MORE AUSTRALIAN ADULT CHILDREN ARE LIVING WITH THEIR PARENTS LONGER

Australian parents are waiting longer for an empty nest as their adult children are living under the same roof for longer, finds the annual HILDA survey

By Sarah Marinos, University of Melbourne

Australia’s young adults are putting their traditional steps towards adulthood on hold – spending more time living in the parental home.

In fact, just over half of young men (54 per cent) and 47 per cent of young women aged 18 to 29 years old are still living under the same roof as their parents.

There are a number of factors preventing young Australians from gaining their first foothold on the property ladder – many young Aussies are taking longer to find their feet in the workforce, incomes are falling and cost-of-living is going up.

The latest Household, Income and Labour Dynamics in Australia (HILDA) Survey finds this ‘seismic shift’ in the nature of Australian households that began in the early 2000s is continuing, says Professor Roger Wilkins, Deputy Director of the Melbourne Institute: Applied Economic & Social Research and HILDA Survey Co-Director.

“The social and economic forces that have driven an increase in the number of young adults living with their parents are still present,” he says.

“We’ve seen a rise in higher education participation, declining full-time employment opportunities for young people, a rising cost in housing, and a trend towards later marriage and family formation.

“The traditional markers of adulthood are happening later in life now.”

The HILDA Survey follows the lives of more than 17,000 Australians each year, over the course of their lifetime, collecting information on many aspects of life in Australia, including household and family relationships, income and employment, and health and education.

A NARROWING GAP

The latest HILDA data was collected in 2021 and found a slight bump in the number of 26- to 29-year-olds living with parents during the first year of the COVID-19 pandemic.

This was mostly due to fewer Australians in that age group deciding to leave home.

The data also shows that the gap between the number of young men and women living out of the parental home is narrowing. In 2001, 47 per cent of men and 36 per cent of women aged 18 to 29 years lived with their parents.

In 2021, that 11 per cent difference narrowed to eight per cent.

HILDA finds men in Victoria, South Australia and New South Wales are more likely to live with their parents than men in other states and territories. Meanwhile, women in Victoria, Queensland and South Australia are less likely to live with their parents – although the reasons for these patterns aren’t clear.

Men employed full-time are less likely to live with their parents, but women who work part-time are more likely to live in the family home than unemployed women. Again, the reasons for these differences are not known.

WHO’S DOING THE HOUSEWORK?

What is the impact of a ‘full nest’, rather than an ‘empty nest’, on family dynamics?

Lyn Craig, Professor of Sociology and Social Policy, says, in short, this living situation generally means more housework for Mum.

“Compared to young adults living alone or in a share house, those living with parents are much less likely to do the same amount of domestic labour.

“Parents living with young adults do more housework. This living arrangement doesn’t turn into a flatmate situation, it typically creates more housework for Mum,” says Professor Craig.

MAYBE BABY…

More importantly, she highlights a more serious implication for young people who are living at home for longer – whether by choice or because they cannot afford to live independently.

“While we are living longer so we have time to stretch out and slow events and transitions during our life course – one thing we can’t really slow is fertility.

“So, there may be implications for young people being able to embark on the great adventure of parenthood,” says Professor Craig.

“Since the mid-20-teens, fertility has fallen below replacement in Australia for the first time and I think that has something to do with the price of housing and young people not being able to afford to establish an independent household away from parents.”

LIVING AT HOME… IN EUROPE

In some parts of the world, it is common for adult children to remain at home for longer.

A Eurostat report found that in the EU in 2021, males left the parental household at an average age of 27.4 years and females at 25.5 years.

Men left the parental home after the age of 30 in 11 EU countries — Croatia, Portugal, Slovakia, Bulgaria, Greece, Slovenia, Italy, Malta, Spain, Romania and Poland.

So is Australia heading the same way?

HAVING FUN WHILE THEY CAN

Professor Wilkins and Professor Craig believe the delay in young people taking traditional steps towards adulthood shouldn’t be viewed solely through a negative lens.

“Some young people would like to start their adulthood journey and to have their own home but Australia’s economic conditions aren’t allowing that.

“Policy action to make housing more affordable and to increase housing supply is a clear way to tackle that,” says Professor Wilkins.

“On the positive side, as a richer society with longer life expectancy, perhaps some young people are making a rational and conscious choice to delay getting into the hard yakka of life.

“They decide to enjoy themselves and have some fun while they are still young.

“As a whole, baby boomer parents are also a relatively wealthy cohort, so their capacity and preparedness to house their kids into adulthood has increased. Perhaps it’s not the imposition it once was on parents who were more constrained economically.”

SUBSIDISING AND STEPPING IN

Professor Craig says accommodating adult children at home is one way in which families today are providing financial support to children who are struggling to gain a financial foothold.

If the bank of mum-and-dad can’t stretch to providing a loan or deposit for a first home, then subsidising adult children to live at home at no or low cost while they try to establish themselves is something many parents are happy to do.

“The adaptation of families is impressive,” she says.

“Whatever families do and whatever situation they face, many of them step in and do good things for each other.

“Adult children staying at home longer may come with some strains, but it can also solve some problems.”

This article was originally published on the Pursuit. Read it here.

Mortgage and inflation pain to ease, but only slowly: how 31 top economists see 2024

A panel of 31 leading economists assembled by The Conversation sees no cut in interest rates before the middle of this year, and only a slight cut by December, enough to trim just $55 per month off the cost of servicing a $600,000 variable-rate mortgage.

The panel draws on the expertise of leading forecasters at 28 Australian universities, think tanks and financial institutions – among them economic modellers, former Treasury, International Monetary Fund and Reserve Bank officials, and a former member of the Reserve Bank board.

Its forecasts paint a picture of weak economic growth, stagnant consumer spending, and a continuing per-capita recession.

The average forecast is for the Reserve Bank to delay cutting its cash rate, keeping it near its present 4.35% until at least the middle of the year, and then cutting it to 4.2% by December 2024, 3.6% by December 2025 and 3.4% by December 2026.

The gentle descent would deliver only three interest rate cuts by the end of next year, cutting $274 from the monthly cost of servicing a $600,000 mortgage and leaving the cost around $1,100 higher than it was before rates began climbing.

Six of the experts surveyed expect the Reserve Bank to increase rates further in the first half of the year, while 20 expect no change and three expect a cut.

Former head of the NSW treasury Percy Allan said while the Reserve Bank would push up rates in the first half of the year to make sure inflation comes down, it would be forced to relent in the second half of the year as unemployment grows and the economy heads towards recession.

Warwick McKibbin, a former member of the Reserve Bank board, said the board would push up rates twice more in the first half of the year as insurance against inflation before leaving them on hold.

Former Reserve Bank of Australia chief economist Luci Ellis, who is now chief economist at Westpac, expects the first cut no sooner than September, believing the board will wait to see clear evidence of further falls in inflation and economic weakening before it moves.

Inflation to keep falling, but more gradually

Today’s Reserve Bank board meeting will consider an inflation rate that has come down faster than it expected, diving from 7.8% to 4.1% in the space of a year.

The newer more experimental monthly measure of inflation was just 3.4% in the year to December, only points away from the Reserve Bank’s target of 2–3%.

But the panel expects the descent to slow from here on, with the standard measure taking the rest of the year to fall from 4.1% to 3.5% and not getting below 3% until late 2025.

Economists Chris Richardson and Saul Eslake say while inflation will keep heading down, the decline might be slowed by supply chain pressures from the conflict in the Middle East and the boost to incomes from the tax cuts due in July.

Slower wage growth, higher unemployment

While the panel expects wages to grow faster than the consumer price index, it expects wages growth to slip from around 4% in 2023 to 3.8% in 2024 and 3.4% in 2025 as higher unemployment blunts workers’ bargaining power.

But the panel doesn’t expect much of an increase in unemployment. It expects the unemployment rate to climb from its present 3.9% (which is almost a long-term low) to 4.3% throughout 2024, and then to stay at about that level through 2025.

All but two of the panel expect the unemployment rate to remain below the range of 5–6% that was typical in the decade before COVID.

Economic modeller Janine Dixon said the “new normal” between 4% and 5% was likely to become permanent as workers embraced flexible arrangements that allow them to stay in jobs in a way they couldn’t before.

Cassandra Winzar, chief economist at the Committee for the Economic Development of Australia, said the government’s commitment to full employment was one of the things likely to keep unemployment low, along with Australia’s demographic transition as older workers leave the workforce.

Slower economic growth, per-capita recession

The panel expects very low economic growth of just 1.7% in 2024, climbing to 2.3% in 2025. Both are well below the 2.75% the treasury believes the economy is capable of.

All but one of the forecasts are for economic growth below the present population growth rate of 2.4%, suggesting that the panel expects population growth to exceed economic growth for the second year running, extending Australia’s so-called per capita recession.

The lacklustre forecasts raise the possibility of what is commonly defined as a “technical recession”, which is two consecutive quarters of negative economic somewhere within a year of mediocre growth.

Taken together, the forecasters assign a 20% probability to such a recession in the next two years, which is lower than in previous surveys.

But some of the individual estimates are high. Percy Allen and Stephen Anthony assign a 75% and 70% chance to such a recession, and Warren Hogan a 50% chance.

Hogan said when the economic growth figures for the present quarter get released, they are likely to show Australia is in such a recession at the moment.

The economy barely grew at all in the September quarter, expanding just 0.2% and was likely to have shrunk in the December quarter and to shrink further in this quarter.

The panel expects the US economy to grow by 2.1% in the year ahead in line with the International Monetary Fund forecast, and China’s economy to grow 5.4%, which is lower than the International Monetary Fund’s forecast.

Weaker spending, weak investment

The panel expects weak real household spending growth of just 1.2% in 2014, supported by an ultra-low household saving ratio of close to zero, down from a recent peak of 19% in September 2021.

Mala Raghavan of The University of Tasmania said previous gains in income, rising asset prices and accumulated savings were being overwhelmed by high inflation and rising interest rates.

Luci Ellis expected the squeeze to continue until tax and interest rate cuts in the second half of the year, accompanied by declining inflation.

The panel expects non-mining investment to grow by only 5.1% in the year ahead, down from 15%, and mining investment to grow by 10.2%, down from 22%.

Johnathan McMenamin from Barrenjoey said private and public investment had been responsible for the lion’s share of economic growth over the past year and was set to plateau and fade as a driver of growth.

Home prices to climb, but more slowly

The panel expects home price growth of 4.6% in Sydney during 2024 (down from 11.4% in 2024) and 3.1% in Melbourne, down from 3.9% in 2024.

ANZ economist Adam Boyton said decade-low building approvals and very strong population growth should keep demand for housing high, outweighing a drag on prices from high interest rates. While high interest rates have been restraining demand, they are likely to ease later in the year.

In other forecasts, the panel expects the Australian dollar to stay below US$0.70, closing the year at US$0.69, it expects the ASX 200 share market index to climb just 3% in 2024 after climbing 7.8% in 2023, and it expects a small budget surplus of A$3.8 billion in 2023-24, followed by a deficit of A$13 billion in 2024-25.

The budget surplus should be supported by a forecast iron ore price of US$114 per tonne in December 2024, down from the present US$130, but well up on the US$105 assumed in the government’s December budget update.

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

Australia is welcoming more migrants but they lack the skills to build more houses

By Brendan Coates and Trent Wiltshire

Australia has an acute shortage of housing. Renters across the country face steep rents rises and record-low vacancy rates.

At the same time, net overseas migration has surged to a record high of 518,100 in the past financial year as international students, working holiday-makers, and sponsored workers returned to Australia after our international borders reopened and fewer migrants departed.

The trouble is, very few migrants arriving in Australia come with the skills to build the extra homes we need.

Migrants are back but lack home building expertise

Migrants are less likely to work in construction than in most other industries. About 32% of Australian workers were foreign born, but only about 24% of workers in building and construction were born overseas.

And very few recent migrants work in construction. Migrants who arrived in Australia less than five years ago account for just 2.8% of the construction workforce, but account for 4.4% of all workers in Australia.

Most migrants who work in construction in Australia have been here for a long time. The largest migrant groups in construction are permanent skilled migrants (including their spouses and children), followed by New Zealand citizens (who can remain in Australia indefinitely on a temporary visa) and permanent family visa-holders (many of whom arrived in Australia long ago as the spouses of Australian citizens).

But among those migrant groups where we’re now seeing the biggest rebound in numbers – international students, international graduates and working holiday makers – relatively few work in construction. And just 0.5% of all construction workers are on a temporary skilled visa.

Changing this situation won’t be easy. After all, Australia rightly wants to attract highly skilled migrants who will make the biggest long-term contribution to the country.

That means selecting highly skilled migrants – mostly tertiary-trained professionals. However, the construction workforce is one of Australia’s least educated. Just 22% of Australia’s construction workforce hold a diploma-level qualification or higher – the least of any industry.

What the government should do

But there are steps the federal government can take to make Australia more attractive to skilled trades workers who can help build the homes we desperately need.

First, the government should make it easier for employers to sponsor skilled trades workers to get a visa.

It should abolish labour-market testing and reduce sponsorship fees for the new “Core Skills” temporary sponsored visa stream – for skilled workers earning between A$70,000 and A$135,000 a year – to encourage more skilled trades workers to migrate to Australia.

The introduction of labour-market testing and extra fees like the Skilling Australians Fund Levy are big reasons why the number of visas granted to temporary sponsored workers in construction has fallen from more than 9,000 in 2011-12 to just 4,021 in 2022-23.

The government should also extend its new streamlined, high-wage “Specialist Skills Pathway” sponsored visa stream to skilled trades workers.

That pathway will be offered to workers who earn at least $135,000 a year. Visas will be approved in a median time of just seven days. Yet skilled trades workers earning more than $135,000 won’t qualify for the new streamlined pathway.

Second, the government should streamline the skills and occupational licensing process for skilled trades workers.

Currently, overseas qualified tradespeople must have their skills assessed separately to qualify for a skilled visa and to be granted a licence by a state or territory to practise their trade once in Australia.

The recent Parkinson Migration Review showed how that process can cost more than $9,000 for some skilled trades and take up to 18 months.

The Albanese government should work with states and territories to better align these processes. And it should pursue greater mutual recognition of qualifications and licences with other countries for skilled trades, as recommended recently by the Productivity Commission.

Migration offers big benefits to Australia. But we’d benefit even more if it provided more of the skilled workers we need to help fix the housing shortage.

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

Role of BTS and BTR Apartments over the next decade

Richard Temlett is the National Executive Director of Research at Charter Keck Cramer and has become one of Australia’s leading housing market experts and thought leaders on the residential housing market across Australia. Richard believes that property development decisions need to be made using data and an evidence base. He specialises in providing forward looking, evidence-based research and insights that help inform developer and financier strategic property development decisions.

In response to the housing crisis in Australia, the Federal Government is seeking to deliver 1.2M new dwellings (240K p.a.) over the 5 years from 2024 through the National Housing Accord. In addition, and in separate announcements, the NSW Government is seeking to deliver 750,000 new dwellings (75K p.a.) over the next decade, whilst the Victorian Government is seeking to deliver 800,000 new dwellings (80K p.a.) also over the next decade.

Charter Keck Cramer has studied the new housing markets across Australia to understand how these housing targets compare to historical completions. At peak years of supply, Australia completed just under 220,000 dwellings (in FY2017). Whilst not shown in the chart below, NSW completed 73,000 dwellings (in FY2018) and Victoria completed 67,000 dwellings (in FY2017) respectively.

The targets set by both the Federal and State Governments, whilst admirable and certainly more reflective of the underlying demand for housing than past policy commitments, are considered ambitious and somewhat unrealistic having regard to both historic completions, the future supply pipeline and limitations resultant from the current state of the property market.

Quite simply, to achieve these targets, Australian policy makers will need to create the conditions for one of the largest home building cycles since the 1950s and 1960s. To facilitate rapid change, Governments at all levels will collectively need to employ numerous tools to establish preconditions that facilitate feasible delivery of these dwellings. This may include seeking innovative ideas from active overseas residential markets.

This insight seeks to start the conversation about the critical role that the Build to Sell (BTS) and emerging Build to Rent (BTR) apartment markets will need to play to achieve some of these housing aspirations.

How the BTS and BTR apartment markets work

In comparision to the established housing or the greenfield markets (house and land), the BTS apartment market is not well understood by many policy makers. The BTR apartment market is even less understood given it is still emerging as a residential asset class in Australia.

In a typical BTS project, a developer buys a site and then seeks to get planning approval. Once they have planning approval, and when the market conditions are suitable, they will launch the project for sale off the plan (OTP). Once they have enough OTP presales, they will obtain construction funding and build out the project.

In a typical BTR project, a developer buys a site and then seeks to get planning approval. Once they have planning approval, and when the market conditions are suitable, they will obtain construction funding and build out the project. Once completed, the developer or owner will rent out the dwellings and ultimately may look to sell the stabilised income producing asset after several years.

There are key points along the respective BTS and BTR development journey where risks are highest and where Government and policy makers can assist. Some of the key points are at the planning stage, the sales & marketing stage and now as a legacy of the COVID-19 pandemic, the construction stage.

The importance of investors to the BTS and BTR apartment markets

As mentioned above, the BTS apartment market still primarily relies on presales of apartments that are purchased OTP by either investors or owner-occupiers. Charter Keck Cramer’s analysis of the majority of the BTS apartment sub-markets illustrates that investors (foreign, local or interstate) are more likely to buy OTP than owner-occupiers. In many BTS apartment sub-markets across Australia, investors can account for up to three-quarters of all sales in a BTS apartment project, although the range is more typically 50% to 75% of purchasers. This means that in a typical BTS project, over half of all apartments will enter the private rental market whilst the remainder will be owner occupied.

BTR apartment projects, which are purpose-built projects for long-term rent, do not rely on presales of OTP apartments. These projects do need to be financially feasible on completion (from a revenue perspective) to a financier or investor before funding can be provided for the project to proceed. Justification is however required to highlight potential performance based on projected occupancy and returns.

At present, there are a number of major (and sometimes distinct) hurdles that are preventing investment into both the BTS and BTR apartment markets across Australian cities. It is essential for the Federal, State and Local Government decision makers to understand that if the investors are not present in either the BTS or BTR apartment markets, then projects will not get funded and will not get built. This means that no owner-occupiers get new dwellings, and no renters get rental accommodation, nor does the Government get any tax revenue. It’s a lose-lose scenario with devastating consequences for Australian cities.

How many BTS and BTR apartments need to be built each year?

The chart below shows that peak levels of BTS apartments (around 60,000 p.a.) were delivered across Australia over FY2017-FY2020. Policy makers must understand that these peak levels of supply were a function of various settings in place over FY2013-FY2017 that combined and manifested into a significant volume of apartments being constructed over FY2017-FY2020. These included critical settings such as OTP incentives to investors, lower and fewer taxes and charges on buyers and investors, first home buyer grants, greater amounts of investor lending by financiers and lower APRA servicing buffers. 

Based on the Federal and State Government targets, Charter Keck Cramer estimates that there will need to be at least 72,000 and closer to 78,000 BTS and BTR apartments completed in Australia each year to hit the various targets. This is a consistent level of supply which requires ongoing settings that are conducive to the feasibility of the BTS and BTR apartment markets and need to be tailored to meet both the housing cycle and overall economic cycle over the next decade.

Where do these BTS and BTR apartment projects need to be built?

There is a common misconception that all BTS apartments are located in large towers of 10+ levels and that the market is oversupplied. It is this misconception that is likely leading to a fear about density in Australian cities.

The charts below show the location of BTS apartment supply that was built over the last cycle (FY2013-FY2020) across various cities. We have broken this down by number of stories to illustrate the role that mid-rise projects (2-6 stories) have played in housing Australians.

It is very clear that the BTS apartment markets are active in different regions across different cities in Australia. It is also important to point out that mid-rise BTR apartment development (2-6 stories) accounted for 40% of the total supply across Australian cities. Much of this supply was built in the Inner and Middle regions of these cities often close to existing public transport nodes, employment hubs, retail facilities and lifestyle amenity.

The charts below highlight the location of BTS and BTR apartments with planning approvals within all major national cities. Charter Keck Cramer observes that there are 156,000 apartments that have planning approval (and have been de-risked from a planning perspective) across the various capital cities. Around 53,000 (34%) are in mid-rise projects (2-6 stories) already located in the Inner and Middle regions of the cities.

It is evident that there is an opportunity to create the settings conducive to facilitate the feasible delivery of a number of mid-rise apartment projects along key transport corridors close to amenity and infrastructure across all the cities. Importantly, apartments can be built in and around existing infrastructure and there will be less cost to Government to build when compared against the significantly higher infrastructure requirements in greenfield estates.

What needs to be done to get things moving?

It is our view that the impact of the pandemic on the housing market needs to be viewed through the same lens as was the impact of WW2. Policy makers at all levels of Government need to employ streamlined (and consistent & complementary) policy to assist with the feasible delivery of the supply of dwellings. No single tool, nor single level of Government, can by itself solve the housing crises.

The current various Federal and State housing announcements (whilst still light on key details) are a good start and begin to address the major issues relating to planning constraints, density and delays. These housing statements need to ensure that key current issues are also acknowledged and accounted for as they relate to the sales & marketing and construction stages of the majority of BTS and BTR apartment projects.

Government and APRA should also no longer fear investors. BTS apartment investors (foreign, local and interstate) must be brought back into the market via OTP stamp duty incentives, the removal of various taxes and charges, as well as the expansion of lending to investors. The substantial amount of foreign capital waiting to be invested into BTS and BTR across Australia must be enticed to proceed via further changes to the MIT, land tax, stamp duty as well as changes to GST.

The Australian housing market is at a very different point in the market cycle compared to 2017 (when there was the misinformed perception that the market was going into oversupply and that investors were crowding out owner-occupiers and driving up house prices). Furthermore, the banking sector is also well capitalised and the current APRA settings are arguably not reflective of the current risks in the housing market. APRA needs to remove the serviceability buffer for all borrowers and arguably allow the big banks to revert to various settings back to what they were with respect to investor lending in 2017.

Policy makers must appreciate that projects must be feasible to proceed. Neither developers nor their financiers will proceed with development if they are not able to meet their financial returns (reflective of the risk). With this in mind, it is also evident that all levels of Government need to go further and consider setting up an Apartment Viability Fund, provide rental subsidies for renters, support the construction industry through insolvency moratoriums, consider different types of construction methods such as modular construction and also entice more skilled workers into the country to build out these dwellings.

To conclude, the Government has a social and moral responsibility to facilitate the feasible supply of new dwellings and support the development industry. The supply of new BTS and BTR apartments, which will take 2-4 years to enter the market, will ultimately ease upward pressure on prices and rents, and also create jobs and tax revenue for the Government. Whilst some of these changes and policies will undoubtedly be unpopular with parts of the public, such change is required if the new dwelling targets are to be achieved.

This article was republished with the permission of Charter Keck Cramer.

How Australia’s prefab industry can help the housing crisis

Prefabrication is a practical solution to meet Victoria’s urgent housing needs by providing speedy and cost-efficient dwellings

By Dr Tharaka Gunawardena, University of Melbourne; Joyce Ferng, AECOM; Professor Tuan Ngo, University of Melbourne; Professor Shan Kumar, Swinburne University of Technology and Professor Priyan Mendis, University of Melbourne

The Victorian government’s recent announcement that it’s aiming to build 800,000 new houses in a decade might seem very ambitious, but it aims to address a very serious problem.

Housing supply in Australia has not kept up with demand. There’s a national shortfall of housing, increasing interest rates which are creating significant levels of mortgage stress, spiralling rental prices and the large number of people now priced out of the housing market.

All of these factors are contributing to what’s now being described as a national housing crisis.

But could prefabricated modular construction – which basically involves producing standardised components or the whole of a structure in an off-site factory, then assembling them on-site – become a key part of the solution.

Our team sat down to look at some of the key issues and how prefab might help.

DR THARAKA GUNAWARDENA: HOW COULD PREFAB HELP TACKLE AUSTRALIA’S HOUSING CRISIS?

Due to the diminishing availability of skilled labour and the demand for quicker construction, prefab is fast becoming a necessity more than an option.

While providing the means to build houses with speed but with a reduced labour load, prefab can offer many more advantages.

It can allow construction with minimum on-site congestion, waste generation and pollution by moving away from a labour-oriented onsite operation to a more process-oriented offsite manufacturing and assembly process.

The fact that prefab units, especially volumetric modules (where the whole structure including finishes and fittings are manufactured offsite as modules), can be removed from the main structure for future reuse, relocation or repurposing is also a boon. This reusability contributes significantly to prefab buildings having a much lower life cycle energy.

Construction can also start earlier because prefab panels or modules can be manufactured in the factory while the onsite preparation and foundations works get underway.

Financially, investors in housing projects can start generating revenue much earlier and the construction process itself is significantly less vulnerable to adverse weather, which means projects are finished faster.

At the same time, advanced mass customisation methods in design and manufacturing allows architecturally unique housing designs to be built while allowing for mass manufacturing.

In all areas, prefab is a more than capable option in building high-quality dwellings in a short period of time.

JOYCE FERNG: DOES AUSTRALIA’S PREFAB INDUSTRY HAVE THE CAPACITY TO MATCH THE GOVERNMENT’S HOUSING AMBITIONS?

Victoria’s housing goals align well with the PrefabAUS Prefabrication Industry Roadmap for 2023-2033, setting the stage for substantial economic benefits and cost savings associated with Smart Building, which aims to decrease construction time frames and waste while increasing quality, productivity and affordability.

The roadmap projects that Australia could earn an annual benefit of $AU9 billion by 2033, driven by the efficiency of Smart Building practices and prefabrication.

In the short term, prefabrication is a practical solution to meet Victoria’s pressing housing needs. Its ability to provide speedy and cost-efficient housing makes it a strong choice for the demands of both single dwellings and multi-residential buildings.

One piece of analysis points to Melbourne’s potential for 230,000 granny flats, a fast-track solution to housing shortages, thanks to prefabrication and the flexibility it offers in navigating town planning regulations.

This current surge in housing demand is a catalyst for elevating the prefab industry’s capacity and capabilities, from single dwellings to customised complex multi-residential buildings.

But there also is the critical need for strategic initiatives and robust partnerships to provide a foundation for this burgeoning industry – providing answers to housing affordability, climate resilience and carbon reduction through energy-efficient design.

PROFESSOR TUAN NGO: IS THE CURRENT REGULATORY FRAMEWORK SUPPORTIVE ENOUGH TO FAST TRACK THIS MANY HOUSES THIS FAST?

There is an urgent need for more comprehensive standards and guidelines for the design of prefabricated housing.

The importance of a reliable design approach for modular structures cannot be overstated, as an unsuitable design can significantly impact both project costs and timelines.

Currently, traditional ‘limit state design’ criteria, which includes stability, strength and serviceability, are the prevailing design practice for modular buildings. But the absence of comprehensive design guidelines for prefabricated modular buildings can mean these techniques, even when using innovative materials, fall short of expectations.

To ensure a safe and robust design, the design loads (like the dead weight of the structure, the weight of occupants and finishes, and other attachments or fittings) of any structure must take into account all potential circumstances. The design loads in modular construction are different from those in traditional construction because of their unique loading characteristics (owing to the transportation, lifting and handling stages of a prefab installation).

The construction process itself requires distinct infrastructure – demanding careful consideration of factors like geometric inaccuracies and installation procedures.

Offsite construction requires a highly detailed design at the early stages. This means the design requirements for modular buildings are significantly different from those of conventional structures.

But the current design of modular buildings mainly relies on a conventional design system and lacks the necessary design guidelines – so it’s imperative to establish and implement suitable design guidelines for modular prefabricated housing.

PROFESSOR SHAN KUMAR: IS PREFAB COST EFFECTIVE IN THE MEDIUM TO HIGH RISE AND MULTI-RESIDENTIAL MARKET?

If it’s well coordinated (by engineers, architects and prefab manufacturers), uses appropriate materials (timber, steel, concrete and other sustainable composites) and smartly executed by skilled prefab-modular contractors, then prefab construction will certainly deliver a cost effective, quality home on time.

More of these projects in the pipeline would encourage prefab contractors to invest in research and development, which in turn, would help achieve simple, smarter, innovative modern methods of construction.

To bring more building contractors into this prefab-modular construction space, there must be a mandatory skills requirement.

Government-initiated grants for research and development as well as low interest bank loans and tax credit initiatives for setting up prefab manufacturing factories would help create interest and reduce barriers to entry.

In terms of regulatory requirements, they must be made easy to make this smart construction a viable alternative to building affordable homes – not just in mid to high-rise apartments, but also in single dwellings and unit developments.

Upskilling the prefab-modular industry, which should start at the student undergraduate level, is the key to successfully getting the required number of affordable home projects completed on time.

PROFESSOR PRIYAN MENDIS: IN TERMS OF RESEARCH AND DEVELOPMENT, HAS THERE BEEN ENOUGH INVESTMENT TO ALLOW THESE KIND OF RAPID SOLUTIONS FOR THE HOUSING CRISIS?

There is a genuine need for more investment into the research and development of modern methods of construction, with prefab as the base.

This need is real – both from the construction industry and academia.

The University’s Centre for Advanced Manufacturing of Prefabricated Housing (CAMPH) which, for five years, worked in strong collaboration with industry pioneers continues to disseminate its knowledge and expertise long after its conclusion.

However, many more areas – like advanced and sustainable materials, factory automation, robotics, financing and value chain issues – still need further development.

Unfortunately, recent trends in government funding have seen less and less attention given to research and development in the construction sector.

The urgent need to solve the housing crisis demands a more significant commitment in government funding to ensure that higher quality housing solutions are provided for future Australian homeowners.

This article was originally published on The University of Melbourne’s Pursuit. Read it here.

Five ways retrofitting cities can help decarbonise our future

New construction is the source of massive amounts of carbon pollution. Retrofitting existing infrastructure is cleaner, and brings multiple benefits

By Tiana Stefanic, University of Melbourne

Australian cities are not equipped to deal with the shocks and stresses of the near future.

We are seeing high levels of carbon emission, high-cost energy consumption, and the effects of climate change on human and non-human dwellers of the built environment.

The construction industry is geared towards constructing new buildings, however retrofitting rather than demolishing existing buildings would drastically reduce the economic and environmental price we are currently paying.

Researchers Dr Judy Bush, Professor Sarah Bell and Enzo Lara-Hamilton of the Melbourne Centre for Cities at the University of Melbourne recently published an issues paper, ‘Retrofitting for Cities: Challenges and Opportunities in Australia’, to highlight challenges and outline potential solutions.

Here are five ways they say retrofitting provides a blueprint for the sustainable development of Australian cities.

1. SIGNIFICANTLY REDUCE CARBON EMISSIONS

Upgrading existing buildings and infrastructure reduces embodied and operational carbon emissions. Embodied carbon emissions are the pollution that occurs as a by-product of the materials used and the construction of a building, while operational emissions are those produced during the day-to-day running of the building.

The material footprint of Australia’s existing buildings is estimated at 3.8 billion tonnes of material which emitted 1804 million tonnes of CO₂, and consumed massive amounts of energy and water when built. By retrofitting existing structures according to new sustainability standards, future emissions of this scale can be avoided or drastically reduced.

The landmark retrofit project Quay Quarter Tower in Sydney used 98 per cent of the original structural walls and core and 65 per cent of the existing floor plates to save an estimated 12,000 tonnes of embodied carbon when compared to demolishing and re-building.

Researchers at the University of Melbourne’s Faculty of Architecture, Building and Planning have developed a suite of design tools that enable industry stakeholders to make better-informed choices about how their choice of materials can improve the environmental performance of construction projects.

2. INCREASE BIODIVERSITY AND IMPROVE DISASTER READINESS

Urban development has contributed to a significant loss of green space and biodiversity. This has resulted in a loss of urban habitat for plants and animals and a lack of shade and habitable public space for urban dwellers.

Increasing ‘green infrastructure’ in the form of green roofs and walls – alongside more trees, parks and gardens – can deliver multiple benefits including urban cooling and positive health outcomes.

The City of Melbourne’s Urban Forest Strategy lays out their 20-year plan to implement green infrastructure across the city. To help with this they have developed the Green Factor Tool, a web-based, open access green infrastructure tool for new developments.

As we face increasingly frequent and intense extreme weather events, it is vital that we adapt cities to be prepared for pandemics, heatwaves, storms, floods and drought.

Modifying existing infrastructure to mitigate the impact of these events aligns with the Climate Resilient Development framework proposed by the Intergovernmental Panel on Climate Change.

3. REDUCING COSTS AND INCREASING PRODUCTIVITY

Retrofitting can provide positive economic impacts through the creation of high-quality jobs, with less labour required and lower material costs for retrofit projects compared with new builds.

There is also an opportunity to significantly reduce building and infrastructure operational costs and to improve rental yield through increased quality of amenities leading to higher paying tenants.

Beyond Zero Emissions has released a Million Jobs Plan that shows how switching Australia to a low-carbon economy could provide 1,778,000 job years over 5 years. Retrofitting buildings and transport, land regeneration, and subsequent training account for 713,500 job years in this estimation.

4. IMPROVE OVERALL HEALTH OUTCOMES

Retrofitting houses creates healthier and more efficient homes. The Internal Environmental Quality (IEQ) of a building can be improved by increasing thermal comfort and changing the functional requirements of buildings for aging populations and people with disabilities.

The Australian Sustainable Built Environment Council (ASBEC) estimates that with the right policies and actions Australia’s building sector could deliver up to 28 per cent of Australia’s 2030 emissions reduction target, whilst creating healthier, more productive cities.

An example is the BREATH project, led by researchers at the Faculty of Engineering and Information Technology at the University of Melbourne, which considered the cost and energy use associated with ventilation systems in buildings as a measure to reduce COVID-19 transmission.

5. AVOIDING OBSOLESCENCE

A major benefit of retrofitting is avoiding the obsolescence of older buildings through their diminishing usefulness and performance. This can help us to retain historical buildings whilst improving environmental performance.

For example, adapting existing offices to accommodate flexible working can mitigate the financial impacts of changing work habits since the COVID-19 pandemic, retain historical buildings and improve environmental performance.

Making improvements to existing housing, rather than demolishing it, retains tenants who would otherwise be at risk of displacement due to urban renewal projects. The Ellebo Garden Room in Copenhagen is an award-winning example of how public housing can be upgraded to achieve modern standards of energy efficiency and comfort while maintaining communities.

By rapidly improving the sustainability of our existing buildings and infrastructure through retrofit strategies, we can achieve modern standards of efficiency and design. This will reduce the demand for resources and increase the resilience of Australian cities, improving the health and vitality of our communities.

Read more in the ‘Retrofitting for Cities: Challenges and Opportunities in Australia’ issues paper, prepared by the Melbourne Centre for Cities research hub.

This article was originally published on The University of Melbourne’s Pursuit. Read it here.

Regional housing shortages impacting essential workers

Liz Ritchie is the CEO of the Regional Australia Institute. Liz’s primary purpose at the RAI is to make a difference through providing leadership, engagement, information and connectivity. Hailing from country NSW, she understands the issues impacting regional Australia and has designed and executed programs across Australia to engage in economic and social issues affecting our regions. Liz served as CEDA’s state director in Western Australia between 2007 and 2016, and prior to that was CEDA’s Associate Director in Victoria and Tasmania.

We’ve got a situation in regional Australia where aged care providers are desperate for staff but are unable to recruit, in part due to housing shortages, writes Regional Australia Institute CEO Liz Ritchie. With regional vacancy rates only increasing slightly from one per cent to 1.5 per cent in the past year and monthly building approvals decreasing since August 2021, the data paints a stark picture and highlights how important collaboration between government, industry, business and community will be over the coming years.

During the past 12 months there has been one issue, almost above all others, that has dominated discussion. Whether it be in the hallowed halls of Parliament House in Canberra, standing on the sidelines of kids’ weekend sporting matches, or making its way onto agendas in business meetings, everyone has been talking about housing. Specifically, the lack of it in Australia right now.

For the regions, housing is perhaps one of the most foundational targets we need to move on. If we don’t have houses, we can’t attract more people to live in the regions, as highlighted in the Regionalisation Ambition 2032. If we don’t have more people living in the regions, who will fill the 91,400 jobs that are currently on offer in country Australia?

When you start to look at those vacancies at a more granular level, as the RAI did in its recent Big Skills Challenge report, you discover that two of the top three roles in most demand across regional Australia include medical practitioners and nurses, and carers and aides –  which equated to almost 12,000 jobs. This has a significant impact on many industries, particularly aged care.

Many people who live regionally often want to age regionally as well. It’s certainly the case for my parents. But it’s getting harder and harder to do that. We’ve got a situation in regional Australia where aged care providers are desperate for staff, but are unable to recruit, in part due to housing shortages.  

In one recent example I came across, a council in southern New South Wales is spending $500,000 to build accommodation for aged care workers it’s recruiting from overseas. The council says while it is a significant investment, it’s an essential one for the future of the local community.

Apollo Aged Care, which is working to revitalise aged care in regional communities, estimates for every bed a facility has, a house is also needed in that community for a staff member. In some of the communities Apollo operates, investigations are underway into purchasing an old motel to house staff, and in another where there is limited housing stock, the possibility of bringing in prefabricated homes is also being explored.

The Regionalisation Ambition sets a target to increase regional rental vacancy rates to above three per cent and ensure building approvals keep pace with population growth. A year into work on realising the Ambition and regional vacancy rates have increased nominally from one per cent to 1.5 per cent, but monthly building approvals have been decreasing since August 2021. The data paints a stark picture and highlights how important collaboration between government, industry, business and community will be over the coming years to address this wicked problem.

And that’s exactly what this is, a big, wicked problem, for if it was an easy fix Australia wouldn’t be in the position it finds itself now. Whilst we still have a long road ahead of us, the wheels are in motion.

The RAI welcomed the Federal Parliament’s recent passing of the enabling legislation for the Housing Australia Future Fund, to direct more than $10 billion towards the development of social and affordable housing. While we know there will be support for cash-constrained local governments to bring vacant land forward for development, we’re yet to see sufficient detail on the carve-outs for regional Australia. Housing – like health and education – is typically the domain of state governments and to this end, a condition of the Federal Government’s investment is that each state and territory also invest significantly.

Perhaps most exciting though, is the emergence of place-based, locally designed solutions, like the examples above.

In a keynote speech to the RAI National Summit in September, the Minister for Infrastructure, Transport, Regional Development Local Government, the Hon. Catherine King, spoke about the Rockhampton Ring Road project in central Queensland. The $1b initiative involves the construction of a new 18-kilometre section of the Bruce Highway. There will be the need to bring in a workforce to help build the road, but instead of setting up a temporary workers camp, houses will be built to accommodate workers and their families which will become future housing stock once the project is complete.

While in western Queensland, 22 councils have combined forces to tackle the housing issue in their part of Australia. The region has been hamstrung by ageing stock, a lack of a real-estate market and limits on borrowing with market failure as evidenced in the RAI’s Building the Good Life report, released in 2022. When the Diamantina Shire Council investigated building two townhouses to accommodate staff, it was quoted $940,000 for each townhouse. 

Unperturbed, the group is working on developing an organisation that would not only build the hundreds of houses the region needs, but also undertake maintenance works on existing council stock creating a pipeline of work for years to come. In the process, the organisation creates ongoing employment, education and training opportunities.  

Regional Australia still has a long way to go when it comes to managing the ongoing housing issues it’s facing, but when so many innovative solutions are coming from the regions themselves, I have faith we will tackle this, one new house at a time.

This was originally published on the Ceda website. Read it here.

‘Beauty’ in architecture can’t be enforced – but design competitions could help architects strive for it

Gethin Davison is an interdisciplinary researcher with a background in human geography, planning and urban design. His research focuses on the governance of design and the relationships between people and places. Gethin's work has been supported by a range of grants from the Australian Research Council and Australian Housing and Urban Research Institute. His work has been published in a wide variety of academic and non-academic outlets across the fields of urban studies, architecture, housing, urban design and planning. 

In 2021, the UK government made beauty an explicit objective of the English planning system. The Levelling Up and Regeneration Act, which received royal assent on October 26 2023, now requires local authorities to use design codes to deliver beauty in new developments.

Driving this emphasis on beauty (which is likely to be strengthened through further planned revisions to national planning policy) is a particularly knotty problem in England’s approach to housing. Everyone agrees that more housing is needed, but no one wants it to be built near them. The government’s hope – as the secretary of state for levelling up, housing and communities, Michael Gove, has put it – is that “communities will welcome development when it is beautiful”.

English towns and cities do desperately need attention. A 2019 national audit by advocacy group Place Alliance found that, in terms of design quality, new housing developments are overwhelmingly mediocre or poor. Office buildings converted under permitted development rights into housing have been characterised by the campaign group Town and Country Planning Association as creating “slums of the future”.

Meanwhile, outstanding heritage assets are being harmed by insensitive new development. And under-resourced local authorities are in no position to help because they have so little design expertise.

There is mounting evidence that buildings and places have a profound influence on public health and wellbeing. The British designer Thomas Heatherwick has gone so far as to claim that boring architecture has brought us “misery, alienation, sickness and violence”.

The government is right to expect more of development. However, it is debatable whether beauty should or realistically can be a planning objective. My research looks at how planning rules influence the design of the built environment. The best way “to build beautiful” – to reprise Gove’s leitmotif – might be to regulate design processes, rather than outcomes.

The problem with beauty

Design codes establish detailed requirements and rules for how sites or areas are developed. They exist to improve design standards. It is questionable, however, whether they can ensure a new development is beautiful.

This is because beauty is mutable, multifaceted, emotive and subjective. It defies definition, let alone physical prescription.

This is evident in the way national design guidance sidesteps the issue of how beauty should actually be achieved. Nowhere is “beauty” – or “beautiful development” – even defined.

This lack of clarity could result in “beauty” ending up being whatever certain planners or politicians say it is. Further, it risks sidelining more pressing matters, including sustainability and affordability.

There is evidence that even planning inspectors are opting not to use beauty in their decisions on planning applications. The question, then, is whether expecting local authorities to codify it in planning rules is realistic.

Regulating processes rather than outcomes

My colleagues and I have looked at how design is regulated internationally. In Sydney, Australia, rather than prescribing design outcomes, the approach is to regulate the design process. In other words, planning rules do not specify the exact types of buildings and spaces that must be developed on a site. Instead, they specify that a particular process must be used to find the right design.

Through the local planning system, it is a legal requirement in the City of Sydney that all major developments, public and private, start with a design competition. Developers of residential blocks, office buildings and even electrical substations cannot simply produce a design in-house, or hire their tried-and-tested architect to do the work.

Rather, they must invite at least three different firms to come up with a proposal. The brief these firms work to sets out the design objectives for the competition, the commercial and construction considerations, and the criteria against which entries will be assessed (such as compliance with the design brief or buildability). A panel of judges then picks the winner. It is a form of competitive procurement, not unlike those used for UK public contracts.

The focus in the Sydney planning system is not on achieving beauty but “design excellence” – a similarly multifaceted and intangible quality that defies simple definition. But by regulating the design process through competitions, Sydney’s planners can require that new developments achieve design excellence without needing to define or prescribe it. They simply establish some basic ground rules and challenge the competing architects to find the best way of delivering an excellent design.

Where other prescriptive approaches to planning often see developers doing the absolute minimum required to gain planning approval – resulting in poor-quality designs – this lack of prescription gives architects the freedom to think outside the box. The sheer fact that a competition generates multiple designs for a site ensures against ugliness. It makes it more likely that the best possible design will be found.

Design competitions have a reputation for being costly and unpredictable, but they don’t need to be. The UK government wants to better enable communities to take control of their housing future. Competitions are a proven way of engaging members of the public in debate about the relative merits of different designs for a site or area. There’s no reason why those members of the public couldn’t also be part of the judging process.

When it comes to our towns and cities, it’s hard to argue against beauty in the abstract. Who wouldn’t want to live in a beautiful home or neighbourhood?

But new development doesn’t happen in the abstract, it happens in real places. Beauty in the built environment matters, but enforcing it through design codes risks creating confusion and disillusionment. Mostly, it serves as a distraction away from more pressing priorities.

This article is republished from The Conversation. Read it here.

WHY WE NEED INVESTMENT IN SOCIAL INFRASTRUCTURE

Robust social infrastructure is essential for the good of our society and the growth of our economy, yet without adequate investment, rising demand from our ageing and growing population will not only cause drastic social and health problems but impact our future prosperity as well, writes Executive General Manager of Social Infrastructure at Australian Unity Ryan Banting.

Australia has a serious undersupply of the social infrastructure that is needed to support the wellbeing of our communities.

Whether it’s in aged care, student accommodation, childcare, specialist disability accommodation, retirement living or hospitals – we fall short on many fronts.

Robust social infrastructure is essential for the good of our society and the growth of our economy, yet without adequate investment, rising demand from our ageing and growing population will not only cause drastic social and health problems but impact our future prosperity as well.

It’s clear we need structural change to ensure we have the facilities and services that support the health of our communities. This will enable healthy economies where we all have the opportunity to thrive – now and into the future.

A unique opportunity for value-aligned private capital

There’s no magic formula for solving the infrastructure funding gap. The financing arrangements for such projects are varied and depend on the mix and relative cost of debt and equity financing. This, in turn, depends on the risk profile of different projects, along with the composition and risk appetite of prospective investors.

Government has had and will continue to play a vital role in financing and delivering critical health and aged care services. But it can’t do it alone.

Private investment, particularly from the pools of institutional money tied up in our capital markets, also has a critical role to play.

However, to realise the opportunity for private capital, investing in social infrastructure must be about more than a blank cheque and the hope of good returns.

Instead, it’s about getting the most out of value-aligned capital partnerships to ensure participants are incentivised to invest in long-term development and delivery relationships.

We see a solution that embraces and includes the important views and experience from industry, government, investors and capital partners, planners, operators, contractors, and health and medical research to face into the challenges ahead of us. Together, by taking a broader and longer-term view, we can get this sector into a shape that shifts the dial on community wellbeing and boosts Australia’s productivity.

But with opportunities come challenges 

The business case for investing in social infrastructure sector is compelling: strong macroeconomic drivers (education and childcare) and macro-demographic drivers (accommodation and living); bi-partisan government support; and favourable supply and demand dynamics. However, the sector is not without its challenges. For example:

• It generally takes longer to get investors up to speed in understanding these types of assets before they are able to commit capital – this of course will improve over time and we are already seeing positive shifts in awareness driven by the growing attention on healthcare infrastructure investing and, more recently, in the build-to-rent and student accommodation sectors;  

• Investors need to consider whether social infrastructure investments fall in the ‘infrastructure’ bucket, the ‘property’ bucket or the ‘alternatives’ bucket, depending on how they manage their capital; and

• Healthcare property, disability accommodation, childcare and aged care sectors are all facing long-term, protracted workforce shortages, while the demand for these services is only growing.

Successful, fit-for-purpose social infrastructure relies on workforce, technology, service delivery, good system design and the built-form.

In an investment portfolio, it doesn’t need to be a separate asset class, but rather a lens for robust due diligence and to help determine appropriate asset allocation and portfolio construction decisions for assets that are in high demand across our communities.

Measuring investment

While the investment proposition is strong, measuring the impact of social infrastructure investment extends beyond capital growth or the regular income it provides.

Investors are increasingly using risk-adjusted returns to make ‘initial screen’ investment decisions but more and more they are seeking measures of impact in deciding where to put their money.

When we invest in good, shared places and precincts we can build communities, we can increase wellbeing, we can build connections and we can build places that make people feel better.

It’s one of the reasons that Australian Unity developed our Community & Social Value framework. Established in 2021 with social impact specialists Social Ventures Australia, we can now measure the tangible social and community impacts our investments have, above and beyond straight financial returns.

The framework is based on three key impact areas:

• Lifelong wellness – ensures access to better healthcare through diverse services and initiatives, emphasising tailored care for improved health outcomes;

• Economic empowerment – focusing on building financial resilience, enabling individuals to fund their own wellbeing;

• Strong communities – fostering social innovation, bridging service gaps, and promoting living in place through investments in care, infrastructure, and specialist housing.

These areas underpin the measurement of unique social impact and inform Australian Unity’s investment in its business decisions, such as our investment in social infrastructure.

Addressing Australia’s social infrastructure needs is essential to support the growth of our economy and the future wellbeing of our communities. But getting it right relies on the coordination of workforce, technology, service delivery and system design.

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

Five bold expert opinions on property’s biggest issues today

From residential price growth to the state of construction costs, these are the expert opinions around today’s biggest property sector issues.

CBRE provides thoughtful, forward-looking insight into real estate trends, strategies and opportunities around the world.

While progress towards a post-pandemic recovery is tracking in the right direction for the economy, Australia’s real estate sector isn’t entirely out of the woods yet. That’s the latest diagnosis from CBRE’s senior experts in our final 2023 podcast episode of Talking Property: The House View Q4. 

Phil Rowland, Pacific Advisory Services CEO, and Sameer Chopra, Pacific Head of Research, identify the ongoing challenges in the real estate sector, particularly in the capital markets arena, as the cost of debt rises and sentiment wanes. An acute housing supply shortage in Australia is also continuing to dominate the media headlines. 

But with challenges also comes the opportunity to capitalise on specific areas of the market while forecasting the trajectory of certain sector trends.  

The five bold expert opinions on today’s most important property sector topics are: 

1. When will the fastest growth in residential prices occur over the next three years

2. When will office occupancy return to pre-pandemic levels 

3. When will construction costs ease  

4. The outlook for big refurbishment projects  

5. The outlook for alternative investments like purpose-built student accommodation  

Residential House Prices 

Chopra remains bullish on the local residential market and is steadfast in backing its strong outlook.   

"It's partly because of the robust jobs picture,” he says.  

“And our new controversial view here is that the fastest growth will be at the front end of the cycle and late cycle. I'm expecting 2023 and 2025 will be double-digit capital value growth, whereas 2024 will be more modest and sort of flat - low single digits. So, I'm calling it plus 10% this year, plus 5% next year and then plus 10% the year after.  

“You’ll get to about 25% price growth over three years and that reflects the higher cost of building new stock.” 

Chopra says this outlook is due to the expectation of supply shock in the early stage followed by interest rate relief in the late stage set to play out.  

“There is a 28% mismatch between construction costs for new stock and capital values, so we expect overall prices will need to increase by about that much through this cycle.”
    
For growth in apartment values specifically, Chopra’s research team have compiled the following forecasts: 

Office occupancy revival 

Office occupancy continues to be a controversial talking point amidst the global embracement of hybrid work models. Despite the resistance towards returning to the office full time for many, Chopra maintains the bold and controversial prediction that occupancy in Australia will be back to 2019 levels by the end of this year or early next year for CBD offices. 

“If you fly on a plane now, it feels just like the time before the pandemic. Kids who are going to university are talking about better experiences like their parents had, and retailers are talking about returning back to just in time supply chains. So why not the office environment?  

“I expect office occupancy will start to recover and it’s possible we will be talking less about office occupancy next year.” 

Rowland agrees, citing the company’s recent global Office Occupier Survey which found that over a third of firms still expect office utilisation to grow from current levels compared to less than 10% who expected it to fall from current levels.  

“I think that office normalisation is a good trajectory,” he says.  

“There is an an upside and portfolio optimisation could also lift that utilisation, but we also need to be cognisant of the opportunities that are offered from hybrid work as well.” 

Easing construction costs 

Construction costs were a major talking point as Australia began its wake from a pandemic-induced slumber. 

“We know construction cost growth roughly peaked in June 2022 when it was increasing at about 17%,” says Chopra. 

“And currently it's increasing, but at about 7% year-on-year. It's kind of halved in terms of its growth rate and my view is that we'll see flat growth by the year’s end.  

“The key here will be just what goes on with construction and labour wage pressure - whether it starts to ease as some of these residential projects get completed.”  

Rowland adds that due to the size of the infrastructure pipeline and the tightness in the labour market, he is still expecting Australia to reach mid to high single digits in construction cost growth. 

“I'm afraid this will continue to add challenges to the development pipeline, particularly in housing.”  

State of big refurbishment projects  

When it comes to refurbishment CapEx, it’s important to consider what’s being reflected in the current market landscape.  

“A number of our clients have articulated some very large pipelines of new projects. This includes refurbishments featuring net zero initiatives,” says Chopra.  

“These commitments were all made when debt was cheaper, construction was cheaper and valuations were higher.  

“I expect that we will probably see a major downshifting, unfortunately. Not because clients don't want to do this, but more because the economic climate does not let them do it.” 

Potential of alternatives and PBSA  

It’s not all bad news for the real estate sector. In the alternatives space, purpose-built student accommodation (PBSA) is looking like a very strong performer in Australia.   

Currently, there are more students looking for on-campus living than there are vacancies.

“It is very tight and stressful situation,” says Chopra.  

“There are around 1.6 million university students in Australia and currently we have one purpose-built student accommodation bed for every 16 students. So it's a deeply underpenetrated market.”  

Rowland echoes similar sentiments, stating that even with the supply coming through over the next three years, it still won’t be enough to alleviate the immense demand with the market continuing to remain very tight.   

There will also be a lot of dispersion in student rentals, according to Chopra.   

“A lot depends on the location and whether it's a new or recently built facility with some amazing amenities around safety, socialising and gyms.  

“I've seen everything from suites that are at $350 a week, up towards $800 a week. We have a lot of proprietary CBRE data and what it shows is that on average, student accommodation has rent growth of about 5.5% per annum.”  

Beyond the local appetite, Rowland explains that PBSA is also an asset class which has been favoured by the global investors.  

“Yields have been more resilient to interest rate changes than the more traditional sectors – but they are about 0.75% higher than build-to-rent.”  

Elsewhere in the alternative assets sector where Rowland is spending more time with clients includes the energy transition.  

“There's certainly a growing role for real estate investors to carve out the value of the hard assets like land and infrastructure from energy supply,” he says.  

“And this could be like what we experienced with telecom towers and healthcare, for example. It's a high growth business where we are dedicating more of our time and resources.”  

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

Stress levels in Australian workplaces among the highest as we battle constant interruptions and irritating colleagues

Libby Sander, PhD, Master HRM, Bachelor of Arts (Japanese), Bachelor of Business, is an Assistant Professor in the Business School at Bond University. Libby is an agenda contributor at the World Economic Forum and her articles have appeared in US Newsweek, the BBC, the World Economic Forum, The Guardian, Huffington Post, Fast Company, Sydney Morning Herald, The Age, and on SBS, amongst others.

As more companies mandate the amount of time to be spent in the office, employee stress levels are on the rise.

A recent study found 34% of employees reported lower mental health levels compared to six months ago. Alarmingly, 37% also reported decreased levels of engagement and sense of belonging.

So why might the return to the office be increasing employee stress? Research indicates a combination of commuting, cost of living pressures, noisy open-plan offices, work culture, interruptions, decreased autonomy and coworker relations are contributing to workers feeling more stressed.

In Gallup’s State of the Global Workplace 2023 Report, the US and Canada region along with East Asia tied for the highest level of stress at 52%, and Australia and New Zealand had the second-highest rate at 47%. These results maintain the record high set in 2021.

And an analysis of 382,000 employee exit interviews found reports of employee burnout have almost doubled in the past year.

The return to the office appears to be a contributing factor with 52% of employees preferring flexible/hybrid work to minimise mental health concerns.

So how might returning to the office be making employees more stressed?

Noisy offices are a significant contributor to stress

As staff have returned to the workplace they have been confronted with the thing employees dislike most about open plan offices, according to research: noise.

Noise has significant implications for both employee well-being and performance. Our research found relatively moderate levels of open-plan office noise caused a 25% increase in negative mood and a 34% increase in physiological stress.

In addition to making employees more stressed and cranky, noisy open-plan offices reduce performance. Research shows employees in quieter one-person offices perform 14% better on a cognitive task than employees in open plan offices.

Fewer interruptions when working from home

In addition to not having to commute, for many employees, fewer interruptions and less noise from coworkers were some of the key benefits of working from home.

Modern knowledge work requires employees to focus and concentrate for lengthy periods. That is hard to do when colleagues are having impromptu meetings next to your desk, or discussing their weekends as you struggle to hit a deadline.

In many open-plan offices, the drive for increased interaction and collaboration comes at the expense of the ability to focus and concentrate. When distraction makes it hard for employees to focus, cognitive and emotional resources are depleted. The result is increasing stress and errors, undermining performance.

Research shows it takes about 23 minutes to get back on task after an interruption. Being constantly interrupted by impromptu questions and random conversation will not only reduce productivity but can lead to withdrawal from work.

To cope with the unwanted noise and interruptions, increasing numbers of employees are wearing headphones while they work.

Keeping tabs on your employees

As resistance to returning to the office continues, companies including Meta, Google, JP Morgan Chase and Amazon have stated they will use technology to monitor building access card data and system usage to track employees who are not complying. Employees have been advised repeated violations could lead to termination.

A recent study by the American Psychological Association found employees who were subject to monitoring technology were 14% more stressed than those not monitored.

And 42% of employees who were monitored intended to look for a new job within the next 12 months, compared with 23% who were not monitored.

Employees who are monitored while working reported higher levels of feeling they do not matter at their workplace (to their coworkers [32% vs. 17% of those not monitored] or to their employer [36% vs. 22%]), they are not valued (26% vs. 17%), and they are micromanaged (51% vs. 33%).

Commuting is stressful and expensive

The lost time and expense of commuting on top of rising cost of living pressures has been a consistent theme as to why employees don’t want to return to the office five days a week.

The Real Australian Commute Report 2022 surveyed 5,000 Australians revealing the average cost of commuting per day is now $20. According to a recent study published by Fortune, the time Americans spent commuting in 2022 increased by 239 hours, a 20% jump from 2019 figures.

But it’s not just the cost in time and money that is of concern, commuting adds to employee stress. A systematic review and meta-analysis of the relationship between commuting and stress found objective measures of commuting (distance travelled and time spent) were positively associated with strain outcomes, especially perceived stress.

Our coworkers can be part of the problem

Returning to the office is great for social connection and can lead to a range of positive work outcomes. However, our coworkers can also be a source of stress.

During my research, I am frequently told by employees of colleagues who eat offensive smelling foods at their desk, make loud sounds while eating, and conduct animated personal phone calls right next to them. Then there are those who wear sweaty gym gear for the rest of the day after working out at lunchtime.

Most famously perhaps in the annals of annoying colleagues was the case of the employee on a research station in Antarctica who stabbed a coworker who persisted in telling him the endings of books he was planning to read.

Workplace culture remains crucial

Being back in the office brings the culture of the organisation into sharp focus. More than one in four workers (26%) indicate a toxic work culture is negatively impacting their mental health.

Employee stress, under performance and turnover are inevitable if organisations are more focused on tasks or just getting their staff back in for face-time for the sake of it, rather than on results. Similarly, if poor leadership is tolerated and understaffing is the norm, low morale and high turnover are likely to follow.

Well designed workspaces that include acoustic treatment, psychological safety, effective leadership, healthy organisational culture, and work arrangements that support autonomy and employee well-being are crucial to reducing stress and employee turnover.

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

Australian cities failing on walkability

The World Heath Organization has set targets to promote physical activity but an international study shows Australian cities are built around cars rather than encouraging walking

By Dr Melanie Lowe, University of Melbourne

More than half of Australian adults don’t do enough physical activity – and our cities aren’t helping.

A healthy level of physical activity isn’t just about going to the gym or playing sport, it is about the built environment around us and how that makes it easier or harder to walk around.

Walking is an easy, popular, equitable, and accessible way to achieve World Health Organization (WHO) recommendations that we each do 150 minutes per week of moderate-intensity physical activity.

But large parts of Australian cities aren’t pedestrian-friendly. Instead, our urban planning is car-centric, creating barriers to healthy, active and sustainable lifestyles.

I’m part of an international team of researchers, led by Professor Billie Giles-Corti at RMIT University, that has developed indicators of healthy and sustainable city environments, which will help achieve the WHO’s 2030 target to reduce physical inactivity by 15 per cent – now published as a Lancet Global Health Series on urban design, transport and health.

Using data from the International Physical Activity and the Environment Network (IPEN) study, our research, led by Professor Ester Cerin from the Australian Catholic University, calculated that to get people walking enough to meet the WHO’s target, neighbourhoods need sufficiently dense populations to support nearby services like shops and public transport – at least 5,700 people per km².

Cities also need connected roads or paths for people to use – about 100 intersections per km², and readily accessible public transport – about 25 stops per km².

Pedestrian-friendly neighbourhoods are associated with reduced non-communicable disease risk and built environment characteristics like population density, street connectivity and access to public transport are important for neighbourhood walkability.

Our further research in The Lancet Global Health Series, led by Dr Geoff Boeing from the University of Southern California, then used these benchmarks to assess 25 major cities across 19 countries.

We found that all three Australian cities included in the study – Melbourne, Sydney and Adelaide – fell short against optimal thresholds for population density and street connectivity that support walking.

Only 51 per cent of Sydney’s population, 18 per cent of Melbourne’s, and none of Adelaide’s population live in neighbourhoods that meet the minimum threshold for population density. This reflects traditional Australian suburbia characterised by standalone, low-density housing.

As contrasting examples, 97 per cent of the population in Lisbon in Portugal and 96 per cent in Valencia in Spain, live in areas with adequate population density. The average for meeting density thresholds was much higher for cities in middle-income countries compared with high-income countries.

Australian cities also have low street connectivity.

Only 13 per cent of the population in Sydney and Adelaide, and 21 per cent in Melbourne live in neighbourhoods that meet the optimal threshold for connected streets to help achieve WHO’s physical activity target.

This is well below the average proportion of the population living in areas with adequate street connectivity, for both high-income and middle-income country cities in the study.

Cities with a high percentage of their populations meeting or exceeding optimal thresholds for intersection density include Lisbon, Portugal (99 per cent), Bern, Switzerland (98 per cent) and Hong Kong (92 per cent). Low street connectivity makes it less convenient to walk to daily living destinations like shops, parks and schools.

Relative to the other cities in this international study – neighbourhoods in Sydney, Melbourne and Adelaide have low walkability overall.

Similar to previous Australian studies, we also found that access to walkable neighbourhoods is inequitably distributed across these three Australian cities. While expensive inner-city areas have better walkability – many middle and outer suburban areas are highly car dependent.

Australian cities also have inadequate access to frequently running public transport, to support walking.

We found that only 49 per cent of Melbourne’s population are within a 500 metres walking distance of public transport that’s serviced at least every 20 minutes, compared with 54 per cent in Adelaide and 58 per cent in Sydney.

By contrast, in Sao Paulo, Brazil 94 per cent of the population have nearby access to frequent public transport.

Inadequate city planning policies may be contributing to our car-centric built environments.

As part of The Lancet Global Health Series, I led a study to assess and compare the presence and quality of policy frameworks across the 25 cities. We found that Australian cities – like many of the other cities studied – don’t have sufficiently ambitious, evidence-based policies to promote healthy, active and sustainable cities.

For example, despite all the rhetoric supporting health and sustainability in our cities, Adelaide and Sydney don’t have policy requirements for minimum street connectivity, and Melbourne and Sydney have state government housing density targets that are too low to support walkability.

The Australian cities also lack measurable policy targets for providing pedestrian and cycling infrastructure, and Adelaide’s policy targets for walking and cycling participation are too low to optimise physical activity.

These policy limitations undermine efforts to increase physical activity through active transport, improve air quality and reduce greenhouse gas emissions.

To enhance health, Australian cities need evidence-informed, measurable and actionable city planning policies. Policies that are contrary to evidence need to be urgently revised and policy gaps must be filled.

Urban design and transport policies should include measurable targets that align with the optimal thresholds needed to achieve WHO’s physical activity targets. More research is also needed to establish optimal health-enhancing thresholds for other urban design and transport features to help guide policy development.

City planning policies and interventions also need to focus on reducing current inequities in access to walkable urban environments.

All levels of government need to work together, with the private and community sectors, to ensure integrated planning and delivery of the full suite of transport and urban design features needed for healthy and sustainable cities.

Policy makers could start by taking note of our Global Observatory of Healthy and Sustainable Cities – an international collaboration that shares the findings of The Lancet Global Health Series.

The Global Observatory hosts city reports and scorecards for all 25 cities in the study – including Melbourne, Adelaide and Sydney. These can be used to guide city planning to better support population health and achieve WHO’s physical activity targets. And more scorecards are planned.

The Global Observatory’s 1000 Cities Challenge invites interested researchers and policymakers to get involved in calculating indicators for their own city.

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

This research was led by the executive team of the Global Healthy and Sustainable City-Indicators Collaboration: Professor Billie Giles-Corti (RMIT University), Dr Melanie Lowe (University of Melbourne, Dr Geoff Boeing (University of Southern California), Professor Ester Cerin (Australian Catholic University, Dr Deborah Salvo (Washington University), Professor Erica Hinckson (Auckland University of Technology), Professor Jim Sallis (Australian Catholic University), Carl Higgs (RMIT University), Dr Deepti Adlakha (North Carolina State University), Professor Anne Vernez Moudon (University of Washington), Dr Jonathan Arundel (RMIT University), Dr Shiqin Lui (Northeastern University). Other contributors from the University of Melbourne include Professor Mark Stevenson and Thanh Ho.

What the experts are planning for obsolete office buildings

There is a rising focus on adaptive re-use in our major CBDs as owners look for ways to reimagine – rather than demolish – older office buildings to make our cities more dynamic.

CBRE provides thoughtful, forward-looking insight into real estate trends, strategies and opportunities around the world.

What are some of the solutions for ageing or obsolete office buildings? It’s a question being debated globally, as landlords and policymakers grapple with ways to create more 24/7 cities, solve for a chronic undersupply of housing and deal with the carbon emissions involved in new construction projects. 

Against this backdrop, a growing number of building owners - both in Australia and globally - are turning to adaptive re-use, choosing to repurpose existing buildings in favour of doing a knockdown rebuild. 

As Nathalie Palladitcheff, the Chief Executive Officer of Canadian real estate company Ivanhoé Cambridge, is known for saying, “The best building for the planet is the building that you don't build”.  

So, what is the potential in Australia? And what could some of the benefits be?  

Turning the old into new  

Replacing offices with apartments is one of the key areas being examined given the ongoing supply issues in our major cities. 

Design studio Hassell recently completed a comprehensive audit of the Melbourne CBD on behalf of the Property Council of Australia, identifying that 86 buildings are ripe for adaptive reuse and could create up to 12,000 new homes. 

Ingrid Bakker, the Principal and Commercial & Workplace Sector Lead at Hassell, says identifying buildings with the right scale and dimension to suit apartments is the key to ensuring adequate natural light and ventilation.  

And that magic number is 24. 

“You hear a lot of people saying you can't convert offices because the floor plates are too big and too deep, and you won't get enough natural light. And that's true, you can't with a lot of office buildings. But if a building is around 24 metres wide that’s perfect for two apartments complying with the Better Apartments Design Standards in Victoria or the Apartment Design Guide in New South Wales,” Bakker notes. 

“So, if you do two metres of balcony, nine metres of apartment, two metres of corridor, nine metres of the other apartment, and then the balcony again, you get this magic number of 24.” 

Before completing the Melbourne audit, Bakker says she initially thought there might be half a dozen suitable buildings, but a total of 86 were identified. 

Even discounting that some of these wouldn’t be workable projects, being too close to other buildings or not having enough access to natural light, and by just focusing on 40 of those 86 buildings, Hassell arrived at the conclusion that these could deliver 10,000 to 12,000 new CBD apartments. 

Notes Bakker, “That's when we started to understand the scale and potential and what that could do to the city to really add some life. The key to activating cities is having that 24/7 city and that passive surveillance that residential gives you to keep it safe.” 

It’s a conversation happening around the world, with Hassell talking to groups in Singapore, Brisbane, Sydney, Perth and San Francisco. 

“It depends on the planning conditions in each city. And some cities obviously allow more height or more density than others. And that's something that we're looking at as we move through the different locations to see whether this can work in different cities,” Bakker says. 

David Harding, the Executive Director of Business NSW, is a passionate advocate of adaptive reuse to help create 15-minute walkable cities. And not just by converting office towers to apartments but by considering a range of other uses 

“We need to bring all of the generations back into our cities. We need to have them pumping all the way through the weekend. We need to have people in the streets through the night in a safe kind of environment. And for that we need to have more mixed-use towers,” he says. 

“We're proposing from Business NSW, and we've been on this for a long time, that we just need to lift the planning regulations to allow invention, to allow innovation, to allow that reinvestment to come in and whether it's educational space, whether it's medical space, whether it's research space, whether it's advanced manufacturing, whether it's luxury housing or whether it's affordable housing for key workers, we need to look at them all.” 

That’s something that’s already happening in London, with some empty office space being converted into hotels, life sciences space and apartments.  

Zoe Bignell, head of CBRE's UK Development Advisory Business, says this is being driven by an ongoing occupier flight to quality, which is hastening obsolescence in a growing proportion of the London office market, as is the cost involved in transforming older commercial stock into better quality office space. 

However, she stresses that not all second-hand office space can be converted to an alternative use even where there is a willingness, and that planning considerations are critical. 

She points to the Central Activity Zones in London where the local planning authorities are endeavouring to protect employment uses. 

“There’s a concern that if the use flips from employment to residential, but the employment cycle comes back and there's more demand for offices, have they mitigated their ability to respond to that in the future. So there's this real conundrum around trying to expedite housing to deliver on that housing crisis, but also not be in a position where you have a future growth in employment in the future,” Bignell said. 

While she acknowledges that there’s not one easy solution, she believes it’s a case of balance. 

“We have some clusters of office space that work really well. We have regeneration sites in London where you can weave in commercial accommodation to help bring in that employment level necessity. My main theme at the moment in speaking to these regulatory bodies is that there's not a one size fits all approach to planning that's going to work. You need to be agile and respond to what developers and end users want. Because the most important thing here is not having buildings that are obsolete because that stymies your high street or your townscape.” 

Bakker has been involved in similar discussion with the City of Melbourne and the Victorian Department of Planning, who she says are keen to understand what needs to be done to unlock any potential issues or to get rid of hurdles. 

“They're open to discretion around some of the current planning codes and also to the apartment design guidelines and looking at each site for its merit. And we did a couple of examples to show what would happen if you complied with the current planning scheme and then what would happen if we had some discretion and we were able to demonstrate that you'd get much more efficiency, a better building, if you did have that discretion.” 

In addition to planning, Bakker believes being able to put a value on the value on the embodied carbon in older-style buildings – something that’s currently not possible – will be one of the critical ways to help accelerate adaptive reuse in our cities, incentivising developers that choose to reuse the existing carbon in a building. 

“I think until there's some kind of value put on the reuse of the structure we'll be in an uphill battle. A lot of the cities around the world have net zero ambitions, with Melbourne having a very aspirational target of net zero by 2040. We're not going to get there if we don't reuse the embodied carbon that we already have."  

Harding would meanwhile like to see a rezoning of major portions of our old-style CBDs into a new definition of mixed use.  

“We need to lift the lid on the innovation, let the investment come back in, let the creative people like Ingrid loose, with much less constraints in a world that needs to be much more nuanced, much more resilient and frankly bring a lot more colour to our towers.” 

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

TO BUILD MORE HOMES WE NEED CONFIDENCE IN BUILDING QUALITY

Dr Paulo Vaz-Serra is a Senior Lecturer in Construction Management at the Faculty of Architecture, Building and Planning at the University of Melbourne since 2014. He is a Civil Engineer and holds a master's degree in Construction and a PhD in Civil Engineering with a focus on knowledge management in construction companies and a postgraduate degree in entrepreneurship and innovation.

Australia plans to build an extra 1.2 million quality homes in five years, but we don’t have the people or regulatory processes to achieve this

By Dr Paulo Vaz-Serra, University of Melbourne

The federal government recently announced an ambitious plan to boost the Australian economy with an extra 1.2 million new houses in five years, including a $AU3 billion National Housing Infrastructure Facility. How the government intends to execute this plan within the current regulatory climate remains unclear.

The plan will require building an additional 240,000 new houses per year, which is double the current capacity to build houses – even more than double if looking at the reduced projection of only 173,000 for 2025.

With the current shortage of qualified professionals and construction companies, achieving this goal will be challenging for all stakeholders, especially the final buyers.

Rushing construction significantly increases the risks to quality.

In a time of uncertain material supply and a shortage of qualified labour, last-minute changes and shortcuts can lead to disastrous consequences for quality, safety and costs.

Given these circumstances, it is crucial we acknowledge the current quality issues in construction to prevent a million homeowners ending up dissatisfied with the quality of their newly built houses.

Building a house is a complex process that starts with good design and engaging highly qualified and competent individuals for construction.

REDUCING CONSTRUCTION TIMELINES INCREASES THE RISKS

Here in my home state of Victoria, I have doubts about the capacity of building surveyors to manage the increased work.

Building surveyors ensure compliance with regulations and are currently crucial to the construction process. Registration as a building surveyor requires a minimum of four years of training and some years of experience.

The City of Melbourne says there are insufficient building surveyors to meet even the existing workload.

This shortage has left tens of thousands of ‘orphaned building permits’ – permits without building surveyors attached – leaving people unable to live in their finished homes. So how does the government plan to cover the requirements for 1.2 million new builds?

This increase in buildings will also add to existing issues with inspections mandated by the Victorian Building Authority (VBA) – an authority facing criticism for its “appalling culture” and ability to effectively oversee the sector.

These mandatory inspections are limited to only three stages of the structural work: before placing a footing; before pouring an in-situ reinforced concrete element; and at the completion of the framework.

Fire and smoke-resistant elements are also checked during the construction process and on completion.

At the completion of all building works a final inspection is limited to checking compliance with regulations.

Inspectors have spoken out about pressure to overlook faults to meet unrealistic inspection targets set by the VBA. This has led to dramatic outcomes, including conducting inspections from the sidewalk.

WILL THE NEW BUILDS MEET QUALITY STANDARDS?

The current regulatory system employs the National Construction Code (NCC) to determine quality based on how a building performs, rather than solely on materials and processes.

If it functions, it is considered compliant.

For instance, if someone turns on a tap, water must flow, regardless of whether the shower was constructed according to the design and expectations of the owner. In addition, owners have to accept cracks in walls if less than one millimetre as authorities consider that some movement of footings is ‘normal’.

The Supreme Court recently ruled that a contractor did not need to comply with a VBA ‘direction to fix’ because the VBA inspectors failed to detect the faults before the certificate of final inspection was issued. The owners were left to deal with the problem themselves.

This clearly ineffective level of inspections prompted the City of Melbourne to propose that inspections should be managed by an independent authority.

WE CONTINUE TO LOSE DESIGN AND CONSTRUCTION KNOWLEDGE

The terms ‘builders’ and ‘contractors’ are now used interchangeably when historically they hold significant differences and carry different implications.

Builders referred to companies with internal competencies to perform all construction aspects, possessed in-house trades capabilities and employed foremen as site managers with expertise in various trades including carpentry, plumbing and electrical.

Contractors referred to contract administrators or what are now known as ’main contractors’, people responsible for managing subcontractors. They employ ‘project managers’ who often manage subcontractors across different trades, but they may have no expertise in any of these individual trades.

The industry has largely switched from using ‘builders’ to using ‘contractors’ as they are more cost-effective. But this has led to the loss of design and construction knowledge.

THE DISCONNECT BETWEEN DESIGN AND CONSTRUCTION

The Victoria Building Authority’s system currently assigns primary responsibility to tradespeople, empowering them to make decisions that often diverge from original plans. Architects and engineers are not required to be on-site and are seen as an unnecessary cost.

But this leaves initial design quality control in the hands of less qualified people.

This leads to situations where tradespeople alter complex design systems, including drainage in hydraulic engineering systems, based purely on their practical experience.

This can result in problems like leaks due to non-designed penetrations in external walls, but also aesthetically undesirable and quality-compromising outcomes, like pipes in front of facades and windows.

BUILDING REGULATIONS – A MISSED OPPORTUNITY

This year’s amendments to the Victorian Building Act 1993 were a missed opportunity for reform.

Despite calls for changes and to increase the accountability of building companies, more responsibility has instead been put in the hands of building surveyors.

Investment in proper building design and the accountability of those responsible for the management and execution of works is desperately needed to avoid a potential catastrophe that could endanger lives.

The 2021 Champlain Towers building collapse in Miami and the devastation wrought by the recent earthquakes in Türkiye and Morocco are tragic examples of how inadequate building approval processes can increase the severity of disasters.

According to the VBA webpage, in Victoria, we have nine types of ‘building practitioners’ (each with up to 30 different subtypes): building inspector, building inspector (pool), building surveyor, quantity surveyor, draftsperson, erector and supervisor of temporary structures, project manager, domestic builder and commercial builder.

For end-users, these terms are difficult to distinguish and their responsibilities are unclear.

A SOLUTION TO CLEAR UP THE CONFUSION

With increasing concerns about apartment quality in Victoria, the Parliament of Victoria launched an Inquiry into Apartment Design Standards.

This inquiry aimed to address the challenges within the architecture, engineering and construction industries and received 53 submissions, including one from me and my University of Melbourne colleagues Steven Richardson and Dr Andrew Martel.

Our proposed solution, based on practices in other countries around the world, is to enhance the minimum competencies of builders before they are granted licenses. You can read our submission and the transcript of our appearance before the parliamentary committee.

The responsibility for compliance with design when delivering construction must be on architects and engineers who have the qualifications and competencies to sign off final works.

Therefore, to start a construction company, the Business Licensing Authority must require that contractors demonstrate that they have architects and engineers who are individually liable and accountable on their behalf for the quality of the work that they will perform.

This will allow a proper balance between the business owners of the company, who are focussed on costs and time, and the designers, who focus on quality and the protection of users, as well as public safety during construction.

This transition would address the current situation where a main contractor, often referred to as a ‘project manager’, delivers the project but possesses minimal responsibility and technical qualifications.

Additionally, if ongoing accountability for the quality of works belongs to architects and engineers, this will necessitate clients reevaluating their procurement methods and no longer relying on a ‘design on the run’ building process.

This should ensure they understand the importance of a high-quality initial design that gives them confidence in the outcome of the build.

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

What’s in a view? Why sightlines in leading cities are so important

BY MARTIN CRABB, DON'T BLOCK THE ROCKS

Leading global cities protect their heritage views and sightlines, respecting the human scale of the city’s heritage and topography, cherishing the city as a landscape of natural features.

Earlier this year the final report of the NSW Legislative Council Select Committee on Barangaroo sightlines, made several recommendations.

Among these is that significant cultural and heritage value of the sightlines. The recommendations included that:

“The NSW government, in consultation with the Heritage Council of NSW, develop a view management strategy that effectively identifies and preserves sightlines in the Millers and Dawes Point precincts that are of significant cultural and heritage value to New South Wales, and ensures that these views are considered in the context of any major redevelopment project”.

In response NSW government committed to consulting with the community to develop a view management strategy:

“The government will ask the Department of Planning and Environment, including the Government Architect, to consider the development of a view management strategy that provides a framework for protection and consideration of significant views and sightlines when major redevelopment projects are proposed”.

Meanwhile, word on the street is the revised scheme for Central Barangaroo Modification 9 will be lodged before the year is out.

Following the public outcry against Mod 9, which sought to block views of the harbour and lower lying stars from the Sydney Observatory in the western sky, blocked harbour views from the Langham Hotel and dramatically impacted the heritage and tourism qualities of Millers Point and the Observatory Hill precinct, which Sydneysiders enjoy.

It would seem prudent that the revised proposal be only assessed once a view management strategy for Sydney is finalised and considered.

What is a view management strategy?

If you stand out in front of “Ye Olde Cheshire Cheese” public house (rebuilt in 1667) in London’s Fleet Street and look east, you will enjoy an uninterrupted view of St Paul’s Cathedral.

Lean forward and you can see the silhouette of 122 Leadenhall Street (“The Cheese Grater”), which owes its shape to obligation to protect this view.

The Act for the Rebuilding of the City of London, passed in February 1667 proposed that all new buildings had to be constructed of brick or stone against the future perils of fire. It also imposed a maximum number of storeys per house for a fixed number of abodes to eliminate overcrowding. The London Building Acts of 1888 and 1894 ruled that architects should not be allowed to build structures higher than 10 storeys to ensure the city’s finest landmarks were not obscured (and so fire crews could reach the upper levels).

London has grown upwards since then, but still has protected views that pinwheel around historic sites such Westminster (and “Big Ben”), the Tower of London and St Paul’s Cathedral.

These “sightlines” influence the volume and massing of new developments, defining the edges of clusters of towers and their dividing chasms. Formalised under the London View Management Framework, the City of London has sought to balance the heritage sense of place with the desire to add more high-rise office and residential building – a challenge faced by many developed cities.

A similar commitment to preserving London’s heritage with the development of “sightlines” was included in the 2004 London Plan, published by then mayor Ken Livingstone, and based around the aspects and panorama that include historical sites such as St Paul’s Cathedral, the Tower of London and Westminster Palace.

London is not alone; many great cities protect the views to and from their monuments.

By 1300, the population of Florence grew to over 100,000 people. A series of laws were enacted to encourage order and dignity, express a shared spirit of civic pride, and to make the city il più bello che si può (as beautiful as possible).

Towers were reduced to a uniform height and regulations were passed to dictate the appearance of buildings. Today, nothing is built taller than the Palazzo Vecchio, and all roofs must be made of terracotta tiles to maintain the roofscape when seen from adjoining hills and Piazzala Michelangelo.

Rome, admired for its topography and resulting views was perhaps the first intensively represented city – first in paintings, prints and postcards, and then in the photographs of tourists.

Sweeping views of St Peter’s Basilica and the winding Tiber were influential in re-imaginings of idealised classical landscapes. The height of buildings in Rome greatly affects the view of landmarks and the overall skyline. You can still sit at the top of one of the seven hills that made up ancient Rome and see the other six.

Restricting the height of construction in Paris has a long tradition that goes back to 1667 when an ordinance during the reign of Louis XIV limited the height of buildings with façades on streets to 16 metres. One major purpose of the ordinance, which was issued one year after the Great Fire of London, was to implement safety precautions.

Royal decrees by Louis XVI in the 1780s specified heights of buildings proportionate to the widths of the streets they overlooked for reasons of hygiene, safety and aesthetics.

If a street was less than 7.8 metres wide, for example, buildings could be no higher than 11.70 metres, with a maximum of 20 metres permitted on streets of the same width.

The tradition of proportion was continued into the next century and was particularly developed by Baron Haussmann, the Prefect under Napoleon III who gave the centre of Paris its distinctive large boulevards and uniform stone-cut façades with wrought iron balconies and decorative door and window pediments.

Haussmann dictated that all of these elements on any given building had to be uniform and broadened the practice of limiting the height of the building to even specifying how many floors it could have. Modern Paris has limited high rise development to the La Defence district, maintaining low rise development in the historic city centre and affording a view that includes the Eiffel Tower, the Arc de Triomphe, Sacre-Coeur, Notre Dame and the Pantheon.

In Vancouver, one of the worlds “most liveable cities”, protected views restrict development in what is already a constrained site: a peninsula surrounded by water.

The City of Vancouver protects spectacular ocean and mountain views while promoting density in the downtown area. The mountains behind the city skyline signify their connection to nature and align with their sustainability goals.

However, the downtown peninsula has limited land available for development because of its geographic boundaries. To reduce urban sprawl, the city considers higher buildings that don’t impact the protected view corridors.

In consultations with the community, the city identified several locations from which both residents and visitors can appreciate the uninterrupted views of the North Shore mountains, the Downtown skyline, and the surrounding water.  

Views of the water in Istanbul, Turkey’s largest metropolis, were important in Ottoman times to detect the approach of rival navies, and over the years open views of the Golden Horn and across the Bosphorus Strait have become traditional images of Istanbul.

St Petersburg in Russia has long been admired for its skyline – the only things punctuating above is flat elevation are steeples of churches. The level was set by the height of the winter palace, and broad, sweeping views across the river remain key to St Petersburg’s identity.

More recently, there was public concern about the “Manhattanisation” of the financial district of San Francisco that many people thought would damage the “city pattern”.

This was developed into a general plan passed into law in 1995, including the preservation of “major views whenever it is feasible, with special attention to the characteristic views of open space and water that reflect the natural setting of the city and give a colourful and refreshing contrast to man’s development.”

I was born in Arbroath – a small town on the east coast of Scotland that happens to be home to Arbroath Abbey – the final resting place of King William I (the Lion) (1165-1214), and the site of the signing of the Declaration of Arbroath (Scotland’s “Declaration of Independence”) in 1320.

The oculus or “O” of the abbey is an iconic landmark which used to guide ships at night which can be seen for miles around.

It was because of Arbroath’s aesthetic value, as well as its historical significance, that efforts began to be made not only to ensure its preservation, but also to improve its setting, from a remarkably early date.

As early as the 1830s King’s Architect Robert Reid was urging that surrounding properties should be acquired and demolished so that the abbey could be seen to better advantage.

Are protected views the best way to preserve the heritage of the city?

Visitors to Scotland may have also made the steep climb up the Royal Mile in Edinburgh, you can only wonder at the shape of the shoreline from Edinburgh’s Castle grounds. The 2006 Street View Study conducted by the City of Edinburgh Council noted some places were “fundamental” to the city, and key views were “precious” and even “sacrosanct” in providing a “sense of the city”.

Nine significant locations were then identified, with a series of views from multiple angles drawn on to the map and a calculation for the “sky space” around the sites to allow its view to remain unhindered. In addition, 22 landscape areas were highlighted for special consideration.

­­­­­­­­­­­­­­­­Much to its credit, the City of Sydney has developed just such an approach with its Central Sydney Planning Strategy, which states:

“There are a number of key views within Central Sydney, to and through parks and other well-utilised public spaces, that help define Sydney.

Examples of significant views include:

• Views toward Central Station clock tower; these are significant due to the towers’ historically physical prominence in the city’s landscape.

• Views along Martin Place: These are important due to Martin Place’s significant as a gathering place.

• Views to and from Observatory Hill: These are significant due to Observatory Hill’s strategic role in the city’s history, in milling, defence, communications, astronomy and time keeping. These functions have required the surrounding views and physical alignments to remain open. Observatory Hill’s physical prominence relative to city development should be maintained.

New development must be designed to make a positive contribution to the characteristics and composition of designated public views. These public views should be preserved and have priority over private views.”

What is a monument?

London architect Jules Lubbock in Proof of Evidence at the City of London Local Plan Inquiry, May 1987, stressed to the symbolic importance of a monument against the skyline:

In focusing more upon the symbolic aspect of the skyline we need to apprehend the strict meaning of the word “monument”.

A monument is a structure designed to warn, to instruct or to commemorate. The word derives from the Latin “monere” – to remind or to advise. Not all monuments, of course, are architectural, and certainly not all architecture is monumental. Just as street façades can act as monuments to a family, a firm or some other public institution, so the skyline can be regarded as the collective monument of a city, and in the case of a capital city, of the country as a whole.

The Acropolis at Athens, St Peter’s in Rome, the Kremlin in Moscow, the Eiffel Tower in Paris, midtown Manhattan in New York and both St Paul’s and Big Ben in London are, or were, some of the greatest examples”
Sydney, and by extension as its status as the first point of European settlement in Australia, has its monument – one that reminds us of early milling to feed to population (as Windmill Hill), defense against perceived threats of French invasion and/or Irish uprising (as Fort Phillip), signaling the arrival of ships from the other side of world (as Flagstaff Hill) and facilitating the setting of accurate time for navigation (as the Timeball and Sydney Observatory).

“Timeball and Observatory: On the 13th of September 1850, Captain King addressed the Colonial Secretary, with the following recommendations: The best locality… is Fort Phillip. From this the ball would be visible from all parts of the harbour.” Sydney Morning Herald, Friday 22 October 1852, Page 2

Chosen for its highest natural point in the harbour, its status as part of our skyline and identity is under threat from the looming Central Barangaroo development.

Views to and from this important site along with adjoining protected Millers Point and Dawes Point Heritage Precincts are our city’s equivalent of St Paul’s Cathedral, Palazzo Vecchio, Hermitage Palace, Eiffel Tower or Coliseum.

We must protect the sights to and from these places and resist the temptation to sell these iconic public views to private interests for a bag of silver.

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

Oliver's insights - has the RBA finished rate hikes?

Shane Oliver is the Chief Economist and Head of Investment Strategy at 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

- It’s likely that the RBA’s cash rate has peaked with numerous indicators pointing to slower economic growth and inflationary pressures easing.

- While the risk in the short term is still on the upside for rates or a delay to the start of rate cuts, our base case is that rates will be on hold until early next year ahead of rate cuts starting in the March quarter.

- Rate cuts through next year should help growth to stabilise and pick up from late 2024.

Introduction

At its September meeting the RBA left the cash rate on hold for the third meeting in a row at 4.1%. The pause in interest rates over the last three months comes after the biggest interest rate hiking cycle (of 400 basis points over 14 months) since the late 1980s. (While the 1988-89 rate hiking cycle was nearly double that seen since May last year, back then household debt to income ratios were about one third of current levels.)

This took the cash rate to 2012 levels and similarly for mortgage rates.

In leaving the cash rate on hold the RBA reiterated that interest rates have already been increased by 4%, higher rates are working to establish a “more sustainable balance between supply and demand”, uncertainty remains high and staying on hold provides further time to assess the outlook. The RBA also noted again that recent data is consistent with inflation returning to target in late 2025. So have we reached the peak in the cash rate? And what does this mean for the economy?

The case for the peak in rates

We were way too optimistic as to how far the RBA would raise the cash rate, but our view remains that the RBA has done more than enough to bring inflation back to target and so we are likely at the peak.

First, rate hikes impact the economy with a lag of a year or more. This is because it takes a while for the hikes to be passed through to borrowers and for them to adjust their spending and for this to impact companies and jobs. This time around the lag has likely been lengthened by savings buffers built up in the pandemic, the reopening boost, more than normal home borrowers locking in at 2% or so fixed mortgage rates in the pandemic and the highly competitive mortgage market which has meant that actual mortgage rates paid on outstanding mortgages have gone up by less than the cash rate. However, these protections are now wearing off.

The rate hikes since April last year mean that a variable rate borrower with a $600,000 mortgage will have seen around $1300 a month added to their mortgage payments. That’s an extra $15,700 a year. Even if the borrower has managed to get a 0.5% discount to their mortgage rate it would amount to an extra $13,300. Many of those on fixed rates are now starting to experience an even bigger increase (because fixed rates in 2020-21 fell to much lower levels than variable rates) in one jump. This has already seen housing debt interest payments as a share of household disposable income double from their lows. Once the rate hikes fully flow through it will likely go to a record high. This is a very big hit to household spending power.

Secondly, we are now seeing increasing evidence that rate hikes are biting:

• Real retail sales have fallen for three quarters in a row and are very weak on a per capita basis, ie adjusting for population growth.

• The ABS’ Household Spending Indicator suggests annual growth in nominal consumer spending has gone negative this quarter which suggests weakness in both goods and services.

Red portion of the ABS’ Household Spending Indicator line assumes spending remains at July level for August and September. Source: ABS, AMP

• A sharp slump in building approvals points to weak in-home building.

• Business investment plans as surveyed by the ABS for the current financial year are only up 7.1% on the same estimate made for the last financial year pointing to a deceleration in growth from the 15.9% rise seen in 2022-23. This is in nominal terms so the slowdown after allowing for inflation will be greater.

• GDP growth has slowed to a 1.6% pace in the last two quarters.

• Labour market indicators including job vacancies and hiring plans in surveys have started to cool and unemployment looks to have bottomed at 3.4% late last year.

• The June half profit reporting season saw less companies than normal report profits up on a year ago and far less than normal raise their dividends, suggesting a degree of caution.

Finally, while our Australian Inflation Indicator has picked up a bit with higher labour and raw material costs it continues to point to a further rapid fall in inflation.

Continuing to raise interest rates will only add to the already very high risk (at around 50%) of recession. At the very least the economy is likely to have slowed substantially by late this year with unemployment starting to rise faster than the RBA is allowing for. This will likely see inflation fall next year faster than the RBA expects. As a result, our base case is that the cash rate has peaked ahead of rate cuts starting in the March quarter next year which should help growth then stabilise and improve later next year.

Short term risks for rates are still on the upside though
In the short term, the risks are still skewed to a further increase in interest rates and or a delay in the start of rate cuts as: inflation is still too high; the labour market remains tight with upwards risks to wages flowing from higher minimum and award wage rises; productivity growth is very weak; and the rebound in home prices is partly offsetting the tightening impact of higher interest rates. Consistent with this the RBA retained its guidance that some further rate hikes may be required. Key to watch will be the global economy, household spending, inflation and the labour market.

While the near-term risks for interest rates are still on the upside those risks have declined though. Absent much stronger wages growth, a further drop in unemployment and/or a reversal of the downtrend in inflation, the RBA is expected to leave interest rates on hold for the rest of this year ahead of rate cuts next year. We are allowing for four rate cuts through 2024 as the economy and inflation slow further.

So soon-to-be Governor Bullock should get an easier run than Governor Lowe. Her main challenge may be trying to turn the economy back up.

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

Think curbing overseas migration will end the housing crisis? It won’t – and we can’t afford to do it

Authors - Dr Dorina Pojani & Aude Bernard

Dr Dorina Pojani is an Associate Professor, Urban Planning School of Architecture, Design and Planning at the University of Queensland. Her research focuses on various aspects of the built environment, including urban design, transport, and housing - in both the Global North and South.

Aude Bernard is a demographer at the Queensland Centre for Population Research at the University of Queensland and Adjunct Research Fellow at Asian Demographic Research Institute at Shanghai University.

With the nation feeling the pressures of a housing crisis, some believe the Australian government needs to ease housing demand by limiting international migration.

To others, this sentiment comes across as xenophobic. They dismiss it outright, based on moral grounds. How can a nation of settlers, built on unceded Indigenous land, contemplate the notion of closing its borders to new migrants?

Leaving the moral arguments aside, it is worth looking at the data to find out if there is any merit to the idea of limiting housing demand by curbing migration – as opposed to increasing housing supply to make housing more affordable.

The evidence from pandemic-era data and longer-term migration and housing trends provides little support for the idea that curbing migration is a solution. And the future impacts on the economy and an ageing population would be costly for Australia, as the latest Intergenerational Report reminds us.

Why does Australia take in migrants?

First off, it is crucial to understand that Australia’s international migration program is not driven by charity. For a start, the percentage of humanitarian migrants is minuscule, about 10% of Australia’s permanent migrant intake. And, compared to other OECD countries, it is very difficult for migrants to bring family members, such as parents or siblings, to Australia.

Among non-refugees, younger and highly skilled migrants dominate the lot. They provide much-needed labour skills and sustain the economy. Migrants help Australia as much as Australia helps them achieve their life goals.

Clearly, limiting international migration is not a realistic policy option.

What’s the level of international migration?

The level of overseas migration is very high at present so, yes, migrants are contributing to housing demand in the short term.

However, this situation is only temporary. Much of it is so-called “recuperation migration” to make up for border closures that all but halted immigration during the pandemic. In 2020-21, Australia experienced a veritable exodus, with a net population loss of 85,000 people. Very few migrants were allowed in until late 2022.

The annual overseas migration intake is expected to peak at 400,000 people in 2022-23 before returning to 260,000 in 2024-25. This will be close to the long-term average before the pandemic. It will not fully make up for the lost population growth during the pandemic.

Housing supply is the long-term problem

The housing crisis has been decades in the making. Housing prices were on an upward trend while the annual overseas migration intake remained constant in the decade leading to COVID-19.

Tellingly, even as Australia lost population during the pandemic, the real estate industry estimates that “from September 2020 to April 2022, the nation experienced the sharpest recorded upswing in home values (28.6%)”.

This shows that factors other than migration have been at play.

Let’s look beyond international migration numbers and compare the net population growth to the housing supply. According to former senior Reserve Bank economist Tony Richards, the national dwelling stock stopped expanding in line with overall population growth in 2001. That’s also when the number of property investors began to increase.

Since 2001, the demand for housing has far exceeded the supply. The shortfall has been especially marked in the most populous states – New South Wales, Victoria and Queensland. By 2021, the national dwelling shortfall was more than 1.3 million units.

Is most population growth due to migrants?

Yes, but not by much. Until the COVID-19 pandemic, about 40% of population growth in Australia was through natural increase and 60% through international migration. Recuperation migration means migrants are contributing a bit more to the mix now.

Overall in Australia, the average number of children per woman reached a historical low of 1.58 in 2021. Birth rates among international migrants are similar to the national average. This is because migrants tend to be highly skilled, particularly in cities, and people in that group are more career-focused and have fewer children.

Low birth rates might be good news for those holding pro-extinctionist views. Others may see it as an economic disaster in the making.

However, the nation is recording about 300,000 births a year. This figure has been constant for a decade. Our population is youthful relative to other OECD countries, with a median age of 42. This means housing demand is not about to stop.

What about internal migration?

In some regions, like South-East Queensland, the internal migration of Australian residents is compounding the impact of immigration. This is not new.

The graph below shows data from 2021-22. At the time, Brisbane and its surroundings were particularly attractive as other states struggled to contain the pandemic.

But historic data from the 1980s onward show Queensland has long been a net population receiver. The state owes its longstanding popularity to its warmer climate and lower housing prices.

The recent spike in interstate migration to South-East Queensland combined with international migration to create a perfect storm. While Sydney’s and Melbourne’s housing markets have been notoriously unaffordable for a while, Brisbane is the latest arrival on the front lines of the housing affordability battle.

The bottom line

International migration contributes to the housing demand but it’s hardly the only, or even the main, cause of the housing crisis. The problem cannot be solved by curbing migration.

To make Australian housing affordable again, we need to increase housing supply in line with demand. We also need to stop inflationary investments in existing housing by abolishing tax rules such as negative gearing and capital gains tax.

This article is republished with permission from The Conversation. Read it here.

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.