. It allows us to contribute to and create awareness for the marine environment in Sydney Harbour, which is our backyard and needs protection.”

Looking forward as opposed to back, Bombonato is focused on what comes next. The current EAP is due to finish at the end of 2023, with ARM Architecture’s recent refurbishment of the interior spaces  (pictured above) laying the platform for the future.

“From an environmental perspective, it's about ensuring that environmental sustainability and heritage conservation work together. We aim to retain and look after the heritage fabric while renewing the space to meet organisational and community needs,” Bombonato says of the ARM project.

“Now, we're looking at what's next and how we can integrate environmental and social sustainability goals more cohesively. Maintaining our Six Star Green Star is crucial, but we also aim to become climate positive by looking at electrification, fossil fuel-free options, circular economy, and contributing positively to nature and the environment. 

“We want to demonstrate leadership and inspire others to take action."

This article was originally published on the Architecture & Design website. Read it here.

Empty office spaces can be converted to residential buildings – but it won’t be affordable

Jenny Baker is a Licensed Professional Engineer (PE), a Certified Lighting Designer (LC), and a LEED Accredited Professional (LEED AP) with more than 10 years of industry experience as an electrical engineer and lighting designer. Jenny was honored with Consulting-Specifying Engineer Magazine’s “40 under 40” in 2015.

Since the COVID-19 pandemic began, more companies have offered remote work options for their employees, or have even switched to working entirely remotely – leaving empty office buildings a new fixture in many cities. In July 2023, Boston’s Planning and Development Agency announced a pilot program to offer incentives to building developers who convert office buildings to residential housing.

As engineers who study buildings, we wanted to know if these empty spaces could be converted to residential buildings, and what hurdles developers would face.

While converting office buildings to multi-family residential involves many considerations – including zoning codes, real estate values and structural issues – certain buildings may be good candidates for this type of conversion. Here’s what it would take to remodel these spaces.

Redefining space

First off, the building owners wouldn’t need to make any major structural changes to convert an office building to a residential building. Most office buildings are designed so that the tenants can easily build out the space to suit their needs. This means they can put up walls, take power where they need, and select finishes like flooring, paint and lighting.

With a conversion to multi-family residential, the shell and structural elements of the building would remain, while the building owners could add or move walls to create individual apartments. The costs for this interior remodeling would depend on the how fancy things like the countertops and light fixtures are.

But remodelers would also need to consider nonstructural building features, like windows. Windows determine the distribution of natural light in each residential unit. Narrower office buildings with more area along the perimeter – and therefore more opportunity for viewing windows – would transition more easily to residential than deep, rectangular-shaped office buildings. No one wants to live in a home with no daylight.

Electricity, fire alarm and telecommunications

Residential and commercial buildings have different electricity needs. Residential buildings have kitchen appliances that require lots of power, but office buildings use more computers, projectors and copy machines – meaning the electrical load would likely be about the same. Office and residential buildings also have similar power needs for lighting.

The electrical load from heating and air conditioning would depend on the type of systems used. While the main electrical service of an office building might be an OK size for a residential building, remodelers would need to add a subpanel to each residential unit. U.S. code requires that all residents have “ready access” to the circuit breakers or fuses supplying their unit.

Building owners would also need to add more fire alarm devices, since residential buildings have more rooms. They might need to revise the internet, telephone and cable systems, as well, to make sure each residential tenant has access to these services.

Though expensive, these electrical revisions are possible. The biggest hurdles would be adding the subpanels and metering to figure out how much each unit uses.

Heating, ventilation and air conditioning

While commercial buildings usually have centralized HVAC systems, residential buildings need separate HVAC systems and controls for each residential unit. That being said, mid-rise and high-rise apartment buildings often use a centralized HVAC system with variable air volume units in each zone. Variable air volume units work together with a central air handling unit that supplies a constant airflow. Each variable air volume unit then adjusts the air flow for its specific zone. Each smaller apartment would be a zone, but some larger apartments may need multiple zones.

Residential buildings typically have a smaller HVAC load than office buildings, meaning the existing HVAC system would be larger than needed for residential reuse. Oversized air conditioning systems often have humidity problems – add to that the fact that residential tenants create more humidity from showering, doing laundry and cooking. The way to mitigate humidity here is through additional exhaust fans. Variable air volume units would also help keep the extra humidity under control. Building owners would need to pay for these additions, as well as ductwork remodeling.

Plumbing and fire protection

In office buildings, most plumbing is centralized, often in the building’s core. For instance, bathrooms tend to be grouped together and located in the same spot on each floor. However, in residential buildings, plumbing is distributed throughout. Each unit typically has its own bathroom and kitchen, and each requires drinking water and sanitary sewer.

The biggest issues here would be the service sizes – or how large the pipes serving the building are – and the interior plumbing system. The service sizes for water and sewer in an office building may not be big enough for residential uses. This would depend on local codes and the number of plumbing fixtures. It’s likely that the pipe for a sewer utility connection would need to be larger for an apartment building than for an office building. Also, the interior plumbing system would need a remodel to serve each residential unit.

Reworking the plumbing for water should be possible. However, reworking the sanitary sewer system would be much more difficult, especially on upper floors. Gravity makes things run downhill, and longer horizontal pipes need more vertical drop to keep things flowing in the right direction. This remodel would require new plumbing chases – vertical cavities that pipes run in – to accommodate the sanitary sewer and vent piping needs. Adding these chases would likely require core drilling of floors. If the owner wanted to invest the money, it would be doable – but expensive.

The fire sprinkler system would likely need revisions once the new walls go up, but the size of the pipe bringing water to the sprinkler system should be pretty close to the right size.

New life for vacant buildings is doable but not easy

No one wants to see office buildings sitting vacant, as vacant buildings can diminish surrounding real estate values. Converting an office building to a multi-family residential occupancy is possible. It would, however, not be cheap.

But office buildings that are due for a remodel or upgrade anyway could be great candidates for this type of reinvention. If the building systems – HVAC, plumbing, electrical – are due for replacement, the project becomes more cost effective. With demand for rental units outpacing growth in new supply, and many cities like San Francisco and Boston offering incentives to convert, there is potential here. For someone with a creative vision and a building in the right location, this could be a successful and innovative project.

This article was originally published on The Conversation. Read it here.

Unlocking ‘smart density’: walking, riding and open space investments are the key

Gus Carfi is the Executive Chairman of Polar Enviro (previously known as SmarterLite Group), a Melbourne-based private group that is pioneering new generation Infrastructure Technology for Safety and the Environment. An incredible focus for Roads, Traffic Communications and Exit & Egress for Buildings / Facilities.

The future of density in Brisbane, Melbourne, Perth and Sydney is being discussed a lot these days. Communities are demanding governments address the lack of affordable housing, which is having real social, economic and environmental impacts.

Opposition to density and the mischievous positioning of it as only cramming people into high rise towers gets too much attention. However, as pointed out in recent articles in this publication, there is growing community understanding and support for a model of density that reduces pollution and improves health.

So, as we debate density from a housing perspective, we also need to talk about the importance of matching any increased density with better walking and riding infrastructure. This cannot be an afterthought; it has to be front and centre of planning changes being debated across the country. Otherwise, we risk ignoring some important lessons learnt from the COVID-19 pandemic, including people’s desire for outdoor activity.

Some commentators suggest momentum is building to fund, approve and rollout more walking and riding infrastructure. Yet the UN Environment Program’s call in 2016 for governments to spend 20 per cent of transport budgets on these measures are not front of mind in debates about density.

No country on the planet is spending that much but there are encouraging local and international developments worth noting. 

Many councils have ambitions to rollout more walking and riding infrastructure, for example, my hometown City of Melbourne has a plan for $7 million worth of bike lanes in the next 12 months. I hope that delays in approvals do not stymie these ambitions.

The French government has announced it will spend $4 billion to double bike lanes by 2030, including $821 million to subsidise the purchase and maintenance of bikes. The government is also changing road rules and training 850,00 young children to ride bikes.

More recently, the UK Department of Transport has been served with a first round of legal papers asking for a judicial review on recent cuts to spending on infrastructure to promote walking and riding and how these cuts can be justified given the UK government’s emission reduction targets.

The approach in France is a mix of carrots and sticks but the situation in the UK is a potential warning for governments who ignore the huge contribution that walking and riding can make to reduce emissions and positively shape the model of density people want.

What both have in common is the conclusion hundreds of millions of people who live in cities came to during COVID-19 lockdowns across the world: governments and communities cannot address climate change, reduce congestion, improve air quality and enjoy better physical and mental health without a smarter approach to density that includes significant investment in walking, riding and open space.

Like in most other cities around the world, how Australians now live, work, and play is changing. A coalition of groups, including the Heart Foundation, RACV, Bicycle Network, Municipal Association of Victoria, Victoria Walks and universities outlined what this meant in Victoria during the pandemic in their Streets are For Everyone Joint Statement. Similar findings were replicated across Australia.

Preferences for safer streets, neighbourhoods, bike paths, parks, and gardens are no fad. This version of smart density offers a model where we can sustain people, place and the planet. Our future depends on this, and lockdowns reinforced how uneconomic and unfair continued urban sprawl can be.

Walking, riding and open space projects are smaller, less complex, and more affordable compared with mega infrastructure projects that seem to get all the attention. The former require less specialist labour, equipment and materials. These projects can also increase the use of recycled content from waste streams like glass and other ways to improve their environmental performance.

No Australian capital city can claim to have the best model of density. It would be foolish to roll out a single model of density across the country but there are some common threads we can all learn from.

Models of density that either cram people into high rise towers with poor amenity and access to private and public spaces, or building further out on the fringes of our cities without adequate infrastructure and services do not work, as highlighted by the National Growth Areas Alliance among others.

Communities, governments and the business sector must come together to prioritise the policies and programs needed for better walking, riding and open space infrastructure. We’re running out of time to get density right, and this type of smart density will receive widespread community support.

Perhaps the best way to shift thinking is to stop calling walking, riding and open space infrastructure “soft infrastructure”. Instead, let’s all promote it as smart, hard infrastructure, the kind we need to handle climate change, affordable housing and other challenges.

Lockdowns were challenging but they showed city dwellers there is a more sustainable way to live, work and play. We also experienced first-hand a vision for what smarter density looks like.

So let’s get cracking and shift our collective focus to safer neighbourhoods and hubs where better walking, riding, public transport and open space are considered critical rather than as optional extras.

This article was originally posted on The Fifth Estate. Read it here.

Building houses in factories for the Commonwealth Games was meant to help the housing crisis. What now?

Louise Dorignon is a geographer and a Vice-Chancellor Postdoctoral Research Fellow at the Centre for Urban Research in the School of Global, RMIT University. She specialises in the production, lived experience and urban outcomes of apartment housing in Australia and Europe. Louise’s VC Fellowship project focuses on modular apartment prefabrication to analyse how it can enable the production of more sustainable and affordable homes and support everyday experiences of post-carbon housing.

Huge sporting events come with substantial public investment in housing. After Melbourne hosted the 1956 Olympics, about 600 houses in the athlete village became public housing in West Heidelberg. After Melbourne hosted the 2006 Commonwealth Games, the athlete village in Parkville was largely sold off, with 320 houses going to social housing.

Victoria’s now cancelled 2026 Commonwealth Games were meant to have the same effect in the state’s smaller cities. New dwellings were intended to help boost social and private housing supply amid the ongoing housing crisis. Ironically, the broader housing crisis may have contributed to the cancellation, as worker shortages and building material price spikes took their toll.

Importantly, half of these were to be prefabricated and modular buildings. This would speed up construction and demonstrate what’s now possible. While regions like Scotland now do almost all of their construction in factories, Australia is only just beginning.

So is cancellation of the games a blow for prefab construction in Australia? It’s a PR setback, given the attention it would have received. The state government has committed to building 1,300 new homes in the regions, the same number intended for the games. As yet, we don’t know if these will be prefab.

Building the prefab profile

Victoria agreed to host the games only last year. That gave very little lead time – the games will start in just two and a half years, assuming a new host is found. This rapid time frame was why Victoria’s government looked to prefab to provide the thousands of dwellings needed for officials, athletes and workers.

After the games, these houses in Victoria’s fast-growing host cities of Bendigo, Ballarat, Geelong and Shepparton were meant to boost social and affordable housing supply.

The plans were a welcome shot in the arm for Australia’s prefab industry, which was just 5% of new builds this year, though it’s expected to reach 10% by 2030. Scaling up the use of prefabrication will need government support and leadership.

Leading prefab jurisdictions like Scotland and Sweden have needed government support to get to where they are, with prefab accounting for 84%.

Why look to prefab homes at all?

Factories are a way of producing standardised products more cheaply. Bringing these techniques to bear on houses cuts costs, slashes waste by up to half, and can quickly boost housing supply. Waste can be cut by precise standardised measurements and the use of low-carbon materials like timber or hybrid steel-timber reduces environmental impact.

You might think prefab homes would all look the same or lack quality. But standardisation can often be high quality. When construction is done in a factory setting with a controlled environment, it can be easier to ensure it’s airtight, well insulated and meets standards.

Prefab factories can reduce the impact of weather on construction, though it does create another challenge – transporting the dwelling to the site.

It’s not just for single or double-storey buildings. More than 500 apartments were delivered to a vacant site in London using modular systems, which were then slotted into place to build Ten Degrees, the world’s tallest residential modular building to this date. The process cut embodied carbon by up to 40%, according to the building’s designers.

Boosting prefab without the games

In a recent report led by Master Builders Victoria, we examined how experiences of the Birmingham 2022 and Glasgow 2014 Commonwealth Games in the UK helped the construction industry innovate in areas like prefab housing.

Preparations for the Birmingham games faced the unprecedented challenge of the COVID pandemic. As a result, the planned athlete village was never used for athletes, and the units built eventually became private and social housing. Prefab techniques were used to build 430 apartments.

Even with the COVID challenge, these apartments were completed ahead of time. In contrast to traditional construction methods, there was more use of the local workforce.

Why isn’t Australia embracing these techniques?

Inertia. To make prefab housing mainstream in Australia will mean major changes to the way things are done at present. Our construction industry is not always able to take risks, which makes innovation challenging.

One way to get around this is to create the demand for these types of houses. In Victoria, the government’s pledge to still deliver the promised regional housing could be tied to prefabrication, to help deliver high quality, sustainable and affordable housing more quickly and begin reshaping the wider industry.

Even with the games gone, other pressures like the rental and housing crisis are only intensifying. Prefab could help here by offering more affordable and sustainable housing as an option, especially outside metropolitan areas where the cost of land makes up a smaller proportion of the cost of a house or as urban infill.

The games would have helped supercharge the prefab industry. But Australia has an urgent need for more housing. Prefab could help deliver this more cheaply and more sustainably.

This article was originally appeared on The Conversation. Read it here.

YIMBYs and NIMBYs unite! You can have both heritage protection and more housing

Dr James Lesh is a historian and Lecturer in Cultural Heritage and Museum Studies. His research explores the theory and practice of heritage conservation in the twentieth and twenty-first centuries. He has also published widely in Australian urban history. Before joining Deakin University, he had previous appointments at the University of Melbourne, University of Sydney, and King's College London

Heritage conservation has been blamed for making the housing crisis worse by standing in the way of new, higher-density housing. But protecting heritage and increasing housing should be complementary objectives. Heritage suffers when not enjoyed by our growing communities. Housing suffers when not shaped by our communal heritage.

YIMBYs and NIMBYs are usually on opposing sides of this debate. Yet what they agree on is the desirability of heritage areas. People in both the Not In My Back Yard and Yes In My Back Yard camps want to live in established suburbs, often in the inner city, with attractive historic urban landscapes.

Unfortunately, NIMBYs have exploited heritage loopholes to prevent development. There is a problem with how overly cautious practitioners and under-resourced authorities are applying heritage protections. So, YIMBYs wrongly blame heritage itself for housing issues.

Empirical evidence that heritage is a barrier to housing supply is practically non-existent. It’s not a talking point among housing experts. The real issues are urban policy, the tax system and housing supply.

In support of both heritage and housing

Heritage should be seen as part of the housing solution. Advocates for both heritage and housing can and have been allies.

In Victoria, for example, architect and politician Evan Walker introduced the first comprehensive local protections in the mid-1980s. He was ably supported by David Yencken, who had been the first chairman of the Australian Heritage Commission and a developer of innovative suburban housing. These city visionaries recognised that we could keep the best of the past and complement it with new, higher-density builds.

Heritage protections were created at a time when our historic neighbourhoods were at risk of widespread demolitions for inferior new buildings. High-rise towers threatened areas like The Rocks in Sydney and Carlton in Melbourne. A surge in ad-hoc redevelopment put valued homes at risk in suburbs such as Brisbane’s New Farm, North Adelaide and Perth’s Subiaco.

Our heritage suburbs were not desirable like today. We only have our fabulous cities of villages because people fought hard for heritage protections.

Heritage is about what we find significant. Eroding protections risks the social, physical and historic fabric of heritage neighbourhoods, the very reasons so many of us – including both YIMBYs and NIMBYs – want to live in them. These areas have vibrant high streets, excellent services such as schools and hospitals, and many transport options.

It’s notable, too, that the smaller block sizes in older suburbs already produce high levels of density by Australian standards. Their walkability and infrastructure also make them more liveable. This heritage of urban vitality is worth conserving and replicating.

We can build more housing in heritage areas

A more palatable and sustainable solution is to build well-designed homes, hapartments and townhouses in and around heritage areas. There are architects and developers who do this. It may be a case of adapting obsolete historical buildings or constructing new buildings on appropriate sites.

When done well, new builds and incremental change improve our historic urban landscapes. Good examples include Perth’s Northbridge, Melbourne’s Collingwood and Sydney’s Chippendale.

Importantly, the best-designed new homes respect local history, prevailing design forms and neighbourhood character. That is a great strength of heritage: it allows us to embrace the most significant and beautiful aspects of our existing built forms and social lives.

Heritage is not just about protecting grand monuments along Spring or Macquarie streets. It is also about everyday aspects of our suburbs: the sturdy stone street kerb, the intricate iron and lacework terrace, the worker’s timber cottage, the subdivided Federation home, the industrial warehouse turned apartment block and, of course, uplifting gardens, parks and trees.

The precincts, places and features that are heritage-protected reflect decades of community efforts. Today, residents still must have a right to have a say in planning and to see their heritage protected. Conservation is enshrined in planning and heritage legislation and widely supported by the community.

Overcoming barriers to densifying heritage areas

Authorities too often say “no” to appropriate housing in heritage areas. It happens for many reasons, though so-called NIMBYism is a factor.

Many local councils have also had funding for conservation cut, while federal and state leadership in urban heritage is minimal.

Some traditional approaches to conservation do tend to prevent rather than promote reasonable change to heritage places. This is also unsustainable: adapting existing buildings is good for the environment.

Many authorities lack the knowledge and resources to ensure new housing is consistent with heritage. We need to equip them with the innovative heritage approaches and creative design outlook they need to make better decisions. Planning and design panels with wide-ranging skills, including heritage, could work with communities to increase housing supply and choice where people want to live.

It’s essential to address the housing crisisc. More people should be able to enter the housing market and enjoy living in established suburbs. We have the heritage, planning and design tools to achieve both objectives.

Heritage strategies for increasing housing supply can include subdivision, adaptive reuse and infill development in and around heritage areas. It’s about designing the best housing for the specific context. Heritage policies should be reviewed and updated across Australia to support these kinds of outcomes.

The urban heritage of Australia’s cities is what makes them among the world’s most liveable. Heritage should not be about blocking housing, but rather about asking “how can we build housing better?”. Let’s embrace our urban past to shape our urban future.

This article was originally published via The Conversation. Read it here.

Designing with Country: Why leading developers are integrating it into their projects

Exploring the true potential and vital considerations of integrating Indigenous voices in commercial spaces.

CBRE provides thoughtful, forward-looking insight into real estate trends, strategies and opportunities around the world. Talking to key industry experts, CBRE explores the concept of Designing with Country. As a business, CBRE is committed to implementing DE&I strategies while increasing cultural diversity and awareness

It was only a decade ago that the notion of sitting down with a community group to discuss the integration of Indigenous voices into commercial spaces would be a rarity.  

Times are changing though, and the concept of Designing with Country is fast becoming a vital strategic component of today’s design and development process. It’s a movement which is both progressive and delicate, while placed at the forefront of some of Australia’s most prominent property developers today. The crucial question is: why?  

CBRE spoke with Troy Casey, Director of Blaklash; Cliff Winby, Vice President, Developments, at Brookfield Properties; Vy Nguyen, Executive Director Precinct Development, Property and Development NSW; and Justin Woodcock, CBRE’s National Director, Development & Infrastructure, Australia, to uncover the intricacies, benefits and challenges of Designing with Country.  

Defining success in Designing with Country 

Designing with Country in the property landscape entails the development of projects that have been integrated with Indigenous voices at the core. Its goal is to bring a deeper cultural connection between the land, the development and its people. More specifically, it aims to restore the balance between Indigenous, colonial and migrant histories through bold and sustainable design. 

The key to this concept? Intricate insight and guidance provided by First Nations communities as part of the greater design and development process.  

“It’s a new space and so many communities are still trying to understand what this means for them, their people, and what can actually be achieved,” explains Troy Casey, whose Aboriginal design agency specialises in First Nations Placemaking. 

“There has been a very sudden boom in the demand for this kind of input from our communities, with so many varied projects with a wide range of complexities, that sometimes I’m not sure if community always experience the benefits of their input on the projects. 

“Holistically though, I do think that Designing with Country provides a critical avenue for our people to gain agency over the shaping of Country, the continuation of culture, and a way to lift up and empower their communities. It just has to be done right.” 

For Brookfield Properties’ Cliff Winby, success in Designing with Country is about creating a place that everybody feels welcome to and is comfortable being in. 

“When it’s approached in the right way you get a more authentic interpretation of the place because you’re paying attention not just to contemporary heritage but to the full history of the site and responding to its unique character,” says Winby. 

In a 2022 Building Talks podcast exploring the convergence of Indigenous design and the built environment, Aboriginal advocate, academic and architect, Jefa Greenaway, provided his thoughts on the trajectory of Designing with Country. 

“Even in major metropolises like Melbourne and Sydney there are still remnants of that relationality to country, and as I often say, you can concrete over country, but country still remains, the story still remains,” he said. 

Greenaway also explained how he sees architecture as a means of cultural expression in order to make the invisible visible by drawing on the wisdom and knowledge that comes with 67,000 years of Indigenous history. One of his roles has been to integrate Indigenous elements into the design degree at the University of Melbourne, drawing on ndigenous knowledge and perspectives. 

“Importantly, we’re starting to normalise that understanding that there is a deep history we can actually engage with, and I think there’s a level of cultural pride that is starting to emanate now.” 

Support from Government and private sector  

Designing with Country has become an important focus area of the NSW Government and subsequently the industry in the last few years, according to CBRE’s National Director, Development & Infrastructure, Australia, Justin Woodcock. 

This movement follows the Government Architect NSW (GANSW) release of the March 2020 Designing with Country discussion paper and December 2020 Connecting with Country Draft Framework.  

“The draft Framework was prepared by First Nations members of the NSW public service, First Nations communities, and the GANSW, and is intended to inform planning, design, and delivery of built environment projects in NSW,” Woodcock says.  

“The ambition of this draft Framework is that those involved in planning, designing, and delivering built environment projects in NSW will commit to helping support the health and wellbeing of Country by valuing, respecting and being guided by Aboriginal people.”  

Fundamentally, Designing with Country provides an important platform for Government bodies and the private sector to engage with Aboriginal stakeholders, including the procurement of Aboriginal businesses to enable not just a genuine understanding of the land, but also the important values it brings to placemaking.  

Property and Development NSW, the central property agency for the NSW Government, echoes a similar sentiment. 

“We are proud to co-create some of our state’s incredible precincts into exceptional destinations, in collaboration with Aboriginal knowledge holders, government partners, community and stakeholders,” says Vy Nguyen, Executive Director Precinct Development, Property and Development NSW. 

“Our work comes with an enormous responsibility to ensure these future places consider and protect Country and First Nations culture, and tell the important stories of our past, for future generations. 

“We are applying a Country-centred approach to design, planning and development across our work on the Macquarie Street East, Parramatta North, and Coffs Harbour Jetty Foreshore precincts.”  

CBRE’s Development & Infrastructure team is working closely with PDNSW on both the Macquarie Street East and Parramatta North projects.  

“CBRE is able to ensure that Connecting with Country is successfully embedded in projects by understanding the requirements of the draft Framework and by undertaking meaningful and detailed consultation with First Nations people, listening to insights, and inviting opportunities for co-design inputs,” explains Woodcock.  

“Specifically, reviewing the draft Framework as an opportunity to add value, and not a requirement is an important step, which creates an opportunity for First Nations voices to provide input and value to a project. 

“It is imperative to ensure leading practice principles for engagement with Aboriginal stakeholders." 

To maximise the success and quality of Designing with Country projects, leading practice principles should be considered. These include: 

• Respect and cultural safety 

• Elevating the voices of Traditional Custodians 

• Continued conversations  

• Develop culturally responsive approaches 

• Acknowledge and protect Aboriginal culture 

Ultimately, whether it’s Government or private sector-led, the end goal is shared.  

“We are transforming precincts today, preserving them for future generations, to create thriving arts and culture experiences that honour our rich Aboriginal and modern history,” says Nguyen.  

Benefits of Designing with Country 

Identifying the long-term metrics on Designing with Country is still limited given its infancy across Australia. Nonetheless, current public consensus is already extremely positive. 

One The Esplanade sits perched on the edge of Perth's Swan River. It is a landmark Brookfield Properties commercial office development, which boasts over 57,000 square-metres of premium grade office space, retail, dining and amenity, private gym, onsite childcare and premium end of trip facilities. More importantly, it showcases the developer’s prowess in Designing with Country.   

“We’ve already had lots of positive feedback from the Perth community on the building and ground plane,” says Winby.  

“As the building occupancy increases, we’ll start to see people engage differently with the spaces and spend time in areas like the building’s heart around the Oculus tree, on the seats under the heritage listed Moreton Bay Fig and exploring the stunning public art. 

“We’re very proud of our public art process which brought the stories relating to the site to life in the creation of two incredible sculptural artworks, namely ‘Within, without’ and ‘Goodjal ba Ngoonii Koorndaam’. 

In addition to the public art pieces, other elements resulting from consultation and collaboration with the Whadjuk Noongar people include the selection of the Tuart tree for the Oculus, and the installation of bespoke furniture referencing ceremonial dancing legs on the corner of The Esplanade and Barrack Street. 

“As a result of this journey, everybody involved in the project has become a lot more aware of the opportunities available through the design and development stages to achieve a richer response to a site's heritage and connection to Country. 

“We’ve also been fortunate to have worked closely and deepened our relationship with the Whadjuk Noongar people, which has allowed us to build a good framework for the next project,” Winby says. 

Challenges of Designing with Country 

Designing with Country demands careful consideration, planning and execution. While its challenges are evident, the final result is what makes it worthwhile for innovative developers.  

Winby highlights what developers need to consider:  

• Time required to resolve the design:  
  “You’ve got a contractor that needs to start ordering and building things on a timeframe to get it done by a certain date. And you need to find time and space to engage in an authentic way. That is an ongoing focus for us – I wouldn’t say it was a challenge for us because we were fortunate to be working with people who understood that context and were keen to engage. But this is something that care always needs to be taken with.”
   

• Developing positive and respectful relationships: 
   “It’s so important to develop a positive respectful relationship. There will be things that are sought-after or concepts that someone might put forward as what they want to see happen - and it unfortunately just can’t happen for cost or practical reasons. You will see that sort of challenge and need to accept that you will need to have constructive conversations about what can and can’t be achieved while working together to find a mutually acceptable outcome. For these conversations to be successful, they must be approached from a perspective of deep mutual respect founded on a positive relationship of wanting to achieve a great outcome.” 
  

• Involving the right people:  
  “The people involved are crucial. That’s where the box-checking approach won’t work. You’ve got to get the right people talking to each other who trust each other. If you lose trust, the project can go off the rails resulting in an outcome that’s not what you’re looking for. Making sure you have the right people to engage with will bring you safely through the journey.”    

Casey notes that some incredible outcomes have been achieved in true authentic partnership with community. 

“We are seeing our people’s culture and values expressed on Country, we are seeing a beautiful, shared education process when industry and community comes together to create meaningful outcomes. Those are the times we hang on to. 

“In other instances, the dramatic demand and pressure that is being put on community to work in this space with people who perhaps aren’t always in the right place themselves to be doing this kind of work can have some fairly negative impacts on our people.  

“The difficulty is that we are talking about a serious societal issue, one that requires a great deal of personal effort to self-educate and shift thinking, but being delivered through the demands and speed of development. Unfortunately, those two things don’t always pair up well; it depends on the team. 

“We see the need for education before involvement. There are a lot of Reconciliation Action Plans out there that don’t seem to stimulate the education and reflection we need to create a culturally safe industry. The will is there and there are many excellent people who want to do their part to make change, we just need to step back a little and learn as people before we start acting as professionals on projects.” 

Quality of Designing with Country 

Addressing the quality of Designing with Country is important as it is almost impossible to regulate in traditional ways. Each project is tailored according to its environment, respective people, surroundings and end goal.  

For Brookfield Properties, this meant developing their own framework called the Cultural Safety Plan which provides a degree of structure and integrates cultural safety into different parts of their projects. 

“Our framework covered every stage of the design and through the development to weave this concept of “cultural safety” into the development, of which Designing with Country might be considered a subset.  

“It covered a range of activities, from cultural awareness training and incorporation of key material in subcontractor site inductions to give them awareness about the heritage of the site, through to cleansing ceremonies and review of the landscape design to ensure it responded to its place” says Winby.   

“I think it’s difficult to legislate or regulate as each site needs to be assessed on its merits. All you can really do is have a framework and use this to work out how best to respond to the project you’re working on.” 

In building these deeper working relationships, Casey adds that developers and designers should conduct some independent research before leaning on communities to teach them. 

“We only make up 3% of the population, after all. Cultural load is a huge issue at the moment, so the importance of self-education is critical before creating relationships that unfortunately often are really only based on work. It's about people first, not professionals.  

“It’s all about turning up. In your spare time go to the talks, go to the community events, reach out and contribute without expectation of return to the many social efforts of our people that really make an impact, before expecting to come together on a project. 

“Of course, there is no one right way to do this, but as a whole we need to always come back to the understanding that it's about Country, culture, and community first. And as a society, take on this journey as people first. 

“Something big we talk about is, how many project teams that have worked with community, ring up, and say: ‘Hey Aunty, remember that project we did together? Well, it's finished. Would you like to catch up and take a walk out on site to see how it all turned out?’ 

“A very small thing that really humanises the whole process, reminds us that it's not just a transaction, but a relationship."

Future of Designing with Country 

Given the gradual rise in Designing with Country, what does its future look like across Australia’s broader development pipeline?  

“I’d like to think the momentum is shifting in the right direction,” says Winby.  

“I think it will become more mainstream and I hope this results in places that are more welcoming and reflect their location and heritage. Ultimately it comes down to those relationships being established and built up over time.” 

Casey says that it’s hasn’t been long since Indigenous people have had the opportunity to access high-quality education in the built environment.  

“Those of us with industry experience are far and wide between. But those numbers are steadily increasing. One day, we would love to see these projects led by Indigenous peoples as industry professionals, in partnership with community. Rather than needing non-Indigenous people to speak for us.  

“It all comes back to the self-determination of our people to care for Country. To embed culture and values from within the industry rather than as a touch point from the outside. If we can all come together to see this happen, the impact of the projects on our communities and our society as a whole could be incredible. Imagine in every project, every town, you can see our culture, you can feel Country in every brick. 

“That’s our hope for the future.” 

This article was originally published on CBRE. Read it here.

Australian recession Q&A: Why the worry? What's the risk? And what would it mean for investors?

Shane Oliver is the Head of Investment Strategy and Chief Economist, AMP. Shane joined AMP in 1984 and has extensive experience analysing economic and investment cycles and what current positioning means for the return potential for different asset classes.  

Key points

- The risk of recession globally and in Australia has increased with ongoing central bank rate hikes.

- Signs of faster wages growth has seen the RBA turn more hawkish. The risk of recession here is now around 50%.

- Recession would mean higher unemployment, less job security & a likely further leg down in shares & home prices.

- By Feb we may need a Taylor Swift lift to help “shake it off”!

- Share market volatility is bad news but the best approach for most investors is to stick to a long-term strategy.

Introduction

The past few weeks have seen lots of talk again about a recession - particularly in Australia. This has been a recurring theme over the last year or so but has intensified lately. But what's driving it? How serious is the risk of recession? And what would it mean for Australians and investors?

But first what is a recession?

A recession is generally defined as a contraction in the level of economic activity. In some countries it’s technically defined as two or more quarters in a row of falling economic activity as measured by GDP but this measure can have its failings, e.g. if GDP falls 1% in one quarter, rises 0.1% the next next and then falls 1% it wouldn’t meet the technical definition of a recession but most would agree that it is. So, some like the US adopt a wider definition based around a period of contraction as measured by GDP and a range of other economic indicators including industrial production, income and employment.

Because Australia has strong population growth there been a focus on “per capita recession” which is where the economy still grows but at a lower rate than the population so GDP per person goes backwards. This is arguably more relevant for individual living standards. GDP per capita has already contracted in the March quarter and most, including the RBA and the Government, are forecasting at least a per capita recession.

Why the concern now?

The concern about recession has been rising with central bank interest rate hikes. The rise in interest rates is aimed at slowing inflation by slowing demand and hence economic activity. It does this by:

• increasing debt servicing costs for households (particularly those with mortgages) and businesses with debt, which reduces spending power;

• raising the cost of future borrowing which slows down home building and business investment;

• lowering asset values – for say shares and property – which results in less spending as people feel poorer via the “wealth effect”; and

• by pushing the currency higher than otherwise making it cheaper to bring in imports and reducing demand for exports.

Because central banks never know when they have raised interest rates enough to control inflation they often go too far – pushing the economy into recession. This was the case prior to recessions in Australia in the early 1980s and 1990s and in the US in the early 2000s and 2008.

We have been off the view that easing global inflationary pressures – as evident in improving supply and falling price pressures in various business surveys, etc – would have enabled central banks to have stopped raising interest rates by now. But central banks have gone further than we thought and remain hawkish. This includes the RBA which following signs of increasing upside risks to wages growth – particularly the higher than expected increase in minimum and award wages at a time of low productivity growth – appears to have become more hawkish and be giving less weight to keeping the economy on an “even keel”.

Why all the fuss about faster wages growth?

Everyone wants to see their wages grow faster than inflation. But when wages are simply chasing inflation higher as we saw in the 1970s it can lead to a wage price spiral which perpetuates high inflation as companies raise prices to maintain profits in response to stronger wages. As a result the second round response to the initial spike in inflation of catch up wage growth risks entrenching high inflation. Hence the more aggressive approach by central banks to guard against this. The Bank of England has gone down this path & the RBA appears to be doing the same.

But unemployment is low & shares are up 10% plus from 2022 lows so how can there be a recession?

It's true the Australian economy has been remarkably resilient despite a 4%, or 400 basis points, rise in the official cash rate and a doubling or more in mortgage rates. The economy is still growing, the roads are congested, restaurants seem full, travel has surged and unemployment is just 3.6%. However, this provides little comfort.

• Interest rate hikes normally impact with a lag of up to 12 months as its takes time for rate hikes to be passed through to borrowers, for borrowers to cut spending and for companies to cut their workforces.

• This time around the lag is likely longer thanks to massive pandemic fiscal stimulus which left many households with much higher than normal savings balances, the release of pent-up demand with reopening, 40% of home borrowers at record low fixed mortgage rates (compared to a norm of 15%) and a highly competitive mortgage market that has blunted the flow through of rate hikes.

This lag was evident in the late 1980s and early 1990s. Despite the RBA progressively hiking rates to 18% over 1988 and 1989 the unemployment rate kept falling prompting many to argue the economy was impervious. But then in late 1989 and early 1990 the lagged impact of rate hikes hit and the economy went into deep recession with the RBA having to rapidly reverse course. It was a classic case of the economy being ok until it’s not!

Of course, things were different back then with household debt to income ratios being one third current levels and very high inflation expectations resulting in much higher interest rates - but the lags are still relevant.

The protection provided households by fixed rates is now ending with borrowers seeing rates reset to levels two or three times what they were and at some point the saving buffers and the reopening boost will have been exhausted. And we are now seeing increasing evidence rate hikes are biting with falling real retail sales, falling building approvals, slowing business investment, slowing GDP growth, more negative corporate commentary, rising insolvencies and indications of a slowing jobs market.

So what's the risk of recession?

We have already revised our Australian GDP growth forecast down to just 0.7% for this financial year (compared to the RBA’s forecast for growth of 1.4%). But as a result of ongoing rate hikes, we see the risk of recession starting around late this year as now very high at about 50%. Consumer spending is almost certain to start going backwards later this year as the 4% plus cash rate will push debt servicing costs into record territory as a share of household income and on the RBA’s analysis 15% of households with a variable rate mortgage (about 1 million people) will be cash flow negative by year end at a 3.75% cash rate & we are now well beyond this.

The US Leading Index - which is comprised of economic indicators like building approvals that normally lead the economic cycle - has already fallen to levels normally associated with recession. In Australia though the Westpac/Melbourne Institute’s Leading Index has fallen but is not yet decisively at levels associated with recession. Which partly explains why we have put the risk of recession at 50% as opposed to more.

What will recession mean for Australians?

Many Australians have had no experience of recession as the last real recession ended over 30 years ago. The pandemic slump in 2020 was due to a mandated shutdown and incomes were protected by programs like Job Keeper so it’s not much guide to any future recession. A recession normally sees higher unemployment – the early 1980s and 1990s recessions saw a roughly 5 percentage point increase, less job security, a contraction in living standards and low levels of confidence. Most will still keep their jobs but they would experience less job security and wages bargaining power and lower levels of confidence. However, recessions eventually also mean lower inflation which would help alleviate cost of living pressures. Recessions often also lead to lower levels of immigration and less household formation which could take pressure off rents and home prices although declining home building won’t help.

What would be the impact on shares?

Historically recessions in Australia and the US have tended to be associated with bear markets in shares, ie, 20% or more falls, as recessions drive a slump in company profits. The next chart shows the Australian share market and falls in it against US recessions. A modifying factor is that share markets are still 8% or so down from their 2021/early 2022 highs so the risk of recession is arguably partly still factored into markets which may limit the extent of falls if a recession does eventuate.

What would be the impact on residential property?

Australian home prices have rebounded from their lows as a severe supply shortfall has dominated rising rates. However, a recession could drive another leg down in home prices as buyers back of, higher rates and higher unemployment push up distressed selling and recession drives reduced household formation. CoreLogic data shows a 9% fall in capital city property prices in the early 1980s recession with a 25% fall in Sydney, and a 6% fall in the early 1990s recession with a 10% fall in Sydney.

What about interest rates?

Recessions invariably drive sharp falls in interest rates as the RBA will cut rates in response to falling inflation and rising unemployment. While we are allowing for two more 0.25% rate hikes from the RBA in the next few months, we expect it to cut rates four times next year.

Implications for investors

While times like these can be stressful, for superannuation members and most investors the best approach is to stick to an appropriate long term investment strategy to take advantage of the rising long-term trend in share markets given the difficulty in trying to time short term swings.

This article was originally published on the AMP website. Read it here.

Building in the same old ways won’t end the housing crisis. We need innovation to boost productivity

Mathew is a Professor of Architecture at Monash University. He led the establishment of Monash University’s Future Building Initiative – a team of interdisciplinary practitioners and researchers who aim to transform the traditional building industry.

He is also CEO of Building 4.0 CRC, an industry-led research initiative co-funded by the Australian Government. Working collaboratively, the consortium strives for innovative research outcomes that translate into commercial, technological and efficiency benefits for its industry partners, and improved environmental, safety and cost performance for the community.

Have we reached peak affordable-housing-debate in Australia? Or is it a case of that old mountaineering saying: the fog is thickest just before the summit?

As someone who has been involved in building innovation for the past decade, what strikes me about the current debate is not its height, but its flatness. By this I mean how something as complex as housing can be reduced to one or two issues of the moment. Is the key to ending our housing woes really just “supply”? And will the Albanese government’s new $A10 billion Housing Australia Future Fund (HAFF) solve that problem?

Yes, this flatness is inherent to politics, but if we don’t attempt to unflatten the problem we’ll be stuck in the very public game of housing affordability “Whac-A-Mole” for quite some time. It goes something like this: release more land … ease planning restrictions … end NIMBY-ism … rent freeze … build-to-rent … early access to super … negative gearing … prefab housing … developer greed … skills shortage … gentrification … supply-chain disruption … inclusionary zoning … capital gains tax reform … industrial action … and so on and so forth.

So much froth for so little beer. So how do we build the industry’s productivity and capacity? The answer is the same as it has been in every other sector: the building industry desperately needs to innovate.

But what about the new housing fund?

The federal government says its new fund will provide A$500 million a year to build much-needed social housing. The opposition says this will fuel inflation. The Greens are demanding more direct funding of housing (at first $5 billion a year, now reduced to $2.5 billion) and a rent freeze.

Is the new fund inflationary? Yes and no.

Unless the bill is coupled with measures that increase the industry’s productivity and capacity, it will be inflationary. The industry lacks the capacity to build as many dwellings as the market needs, or the extra 30,000 social and affordable homes the government says the fund will deliver in the first five years. Remember, property prices are just off an all-time high, with construction costs up by more than 50% over the past decade.

To meet our housing targets, we need to find new ways of building more with less.

Supply is only one piece of the puzzle

The problem with seeing housing provision solely as a matter of “supply” (read “funding”) is that this accounts for only one phase of the process. It takes more than dollars to deliver a building. We must address all the phases: development, design, construction, operation and, after all that, end of life.

If we don’t do that, we won’t solve the root problems. And we risk missing opportunities ripe for innovation.

Let’s consider some innovative ideas for each of the building phases.

Development

New business and ownership models are needed. These include:

• housing-as-a-service (HaaS) – the space between short-term rental and long-term hotels, which suits mobile or itinerant populations and which AirBnB is increasingly exploiting

• co-housing – residents band together to develop housing themselves or with help from an agent, such as Nightingale or others

• build-to-rent – instead of building to sell to residents or investors, housing is retained for the purpose of renting it out, with recent federal tax changes supporting this approach

• rent-to-buy – residents have the right to buy (progressively or outright) their rental housing

• shared equity schemes – a way for buyers to own a more “affordable” fraction of the home and get a foot in the door.

These alternative approaches will change the calculus of property development. Let’s not aim to centralise housing development. Rather, we should crowd-source it to as many organisations as possible.

A final area for innovation in the development phase is planning. We can use digital tools to make the planning system more transparent and efficient.

Design

Make houses more efficient. Australian houses are among the world’s largest even though households are shrinking. As the Swedish saying goes: “The cheapest square metre is the square metre you don’t build!”

Make houses more flexible and diverse. Housing could then accommodate different uses, such as home offices or sublettable units, and various family structures and sizes, including extended families.

Construction

Develop new building systems and supply chains. We need faster, cheaper and higher-quality ways of building.

In contrast to building on site from the ground up, prefabricated, modular or industrialised house-building happens in factories. These approaches could increase capacity, on top of traditional approaches.

More people, more people, more people: the industry needs a new generation with different skill sets.

Up entering Swedish and German house-building factories, it is clear these are more inclusive workplaces. A key benefit of industrialised building is it promotes greater workforce participation. These are the diverse and high-skill jobs of the future.

Operation

Improve building performance through better development, design and operation of housing. Occupants won’t be left with unaffordable “utility timebombs” with high running costs.

Make houses more durable and easy to maintain. Well-designed and well-built housing can be used for decades past current buildings’ “use-by” dates. Longer-lived buildings will help to plug the holes in the leaky bucket of housing provision.

End of life

An increased focus on decarbonisation and sustainable use of resources will enable new approaches to reusing and recycling building materials.

Re-using existing and obsolete buildings for new housing – adaptive re-use – is another way to provide more housing.

Where to from here?

Innovations like these could be applied tomorrow to help us do more with less.

A final challenge to government: as we prepare to spend billions on building housing across the country, is it too outlandish to imagine we could invest a mere 1% of those vast sums in innovation programs? Innovation can deliver the increases in building productivity and capacity that Australia so badly needs.

This article was originally published on The Conversation. Read it here.

THE FUTURE OF OUR PUBLIC HOUSING TOWERS

Instead of demolishing Melbourne’s ageing public housing towers, clever refurbishments could save millions of dollars and provide high-quality public housing

Chris Barnett is an architect with over 25 years experience working on collaborative design and sustainability leadership projects, with his work having won both architectural and wider building industry awards. Chris has sat on the Australian Institute of Architects National Sustainability Committee and represented the AIA on the Australian Sustainable Built Environment Council w Sustainable Housing Task Group.

Monolithic in scale and nature, Melbourne’s 47 public housing towers have become aging assets that present great challenges to the state government of Victoria. This has been amplified by Australia’s current housing affordability issues and 30 years of under investment in public and affordable housing.

These behemoths were designed in the 1950s in the internationalist modern architecture style as part of a bold public housing vision to redevelop inner slums of Melbourne.

Built throughout the 1960s, the towers have provided a backbone to Victoria’s public housing system for the past 60 years.

Born in an age when state governments built public housing directly, the towers were innovative in their prefabricated design – constructed like a pack of cards from concrete panels precast in a government facility at Holmesglen.

The towers have provided accommodation for thousands of families and integrated waves of new migrants into our suburbs over the years, but it’s undeniable that the monolithic design, uninsulated concrete walls and low maintenance of the buildings has led to a range of poor health and social outcomes.

The towers’ poor connectivity to surrounding communities, harsh and meagre communal areas, and drab pebble-crete façades now commonly stigmatise them as a symbol of our neglected public housing system.

The government has undertaken rolling foyer, hot water system and apartment interior upgrades over the years, but the towers have never been significantly upgraded over their now long life.

A 2018 Victorian parliamentary report found years of chronic under-investment.

The last public attempt to design a future for the towers was the ‘Tower Turnaround’ competition to rejuvenate a building in Footscray in 2007.

A prototype of an innovative ‘pod’ apartment extension designed by BKK Architects was built as an outcome of the competition, but the further retrofitting of the building or any further application of the approach did not proceed.

This year, architecture students at the Melbourne School of Design have taken up the challenge of imagining futures for Melbourne’s public housing towers in their final design thesis subject.

In the meantime, the Victorian Government’s Big Build strategy is taking a demolish-and-rebuild approach to updating our public housing, and the open grounds surrounding the towers are currently being filled by new medium-density public and affordable housing.

But with no coordinated process for the towers themselves, this strategy creates further equity issues by taking away the public open spaces designed to compensate the tower residents for the lack of private outdoor spaces like balconies.

With a depth of both social history and embodied energy (this is a calculation of all the energy that’s used to produce a material or product) in their pre-cast concrete structures, can these ageing buildings have their life extended, avoiding the need to re-house thousands of existing tenants, or is it time to pull them down?

DEMOLISHING THE TOWERS

New housing has the potential to provide better social amenity, healthier homes and lower energy bills for residents – and the removal of the monolithic towers from our wider urban landscapes is also likely to be considered a positive move by many.

However, demolishing the towers will involve moving and re-housing thousands of residents, either temporarily while sites are developed, or permanently if the sites are redeveloped at lower densities.

This will cause a huge upheaval to the lives of the people living there – especially the elderly and infirm.

It will also cost tens of millions of dollars per tower to temporarily rehouse these people while sites are redeveloped.

Demolishing such tall buildings will be a long, complex and disruptive process which I estimate will cost additional tens of millions of dollars per site.

Environmentally, demolishing the towers will have a huge carbon emission and a range of other impacts, including the need to contain asbestos elements in the demolition and trucking huge amounts of construction waste to landfill through our suburbs.

As we move into an era of active carbon emission accounting in our buildings, the embodied energy contained in the towers’ concrete structures is a public asset that we should do everything possible to extend the life of.

EXTENDING AND REFURBISHING THE TOWERS

While the towers are poorly insulated and difficult to alter structurally, there are options to rejuvenate them for another 60 years without needing to decant the residents – providing much greater value to our public housing system.

Interestingly, the apartments in the towers are now considered relatively large by private market standards, with views developers would drool over.

If refurbishments could update and expand the poorly designed and maintained communal areas of the towers and provide some level of private or communal outdoor space, there’s no reason these apartments could not become public housing that residents could take pride in.

The towers’ prefabricated construction does not allow the alteration of walls or any further weight loaded onto them.

However, the towers are designed with apartments on one side with solid or screened corridors on the other. This single-sided corridor design presents the opportunity to add new structures to the corridor sides of the towers.

These new structures could be built from the ground up, providing additional bracing to the existing towers rather than adding any load to them. Most importantly, this could be done without interfering with the apartments, and without the need for residents to move out of the towers.

Existing narrow corridors could be widened out into more generous and social communal spaces, with light wells and garden elements.

New floor areas built in and off these spaces could provide flexible communal workspaces, educational spaces, areas for service providers and even new apartments, which, if private sector, could help pay for the works.

The new areas could include outdoor spaces for residents at different levels, including on the roof, with both attractive landscaping and productive gardens.

We could also consider fully rejuvenating the tower façades by investing in private balconies or glazed winter-gardens on the other apartment façades.

While this would create more disturbance for residence, it would improve the thermal performance of the buildings and humanise the huge scale of the tower façades.

Extending and refurbishing the towers would have a much lower environmental impact than demolition. By using the embodied energy already in the concrete structures and avoiding the material use and emissions impacts of building new structures, these stalwarts of the Melbourne skyline could have a new lease of life.

As part of a research-based thesis studio, students at the Melbourne School of Design considered the futures of the towers and how they could be refurbished for a further 60 year life-span. You can see examples of their work.

This article originally appeared in The University of Melbourne Pursuit. Read it here.

Building activity produces 18% of emissions and a shocking 40% of our landfill waste. We must move to a circular economy – here’s how

Dr M. Reza Hosseini is a Senior Lecturer in Construction Management at Deakin University. He is also a research fellow of the Centre for Research in Assessment and Digital Learning (CRADLE). With a background in Civil Engineering, an MSc in Construction Engineering & Management, and a PhD in virtual design and construction, Dr Hosseini's expertise lies in digital engineering and circular construction. He appears in the top 2% of researchers in 2021 and has contributed significantly to the field, publishing around 240 papers and book chapters on various aspects of sustainable construction engineering.

Architecture, engineering and construction employ 1.2 million people in Australia and account for 9% of GDP. But our biggest services sector also produces roughly 40% of landfill waste and accounts for 18.1% of Australia’s carbon footprint. The sector must change its practices fast for Australia to meet its commitments to cut emissions under the Paris Agreement.

A circular economic model can help solve the environmental challenges created by our built environment – water, waste and power systems, transport infrastructure and the buildings we live and work in. A circular economy involves sharing, leasing, reusing, repairing, refurbishing and recycling materials and products for as long as possible.

Circular economy principles have gained recognition from all levels of government in Australia. But there’s a big gap between acknowledgement and action. Progress towards systemic change has been very limited.

A new report by university and industry experts lays out a roadmap to a circular economy. Those working in the sector reported the top three barriers as: a lack of incentives, a lack of specific regulations, and a lack of knowledge. The top three enablers were: research and development of enabling technologies, education of stakeholders, and evidence of the circular economy’s added value.

So what are the world leaders doing?

Extensive research for the report drew on real-world experiences, including a survey and interviews with stakeholders. The report offers practical recommendations to drive the transformation to a circular economy, with examples from global front-runners.

The first recommendation is to learn from these nations. Most are in Europe.

A leading example is the Netherlands’ “Cirkelstad”. This national platform connects key players in the transition to a circular economy in major cities. It provides a database of exemplary projects, research and policies, as well as training and advice.

Cirkelstad highlights the importance of broad collaboration, including research organisations. One outcome is the City Deal initiative. It has brought together more than 100 stakeholders with the shared goal of making circular construction the norm. They include government bodies, contractors, housing associations, clients, networks, interest groups and knowledge institutions.

We rarely see such collaboration in Australia. Connections between government, research and industry practices have been weak. Our universities compete fiercely.

In Denmark and Sweden, rigorous regulations have been effective in promoting circular practices. Denmark has incentives for the use of secondary materials such as recycled brick. It also promotes designs that make buildings easy to disassemble.

In Sweden, contractors must give priority to using secondary materials in public projects. Suppliers are evaluated based on their environmental impacts

In Canada, Toronto is notable for its proactive approach. Measures include a cap on upfront carbon emissions for all new city-owned buildings.

Test beds and pilot projects have proven effective, too. A good example is the UK’s Waste House.

Waste House was built using more than 85% waste material from households and construction sites. Yet it’s a top-rated low-energy building. The project is an inspiration for architects and builders to challenge conventional construction methods and embrace circular practices.

Much of the focus of Finland’s circular economy initiatives is on construction and urban planning. Various policy tools and incentives encourage the use of recycled or renewable materials in construction. The renovation of Laakso hospital in Helsinki is a notable example.

Strategic zoning of public spaces can also be used to bolster circular economy activities. An example is the repurposing of urban land for activities such as waste sorting.

How can Australia create a circular economy?

Australia has been slow to adopt such measures. There are voluntary schemes, such as Green Star, that include emission caps for buildings. However, Australia lacks specific, well-defined requirements to adopt circular economy practices across the built environment sector.

Our report’s recommendations include:

• develop metrics and targets to promote resource efficiency

• adopt measurable circular procurement practices for public projects

• provide incentives for circular practices

• establish technical codes and standards that foster the use of secondary products.

The report finds funding for collaborative projects is badly needed too. Regrettably, the Australian built environment is not seen as a research funding priority. But more funding is essential to foster the innovation needed to make the transition to a circular economy.

Innovation can help us reconcile the public demand for spacious homes with sustainable construction practices. We can achieve this through a mix of strategies:

• moving towards modular construction techniques

• creating incentives to adopt circular design principles

• making adaptive reuse of existing structures a priority

• designing multi-functional spaces that makes the most of resources.

Integrating circular economy principles into education and training at universities and schools can embed a culture of innovation. Equipping students with this knowledge and skills will enable the next generation to drive change in our built environment.

Currently, there are few Australian-based training programs that focus on the circular economy. And available courses and programs overseas are costly.

There is also a need to promote inclusivity in the built environment sector. Circular solutions must incorporate cultural considerations.

By embracing the above strategies, Australia can foster a harmonious balance between cultural values, environmental sustainability and efficient resource use.

Collectively, these initiatives will lay the foundation for a circular economy in the built environment sector. The growing need for housing and infrastructure underscores the urgency of achieving this goal in Australia. Ultimately, consumers, industry and the environment will all benefit.

This article originally appeared on The Conversation. Read it here.

Australian Real Estate Investment- Medium/Longer Term

Scott Keck is Chairman of Charter Keck Cramer, a leading Australian independent, strategic property consulting firm. Scott has over 50 years property valuation experience within the Melbourne market, having begun with the firm in 1968, becoming a Director in 1978, Managing Director in 1984 and Chairman in 2010. As an experienced independent practitioner Scott provides specialist strategic and mediation consulting, including an emphasis on land acquisition for major infrastructure projects.

Fundamental to the performance of the real estate markets will be the impact of progressive population growth and cultural change over the long term. Currently, Australia’s population of approximately 25 million is, according to various sources, about 78% Caucasian and 22% Asian, comprised predominantly of 1st to 3rd generations originating from China, Southeast Asia, India and Pakistan. It is projected this may progressively transition naturally to 30% Asian, 70% Caucasian over the next 40-50 years.

The longer-term economic prosperity and substance of Australia will depend on significant population growth, which is anticipated to be mainly sourced through immigration, predominantly from Asia. As Australia predictably moves towards a population of 45–50 million by 2075, the additional 20 to 25 million residents will, given current geopolitical and trade policies, as well as social and cultural initiatives, be from the broader Asian region, mainly India and China, representing up to 95% of future migration. By around 2075, through this continued process of ‘Asianisation’, Australia’s population will have then transitioned to at least a 60% Asian majority. Australia will then, in every sense, truly be part of Asia, and the cultural, commercial and community sense of being an Asian society will begin to envelope us much earlier.

As Australia’s population increases, the focus will be on the east coast, mainly New South Wales and especially Victoria, igniting population growth in Melbourne and regional areas. In the Australian context, it is noteworthy that Victoria is unusual, being a relatively small state but with the soon to be largest city, which is why it’s regional areas will continue to benefit more than in other states. Into the future, Victoria’s regional areas and townships will strongly benefit by responding to the economic heartbeat of Melbourne as it surges to a of possibly nine million over the next 30 years, and Victoria to 11 million. These growth estimates may likely prove to be conservative as global socio-economic and territorial challenges, especially in the closer Asian region, increasingly contrast Australia as a nation of safety, future prosperity and low sovereign risk.

Melbourne has the capacity to grow to meet its share of national population growth and other responsibilities, as do Victoria’s regional centres notably at Geelong, Ballarat, Bendigo, Shepparton, Albury, Wodonga, and elsewhere. Not only the regional cities, but also many smaller but well-located townships with functional road and rail infrastructure, will contribute to the solution for accommodating and sustaining Victoria’s growth. 

Residential supply in all forms, whether for ownership, private or institutional investment, or in response to rental demand including land subdivision, house/land packages, townhouses, apartments, build-to-rent (BTR) student accommodation, retirement, aged and health care, will be in high demand and therefore offer a depth of development opportunity and the conditions for strong capital growth. This demand will be generated not only due to immigration, but also within the existing population, due to generational changes in household formation and the ageing population. Aligned with this major residential expansion will be the need for retail, commercial and industrial accommodation servicing many new growth centres. For patient capital prepared to take a long-term view, now is the time to acquire development sites, significant land banks for future development, and to form appropriate local joint venture (JV) business arrangements and consultancy relationships.

Viewed from another perspective, the prospects for Australia, particularly Victoria, due to the medium to long-term impact of population growth, are likely to be greatly enhanced by a very significant external factor. Since the end of the Second World War, Asian investment has primarily focused on the growth of the region’s own various economies- Japan, Singapore, South Korea, Hong Kong etc. Over  the last 10 years, however, the sovereign risk across Asia has increased and many countries are now considered to be of higher investment risk due to concerning political and military regimes or corruption, weakening economies, population collapse, territorial challenges and geopolitical turmoil. In a period that is now strengthening, characterized by ever greater uncertainty and instability, it can be anticipated that a significant portion of Asian investment will shift towards much greater security, but in circumstances that will be familiar and comfortable. This shift is likely to favor Australia as it emerges as the NEW ASIA.

Victoria bites a $117 billion bullet, and begins the long march of land tax reform

Dr Isaac Gross is a lecturer in economics at Monash University.He has a DPhil and a MPhil from Oxford University in Economics. From 2011 to 2013 he worked as an economist for the Reserve Bank of Australia.

The Andrews government’s ninth budget is its toughest. The bill from Victoria’s COVID experience, as well as the state government’s ambitious infrastructure spending, has finally come due.

The pandemic has added more than $30 billion to the state’s total net debt, bringing the total to a whopping $117 billion. (New South Wales’ state debt, by comparison, is about $80 billion.)

Victoria’s floods in 2022 have added to the debt. But so, too, has the Andrews government’s borrowing for its $90 billion “Big Build”, encompassing projects from removing Melbourne’s level crossings, extending Melbourne’s underground rail network, and building a suburban rail loop.

The state’s debt load was manageable when interest rates were low. But with borrowing rates now almost 4% and rising, interest payments are swallowing increasing amounts of the government’s budget. Interest payments on the debt are expected to be $5.5 billion in the 2023-24 financial year, rising to $8 billion by 2026-27.

There are only two ways to fix this – reduce spending or increase taxes. Andrews and Treasurer Tim Pallas have chosen to do a bit of both, with a 10-year plan to pay down the $30 billion COVID debt.

Less infrastructure spending, more taxes

The Victorian government has already announced it will delay several infrastructure projects. The Melbourne Airport rail link and the Geelong rail upgrade have been put on ice due to the federal government’s ongoing review of infrastructure projects. If they’re delayed, as seems likely, they’ll lower the debt burden of the state.

This will be a shame for Melbourne’s frequent flyers, but is probably the right call. Infrastructure Australia says the construction sector is already at capacity on large infrastructure projects. This significantly increases the likelihood of cost and time blowouts.

Infrastructure Australia expects the (recently widened) Tullamarine Freeway won’t reach capacity for at least another decade, so delaying the rail link is probably the best course of action.

To help pay down the debt, a suite of tax hikes has been implemented, primarily rises in payroll tax (falling predominantly on large businesses) and land tax (which is largely paid by landlords).

The measures are expected to raise more than $8 billion over the next four years, although they’ll be put in place for a decade.

Reforming land tax

Beyond the immediate task of paying down debt, the Victorian government has taken on the task of land tax reform, proposing to eliminate stamp duty on all industrial and commercial land in favour of an annual land tax.

No changes affect residential land, at least for now. But this could change if the reform proves popular.

Land taxes are the most efficient, and hardest to dodge, form of taxation.

Taxes on labour, such as income tax, can discourage work. Taxes on company profits can discourage investment and lead businesses to set up shop elsewhere. Land cannot be moved, and taxing it does not discourage its use.

The biggest problem with replacing stamp duty with land tax is that it often takes a lot of time and money for a fair transition to occur. In the Australian Capital Territory, a transition that began in 2012 is taking 20 years. The Victorian government proposes doing it in 10 years, with further details to be released later this year.

The next transaction to occur after July 2024 will still attract stamp duty, but transitions after that initial one will be shifted to an annual land tax model.

Phasing out business insurance

The Andrews government also has a plan to phase out taxes on business insurance over the next 10 years.

This small, but highly inefficient tax has long been criticised by economists, as it’s punished businesses that seek to mitigate risk by buying public liability or professional indemnity. Removing it, albeit slowly over the next decade, will help the Victorian economy grow over the coming years.

Budgets are all about choices. The Victorian government has no easy choices.

Faced with a mountain of debt, it has outlined a plan for paying down the debt with a mix of tax hikes and spending cuts. The job remains far from complete, but this budget is a decent first step to get Victoria’s finances back on track.

This article originally appeared on the Monash Lens. Read it here.

Commercial property returns under threat

Shane Oliver is the Head of Investment Strategy and Chief Economist, AMP. Shane joined AMP in 1984 and has extensive experience analysing economic and investment cycles and what current positioning means for the return potential for different asset classes.  

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Key points:

• Australian unlisted commercial property returns have been very strong over the last two decades thanks largely to the “search for attractive yields” by investors.

• With the back up in bond yields, this driver is reversing leaving retail and particularly office property vulnerable to significant capital loss in the face of reduced space demand.

• Key to watch will be bond yields, whether the economy avoids recession and where “work from home” settles.

Introduction

Over the last 10 and 20 years, returns from Australian unlisted commercial property have averaged 9% pa. This in part reflected the search for decent income bearing investments by investors in response to falling interest rates & bond yields that pushed up property values faster than justified by rents. However, it’s now vulnerable from the rise in bond yields over the last two years and reduced space demand flowing from “work from home” for office property and online retail for retail property.

Commercial property and the investment cycle

Just as shares lead in the investment cycle, unlisted assets like commercial property, being more connected to the real economy, tend to lag. The next chart is a stylised version of the investment cycle – the thick grey line is the economic cycle. (Note that residential property has become more interest sensitive and now tends to move ahead of commercial property.)

Bonds do well in the economic downturn phase as interest rates fall and when inflation is still falling. Shares tend to lead the economic recovery as they respond first to easy money and as far-sighted investors sniff out recovery and continue doing well as profits rise before coming under pressure from eventual interest rate hikes & fears of a new downturn. Real assets tend to do relatively well later in the cycle as: it takes longer for easy money to flow into them; the valuation process results in a lag; & they tend to move more with current economic conditions which drives rents. This benefitted unlisted commercial property returns in 2021-22. However, the investment cycle is now turning against commercial property with interest rates up sharply and economic growth slowing. The slump last year and ongoing volatility in share markets has at least partly anticipated this with commercial property starting to follow with a lag.

A-REITs show the way…with a lot of noise!

This cyclical relationship can also be seen by comparing the returns from Australian Real Estate Investment Trusts (A-REITs) and directly held (ie, unlisted) non-residential property returns. The former are correlated with the share market. This makes them highly volatile but means they often provide a good lead for unlisted commercial property. Their weakness since January last year signals rougher times ahead for unlisted commercial property and returns have started to slow to reflect this.

The “search for yield”

Commercial property is arguably more vulnerable now because it benefitted from the decades long downtrend in interest rates and bond yields that may now have come to an end or be reversing. As interest rates and bond yields fell it drove a search by investors for decent income bearing investments – the “search for yield” - that pushed property values up faster than growth in rents and hence pushed property yields to record lows. The next chart shows yields for unlisted commercial property. With each 0.25% fall in property yields translating to a roughly 4% capital gain and with average commercial property yields having fallen from 7.3% to 4.89% between December 2009 to December 2019 this provided a huge boost to returns, averaging roughly 4.3% pa and pushing values nearly 50% higher over ten years. This is now starting to go in reverse.

Of course, while the decline in yields since the 1980s was big, unlisted non-residential property was not alone. In fact, while the grossed-up dividend yield from shares has been range bound over the last 40 years, yields on bonds, residential property and listed property have fallen more than unlisted commercial property yields. See the next chart. 10-year bond yields have fallen from well above commercial property yields in the 1980s to well below. And in the 1980s the rental yield on residential and commercial property was similar, but today the former is far lower.

The commercial property risk premium – is it enough?

This suggests that while unlisted commercial property is vulnerable to an ongoing back up in yields other assets are arguably even more vulnerable. But there is a catch as commercial property is facing an oversupply problem in office and retail whereas the other asset classes are not, eg, Australian housing is facing chronic shortages as immigration surges.

But first to get a better handle on the relative attractiveness of unlisted commercial property compared to bonds we calculate a property risk premium. Comparing the bond yield with the average property yield is not strictly correct as the former is a nominal yield while the latter is a real yield. So, a better comparison is to look at the risk premium offered by commercial property over bonds. The next chart shows a proxy for this.

It assumes that rental and capital growth will average 2.5% pa over time (ie, in line with targeted inflation) and adds this to the average unlisted non-residential property yield to give a guide to potential total returns. The 10-year bond yield has been subtracted to show a property risk premium. Despite the collapse in property yields in late 2020 it reached a record high of more than 6.7% thanks to plunging bond yields at the time below 1%. Since then, the rise in bond yields has seen the risk premium plunge to levels not seen since the 2000s, but at around 4% it’s still relatively high. But there are two threats here. The first is if bond yields continue to rise reversing the yield chasing investor flows that commercial property has benefitted from over many years. And even if bond yields don’t rise further there is a risk that the reduced property risk premium may not be enough to keep investors happy given the outlook for deteriorating leasing conditions ahead.

Work from home and space demand

Leasing conditions typically deteriorate when the economic cycle turns down as companies lay off workers & cut hiring, retail spending slows and economic activity slows generally impacting industrial property. This time around it could be made worse by structural considerations in the case of retail and particularly office property. Retail property has been adjusting for years to the rising proportion of activity which is transacted online. The share of retail sales online has gone from around 7% pre-pandemic to around 11% now and this is acting to constrain retail space demand and rents. While there has been a return to the office post the pandemic lockdowns, many office employees are averaging two days a week in the office with Mondays and Fridays often near deserted. There are huge benefits to working together physically around culture, collaboration, idea generation and learning from others but there are also benefits to working from home in terms of no wasted commute time, more focussed work, less damage to the environment, better family flexibility and life balance. Once the pandemic revealed these benefits, they can’t then be unseen. And cost focussed companies with hot desking, laptops and work anywhere IT have pushed their staff in that direction anyway. The ideal for most is probably somewhere in between the extremes at say 2-3 days a week in the office but a return to the pre-pandemic norm of 4-5 days is most unlikely. This means that many companies will likely give up space when their leases expire, as they accept that balanced work from home is here to stay and they use it as a way to save rental costs. Over time this could mean a 30-40% reduction in leased office space demand. Average Australian capital city office vacancy rates are at 15% - their highest since the mid-1990s. But because this measures leased space, significant upside is possible if companies bite the bullet and cut leasing requirements. And rising vacancy rates mean lower office rents and falling values.

Return outlook and what to watch?

The combination of the back up in bond yields resulting in a stalling if not reversal of “search for yield” demand for commercial property, slowing economic activity and structural threats to office and retail space demand leaves unlisted commercial property at risk of significant capital loss (15% plus) ahead. Industrial property has benefitted more from the plunge in bond yields but not does face the same structural threats to space demand as office and retail do so is better placed.

This risks a flow on to banks. Particularly in the US where commercial property loans make up about 40% of smaller banks lending and 13% of bigger banks lending at a time when property owners will be finding it harder to borrow with recent banking stress. In Australia, commercial property loans are only 6% of bank assets and lending is far more prudent suggesting less risk of a re-run of the damage to banks seen in the early 1990s property collapse. Key to watch will be bond yields, whether the economy avoids recession and where “work from home” settles.

If you would like to listen to this as a podcast, listen here.

This article originally appeared on the AMP insights hub. Read it here.

Despairing about climate change? These 4 charts on the unstoppable growth of solar may change your mind

Andrew Blakers is Professor of Engineering at the Australian National University.He was a Humboldt Fellow and has held Australian Research Council QEII and Senior Research Fellowships. He has published approximately 300 papers and patents. His research interests are in the areas of silicon photovoltaic solar cells and solar energy systems. He has extensive experience with basic and applied research and was a leader of the team that developed PERC silicon solar cell technology, which currently has approximately 30% of the worldwide solar market and cumulative module sales of around $30 billion (mid-2018).

Last year, the world built more new solar capacity than every other power source combined.

Solar is now growing much faster than any other energy technology in history. How fast? Fast enough to completely displace fossil fuels from the entire global economy before 2050.

The rise and rise of cheap solar is our best hope for rapidly mitigating climate change.

Total solar capacity tipped over 1 terawatt (1,000 gigawatts) for the first time last year. The sector is growing at around 20% a year. If this continues, we’ll hit 6 terawatts around 2031. In capacity terms, that would be larger than the combined total of coal, gas, nuclear and hydro.

Fewer and fewer new fossil fuel power stations are now being built. As the rest of the global fleet age, most will retire by mid-century.

Australia is finding the path

It might surprise you to learn that Australia is a global renewable energy pathfinder. Most solar panels use Australian-developed PERC technology, for instance.

All the leading countries for per capita solar and wind generation are in Europe – except Australia. In Australia, 99% of new generation capacity is now solar and wind because it is cheap.

But unlike European countries, Australia cannot share electricity across national boundaries.

Instead, we have to cope with rapidly increasing levels of solar and wind by sharing it across state boundaries. This is proving to be relatively straightforward. Solar and wind have reached a share of 31% of the national electricity market, while the grid remains stable.

Already, three states or territories are at very high penetration of renewables. The ACT has built or bought enough renewables to cover 100% of its use. Tasmania, too, is at 100% renewable power, thanks to hydro and wind, and is aiming to double this to export to other states. And South Australia will soon become the world’s first gigawatt-scale grid to run on renewables. Currently, it’s sourcing around 70% of its power from solar and wind.

This matters because of Australia’s location. Like 80% of the world’s population, we live at low to moderate latitudes where there is plentiful sunshine, even in winter. That means the methods we pioneer or test can be readily adopted by nearly everyone else.

Where will the era of ubiquitous solar take us?

Solar capacity has been growing at 20% a year for decades.

Elimination of fossil fuels from the global economy is straightforward: electrify everything using clean electricity from solar and wind. This includes:

• electric vehicles replacing conventional vehicles

• electric heat pumps replacing gas space and water heaters in homes and businesses

• electric furnaces replacing gas burners in factories

• electrolysis of water producing green hydrogen for the chemical industry, allowing for clean production of ammonia, metals, plastics and synthetic aviation fuel.

To run our homes, industries and vehicles with electricity, we’ll need to double electricity production. Why not more? Because electricity is usually much more efficient at producing an energy outcome. For example, 85% of the petrol you put into your car is wasted as heat.

In countries with a significant chemical industry, electricity production might need to triple.

If these trends continue, by mid-century we will be in a very different – and better –  energy world.

Many developing countries – including population giants such as Indonesia, India, China and Nigeria – could catch up with Europe or Australia for per capita energy consumption. Given electricity consumption is strongly correlated with affluence, access to cheap electricity will be a major boon for many nations.

But is it possible?

By 2050, Earth will have a population of about 10 billion people. To supply everyone with enough electricity to live a good life, we’ll need about 200 billion megawatt-hours per year (equal to 200,000 terawatt-hours per year).

Let’s assume that solar does the heavy lifting for decarbonisation, completing two-thirds of the task with the remaining one-third left to wind, hydro and everything else put together. Is it possible?

Yes. If sustained, solar’s growth rate of 20% per year is easily fast enough to reach 80 terawatts of installed capacity in 2050 – enough to provide 130,000 terawatt-hours per year and (with help from wind) to entirely decarbonise an affluent world.

That would see global electricity consumption reach 20 megawatt-hours per person per year – double Australia’s current consumption per person.

As well as eliminating most greenhouse emissions, we will also get rid of car exhausts, smokestacks, urban smog, coal mines, ash dumps, oil spills, oil-related warfare and gas fracking.

The main short-term bottlenecks are likely to be building enough transmission lines – and ensuring we have enough engineers and installers.

We have the space and the raw materials

Long term, there are practically no constraints on vast deployment of solar.

The sun will shine for billions more years. Raw materials for solar panels are abundant – silicon from sand and common metals like steel. There are no toxic metals or no critical materials like cobalt in them, and they are highly recyclable. Energy storage is now a solved problem.

Most countries have vastly more solar and wind resources than needed to be energy self-sufficient. This, in turn, will boost their resilience in the face of war, pandemics and the changing climate.

Densely populated regions without much free land such as Japan, Europe and the northeastern United States have enormous offshore wind resources, while Indonesia and west Africa have enormous offshore solar resources – picture solar farms floating on calm tropical seas.

We have plenty of space. Eighty terawatts of solar translates to 8 kilowatts per person. This is the size of a typical Australian rooftop solar system, which is usually shared by a family rather than an individual.

The required area of solar panel is about five square metres per kilowatt (40 square metres total for 8 kilowatts). Some of the panels will be on house roofs. Others will be on ground-mounted solar trackers and operated alongside agriculture. Some crops and grass like the partial shade given by panels. Other options include floating on lakes and seas.

For our energy intensive lives in Australia, we’ll need perhaps 15 kilowatts of solar and wind per person, which run reliably for 30 years and can then be dissembled and recycled.

In the 1950s, nuclear energy advocates talked of a future when energy was too cheap to meter. That didn’t happen with nuclear. But solar offers cheap, unlimited energy, available forever with minimal resource, environmental and social constraints.

This article originally appeared in The Conversation. Read it here.

THE STATE OF MENTAL HEALTH IN THE INFRASTRUCTURE CONSTRUCTION INDUSTRY

Long work hours, high-pressure project targets and fixed-time contracts contribute to the infrastructure industry being deemed at high-risk for mental ill-health. Supporting mental wellbeing is vital to the industry's continued success, writes Grant Fuller and Professor Luke Downey.

Professor Luke Downey

Grant Fuller

The construction industry is a significant driver of Australia’s economy. It is our third largest industry, behind only mining and finance, and produces around eight per cent of our Gross Domestic Product (GDP) in value-added terms. In the 2022 fiscal year, the total value of infrastructure engineering construction work in Australia amounted to more than $40 billion.

What is not necessarily considered in generating this economic benefit is the value of the mental wellbeing of the individuals responsible for delivering this core industry. But supporting their mental wellbeing is vital to its continued success. Unfortunately, the industry is deemed at high-risk for mental ill-health and suicide.

The factors behind this are undoubtedly multi-faceted and complex. But if we consider that a job in the construction industry requires employees to be present or available for six to seven days a week, engaging in long work hours to deliver complex projects, dealing with ever-changing demands of high-pressure project delivery targets, while on fixed-time contracts, it’s unsurprising that something must give.

In 2018, a survey conducted by Professor Luke Downey from Swinburne University confirmed the suspicions of many in the industry that the state of mental health within the infrastructure construction industry was not what it should be. Almost half of the 683 respondents to the survey met the criteria for burnout; 85 per cent of respondents reported suffering from moderate to high levels of stress, and unsurprisingly, 59 per cent of respondents reported being dissatisfied with their work-life balance.

These results were accompanied by significantly elevated levels of depression and anxiety, indicating that drastic change was needed to address the personal toll of working in this industry.

The Cost of Doing Nothing Report also demonstrates that urgent change is needed to address cultural issues within the industry, which cost the economy close to $8 billion annually due to workplace injuries, mental illness, suicide, long work hours and a lack of diversity.

Currently, Australian construction workers are six times more likely to die from suicide than from an accident at work, with young construction workers more than two times more likely to take their own lives than other young Australian men.

The Downey-Swinburne and The Cost of Doing Nothing reports identified modifiable aspects of work conditions, organisational factors, and the culture underpinning work within the industry as contributing factors.

In a series of focus groups conducted by the authors, the drivers for the concerning mental health data from the Downey-Swinburne report were examined in detail by industry leaders. Several key themes emerged, with demand for construction resourcing being pegged as a significant driver of reduced wellbeing. The leaders observed that workload and resourcing pressures had been intensified by the volume of work and the pipeline of large-scale infrastructure projects underway or in planning.

Industry leaders identified the procurement environment and competitive tendering strategies as contributing factors to various stressful work conditions experienced in project delivery. In the competitive construction environment, timelines for project delivery may not always be realistic or achievable – despite the confidence they are presented with in tendering documents.

The leaders emphasised that numerous factors can adversely impact delivery timelines and create conditions in which people are required to work harder and longer to satisfy project requirements.

In an industry where more than 60 per cent of employees report working more than 50 hours per week, work hours are the most consistent and potentially improvable factor identified as driving reduced wellness. The leaders identified long work hours as a critical risk factor for mental ill-health in the industry.

Leaders also argued that, although tight timelines result in people needing to work long hours, long working hours should not be regarded as an inevitable feature of project-based construction work. How this could be reasonably and fairly implemented across the industry given the existing procurement, tendering, and resourcing challenges was, and still is, overwhelmingly beyond any solution individuals and companies have applied since 2018.

But pilot programs such as The Integrated Approach to Wellness demonstrate what is possible when taking a preventative approach to mental health and wellbeing. WorkSafe’s WorkWell Mental Health Improvement Fund supported the Integrated Approach to Wellness, which focused on preventing mental injury and illness by building a positive culture and transforming leadership practices.

The program was piloted on McConnell Dowell’s Mordialloc Freeway Project and ran for approximately 12 months, with an initial focus on culture and leadership interventions and shifting in the latter part of the pilot to focus on embedding new behaviours across the project. The participating employees reported a 60 per cent improvement in ‘work/life balance’, a 41 per cent reduction in ‘burnout’ and an average decrease of 39 per cent in levels of ‘depression, stress and anxiety’.

In addition, initiatives such as Culture in Construction, Wellness in Infrastructure, and Roads Australia’s Fellowship programs continue to focus on moderators of mental health within infrastructure. This highlights that there’s a groundswell of committed individuals, clients, and organisations advocating for change and attempting to address these systemic issues for a happier, healthier future within the infrastructure construction industry.

If you or someone you know are feeling overwhelmed, phone Lifeline on 13 11 14. 

This article was originally posted on CEDA. Read it here.

3D printing promises to transform architecture forever – and create forms that blow today’s buildings out of the water

James Rose AIA is director of the Institute for Smart Structures and a distinguished Lecturer & assistant professor of the University of Tennessee College of Architecture and Design. James is an architect, educator & industrial designer with a keen interest in the intersection of material and process. His research/practice focus on sustainability, design/build education and the architectural implications of emerging technologies. He is the recipient of numerous awards & he has co- authored numerous papers.

In architecture, new materials rarely emerge.

For centuries, wood, masonry and concrete formed the basis for most structures on Earth.

In the 1880s, the adoption of the steel frame changed architecture forever. Steel allowed architects to design taller buildings with larger windows, giving rise to the skyscrapers that define city skylines today.

Since the industrial revolution, construction materials have been largely confined to a range of mass-produced elements. From steel beams to plywood panels, this standardized kit of parts has informed the design and construction of buildings for over 150 years.

That may soon change with advances in what’s called “large-scale additive manufacturing.” Not since the adoption of the steel frame has there been a development with as much potential to transform the way buildings are conceived and constructed.

Large-scale additive manufacturing, like desktop 3D printing, involves building objects one layer at a time. Whether it’s clay, concrete or plastic, the print material is extruded in a fluid state and hardens into its final form.

As director of the Institute for Smart Structures at the University of Tennessee, I’ve been fortunate to work on a series of projects that deploy this new technology.

While some roadblocks to the widespread adoption of this technology still exist, I can foresee a future in which buildings are built entirely from recycled materials or materials sourced on-site, with forms inspired by the geometries of nature.

Promising prototypes

Among these is the Trillium Pavilion, an open-air structure printed from recycled ABS polymer, a common plastic used in a wide range of consumer products.

The structure’s thin, double-curved surfaces were inspired by the petals of its namesake flower. The project was designed by students, printed by Loci Robotics and constructed on the University of Tennessee Research Park at Cherokee Farm in Knoxville.

Other recent examples of large-scale additive manufacturing include Tecla, a 450-square-foot (41.8-square-meter) prototype dwelling designed by Mario Cucinella Architects and printed in Massa Lombarda, a small town in Italy.

The architects printed Tecla out of clay sourced from a local river. The unique combination of this inexpensive material and radial geometry created an energy-efficient form of alternative housing.

Back in the U.S., the architecture firm Lake Flato partnered with the construction technology firm ICON to print concrete exterior walls for a home dubbed “House Zero” in Austin, Texas.

The 2,000-square-foot (185.8-square-meter) home demonstrates the speed and efficiency of 3D-printed concrete, and the structure displays a pleasing contrast between its curvilinear walls and its exposed timber frame.

The planning process

Large-scale additive manufacturing involves three knowledge areas: digital design, digital fabrication and material science.

To begin, architects create computer models of all the components that will be printed. These designers can then use software to test how the components will respond to structural forces and tweak the components accordingly. These tools can also help the designer figure out how to reduce the weight of components and automate certain design processes, such as smoothing complex geometric intersections, prior to printing.

A piece of software known as a slicer then translates the computer model into a set of instructions for the 3D printer.

You might assume 3D printers work at a relatively small scale – think cellphone cases and toothbrush holders.

But advances in 3D printing technology have allowed the hardware to scale up in a serious way. Sometimes the printing is done via what’s called a gantry-based system – a rectangular framework of sliding rails similar to a desktop 3D printer. Increasingly, robotic arms are used due to their ability to print in any orientation.

The printing site can also vary. Furnishings and smaller components can be printed in factories, while entire houses must be printed on-site.

A range of materials can be used for large-scale additive manufacturing. Concrete is a popular choice due to its familiarity and durability. Clay is an intriguing alternative because it can be harvested on-site – which is what the designers of Tecla did.

But plastics and polymers could have the broadest application. These materials are incredibly versatile, and they can be formulated in ways that meet a wide range of specific structural and aesthetic requirements. They can also be produced from recycled and organically derived materials.

Inspiration from nature

Because additive manufacturing builds layer by layer, using only the material and energy required to make a particular component, it’s a far more efficient building process than “subtractive methods,” which involve cutting away excess material – think milling a wood beam out of a tree.

Even common materials like concrete and plastics benefit from being 3D-printed, since there’s no need for additional formwork or molds.

Most construction materials today are mass-produced on assembly lines that are designed to produce the same components. While reducing cost, this process leaves little room for customization.

Since there is no need for tooling, forms or dies, large-scale additive manufacturing allows each part to be unique, with no time penalty for added complexity or customization.

Another interesting feature of large-scale additive manufacturing is the capability to produce complex components with internal voids. This may one day allow for walls to be printed with conduit or ductwork already in place.

In addition, research is taking place to explore the possibilities of multi-material 3D printing, a technique that could allow windows, insulation, structural reinforcement – even wiring – to be fully integrated into a single printed component.

One of the aspects of additive manufacturing that excites me most is the way in which building layer by layer, with a slowly hardening material, mirrors natural processes, like shell formation.

This opens up windows of opportunity, allowing designers to implement geometries that are difficult to produce using other construction methods, but are common in nature.

Structural frames inspired by the fine structure of bird bones could create lightweight lattices of tubes, with varying sizes reflecting the forces acting upon them. Façades that evoke the shapes of plant leaves might be designed to simultaneously shade the building and produce solar power.

Overcoming the learning curve

Despite the many positive aspects of large-scale additive manufacturing, there are a number of impediments to its wider adoption.

Perhaps the biggest to overcome is its novelty. There is an entire infrastructure built around traditional forms of construction like steel, concrete and wood, which include supply chains and building codes. In addition, the cost of digital fabrication hardware is relatively high, and the specific design skills needed to work with these new materials are not yet widely taught.

In order for 3D printing in architecture to become more widely adopted, it will need to find its niche. Similar to how word processing helped popularize desktop computers, I think it will be a specific application of large-scale additive manufacturing that will lead to its common use.

Perhaps it will be its ability to print highly efficient structural frames. I also already see its promise for creating unique sculptural façades that can be recycled and reprinted at the end of their useful life.

Either way, it seems likely that some combination of factors will ensure that future buildings will, in some part, be 3D-printed.

This article was originally published on The Conversation. Read it here.

Australia’s Growing Intergenerational Housing Wealth Divide: Trends And Policy Implications

Rachel Ong ViforJ is currently an Australian Research Council (ARC) Future Fellow and Professor at the School of Accounting, Economics and Finance. She is also Chair of the School's Research Committee and a member of CEDA's Council on Economic Policy.

Rachel was the recipient of the 2018 Economic Society of Australia Young Economist Award and the 2019 Professor Mike Berry Award for Excellence in Housing Research.

Australia’s intergenerational housing wealth gap has widened in recent years, with those fortunate enough to receive help from the ‘Bank of Mum and Dad’ having higher chances of becoming homeowners, writes Professor Rachel Ong ViforJ and Dr. Christopher Phelps from Curtin University.

Australia’s intergenerational housing wealth gap (HWG) has widened in recent years, with those fortunate enough to receive help from the ‘Bank of Mum and Dad’ having higher chances of becoming homeowners.

Although the housing wealth of older Australians has always exceeded that of younger Australians, as is to be expected given higher home-ownership rates in later life, this widening gap has important implications for housing policies in Australia. 

Wealth gap growing across several divides 

Estimates from the 1997-98 Australian Bureau of Statistics (ABS) Surveys of Income and Housing show that the primary home equity of older people (Australians in their 50s) was 161 per cent greater than for younger people (Australians in their 30s). This gap had widened to 234 per cent by 2017-18.

Housing wealth gaps don’t only exist across the age divide. As shown in Figure 1 below, the housing wealth of the income-rich was 94 per cent greater than the housing wealth of the income-poor in 1997-98. This had doubled to 191 per cent by 2017-18. The HWG between urban and regional areas also doubled from 46 per cent to 93 per cent, favouring those in cities. However, the age-based HWG remains much higher than those for income and geography. 

Figure 1 also shows another alarming divide between people who are both young and income-poor and people who are both older and income-rich. In 1997-98, the HWG between these two groups was a massive 532 per cent, favouring older income-rich income units. Over the next two decades, this had more than doubled to 1230 per cent. 

Figure 1: Housing wealth gaps (HWGs) in Australia, 1997-98 and 2017-18

A ‘leg up’ the housing ladder 

The gulf in homeownership between young and old is the main culprit behind the widening intergenerational HWG. The ability for young people to step on to the housing ladder is then central in diminishing this age divide, and this is being supported by the 'Bank of Mum and Dad' (BoMD). 

Estimates from the Household, Income and Labor Dynamics in Australia (HILDA) Survey show that those who receive a cash transfer or inheritance in excess of $5000 from the BoMD are more than twice as likely to enter into homeownership than those who do not receive assistance.

As shown in Figure 2, during 2001-2018, 4.5 per cent and 2.6 per cent of young non-owners received a parental cash transfer or inheritance respectively. Among these, 23 per cent became homeowners the following year. However, intergenerational transfers are not limited to direct cash transfers. Parents can also assist their children in non-cash ways. For example, 4.5 per cent of young non-owners lived independently but in rent-free dwellings provided by family or friends during 2001-2018. Among these, 26 per cent became owners the following year. These tenure transition percentages were much higher than those who received no parental assistance, whose chance of becoming homeowners the next year was only 10 per cent.

Living with one’s parents may assist transitions into ownership if it allows the young to save a deposit more quickly than in the private rental market. However, alarmingly, the percentage is extremely low for those living with non-owning parents, suggesting that those from disadvantaged backgrounds are likely to follow their parents in being left out of homeownership.

Figure 2: Intergenerational assistance for young non-owners aged 25-44 years, 2001-2018

What does this mean for Australia’s housing policies?

As life expectancies continue to lengthen, housing policy will need to be formulated through an intergenerational lens to meet the needs of co-existing generations. 

For instance, abolishing stamp duties and replacing them with a broad-based land tax will reduce the upfront cost of home purchases for both the old and the young. This will incentivise downsizing by older “empty nesters” and may free up larger family homes that meet the space needs of younger growing families. However, this needs to be accompanied by supply-side initiatives that increase housing choice for older downsizers in their local areas.

Private-rental sector reform will also need to become a priority as more people – old and young – become lifetime renters. Currently, Australia’s private rental market offers fewer tenant protections than countries such as Germany and the Netherlands, where these markets are more tightly regulated.

To prevent further fraying of Australia’s social and economic fabric, the national policy focus must widen beyond homeownership to promoting housing security and affordability across all forms of tenure and all generations. To achieve this, a comprehensive package of policy reforms is required. There is simply no single policy bullet available to solve this intergenerational challenge. 

References

Ong, R. (2017), Housing futures in Australia: an intergenerational perspective, in Committee for Economic Development of Australia (2017), Housing Australia, CEDA, Melbourne. 

Ong ViforJ, R., Clark, W. A. V., & Phelps, C. (2023). Intergenerational transfers and home ownership outcomes: Transmission channels and geographic differences, Population, Space and Place, 29, e2624. https://doi.org/10.1002/psp.2624

Ong ViforJ, R. & Phelps, C. (2023), The growing intergenerational housing wealth divide: Drivers and interactions in Australia, Housing, Theory and Society, https://doi.org/10.1080/14036096.2022.2161622

This article originally appeared on CEDA. Read it here.