A growing number of people are abandoning the open market and banding together to develop their dream homes. Now, there’s a consultancy to help, and it riffs off Germany’s baugruppen model.
Back in 2010, a group of friends decided they’d like to create their own multi-home development in Northcote, in Melbourne’s northern suburbs. For one member of the group, Tim Riley, the experience was eye-opening and set him on the path to launching Property Collectives to help other people achieve the same goal.
Architect Tim Richardson joined as design and construction manager in 2019.
Over nearly 15 years, the business has supported the delivery of nine co-investment developments in Melbourne, and the tenth is underway.
The mission is to ensure that the homes are both affordable and sustainable.
Victoria Street, Brunswick
One of the group’s recently completed projects is a 10-dwelling development at Victoria Street in Brunswick, in Melbourne’s inner north, next to Westwyk Eco-Village.
The project of oversized apartments kicked off planning and design in 2018. Zen Architects was appointed, and development approval was achieved in February 2021. Bank Australia financed the project, and Maven Building was contracted to construct the project in 2022, with completion in 2024.
RMIT’s Alan Pears provided consulting advice for energy and thermal performance, and the development has achieved an average NatHERs rating for the apartments of 8.7 stars. The lowest individual rating is 8.1 stars, and the highest received 9.4 stars.
The all-electric building services design includes CO2 refrigerant heat pump hot water systems, EV trickle charging, and a shared 30-kilowatt communal solar PV system managed by Allume Energy Solshare.
The development, which opted out of ensuites but includes good studies that suit working from home, incorporates rainwater harvesting and reuse and permeable paving to reduce flows into the municipal stormwater system.
Low VOC materials, north-south cross ventilation for every apartment, a shared garden area including 100 square metres of productive vegetable and herb garden space, cycle parking for every dwelling and double-glazed windows with thermally broken frames throughout also contribute to long term sustainability and low operational costs.
The residents have a green travel plan to supplement fewer than the usual parking spaces, achieved thanks to the owners’ significant equity, which allowed them to negotiate the reduction with the bank (banks like bigger numbers of car parking).
Finding a niche in the market
The important factor in all the collective developments is that they are homes for living in, not just investments that might be flipped in a few years for capital gain.
Richardson says that for a development cohort, financial and capital value may not be an issue, as they are “building for the long term.”
For developers that are creating market products, the proposition is different. It is “easier for them not to be novel” as that makes it smoother to get valuation, finance, and development consent.
“We are innovating on the edges and pushing the existing typology (of multi-residential further),” Riley says.
Richardson adds that when a development group is trying to make aspirational decisions, it is hard in a stable market and incredibly difficult in a rising market.
“We are responsible for doing developments in an affordable way, we are responsible to the owner participants (for that). So, we deliver on first principles first, then repatriate the aspirational features back in order or priority or value creation. And we have the group involved in that process, so they are understanding the trade-offs.”
How the model works
The model is similar to Germany’s baugruppen model, where a group comes together to co-design, co-invest and co-develop a multi-family housing community.
Riley and Richardson work with groups for the full project journey, from the initial wish to turning the key at completion.
That includes project management, explaining the legal and financial structures of co-investment developments, commercial management and the equity, debt, and development finances, as well as any marketing and support for navigating development approval processes.
The pair say that helping the group form an effective entity is an important part of the initial engagement.
The team works with the future homeowners to determine matters such as the type of homes, the common area and amenities wish list, and contextual factors such as how close they’d like to be to schools, public transport, parks, and civic facilities.
“We get a really firm brief developed before the group gets their land,” Riley says.
The search for a site is next. That involves costs, spatial configuration, land value, projected capital values and location all coming into play.
Balancing between green and the bigger systems
Once a site is found, the work of appointing an architect, obtaining development finance, navigating valuations, gaining development consent, and appointing a builder begins.
Richardson works with the groups to “get the balance right” in terms of specifications and aspirations.
World’s best practice
The Royal Institute of British Architects (RIBA) Plan of Work is used to frame the project processes from design through to completion.
This is an open-source resource Richards describes as the “world’s best practice” for guiding the process of development while also ensuring the right stakeholders are around the table at each point in time.
RIBA’s plan of work incorporates key strategies for elements such as conservation, costs, fire safety, health and safety, inclusive (accessible) design, planning, plan for use, procurement, and sustainability.
Richardson says the initial design ideas and wish list requirements get “reworked into something that gets various computers to say yes.”
The computer systems that need to approve a proposal include those used by banks, valuers, real estate agents and also potential future members.
“There is a limit to how peculiar a development can be before it is over-capitalised for value and can’t get debt financing.”
Without the guidance of what is feasible, he says everyone’s aspirations can become unrealistic.
Many groups want “all the sustainable aspirations”, but these may not always pass the sense tests involved in gaining the finance to proceed.
What ‘value’ depends on who you ask
There are trade-offs between capital costs, operational costs, and underlying value. At the heart of that is what “value” means to different stakeholders and how to create it.
In the eyes of finance and real estate, value creation is “much more about quality,” according to Richardson.
In terms of construction, the relative value of time also needs to be factored in. Land costs and labour costs are escalating constantly, so delays or extended timeframes have a measurable cost impact.
Valuers, meanwhile, look at the sales price of comparable properties near the proposed development, and banks look at value through the risk lens, including how feasible it will be for them to finance the completion and sale of the project if the original builder or developer goes bust.
“Projects are limited by fundamental rules of real estate valuation,” Riley says. “It comes down to the valuation report for construction funding.
“Anything above compliance (with the building code), valuers are just not seeing the value.”
Architect Tim Richardson says the consultancy is “very invested in building longevity and how it will perform.”
The team looks at where true value is created.
“It is about understanding how a building is going to consume and be using energy for the longest term,” Richardson says. “In the general property market, value is (just) about the costing up front.”