HOUSING: There’s a new player on the housing block that looks set to entirely change the rules in terms of market models.
Smart Urban Villages brings together sustainability, the sharing economy, European leasing models and a viable investment asset into a package that aims to transform the conversation on housing affordability.
It has just completed feasibility studies for five sites, two in Canberra, two in Melbourne and one in Sydney, co-founder and director Ben O’Callaghan told The Fifth Estate.
The urban eco-village model looks to sites within 15 kilometres of a CBD, ranging in size from 2000 square metres to 10,000 sq m, with between 20 to 50 dwellings to be developed per site.
By being positioned within the 15km zone, occupants will have easy access to infrastructure including public transport, employment, education and other necessities.
The scale of up to 150 residents is deliberate, as it is about ensuring people can make good connections and build a sense of community.
“We are looking for an iconic site so once the first [development] has been done, we can replicate and repeat it.”
The plan is to develop a mix of two-to-three-storey apartments and townhouses with shared open space and common facilities including share electric cars and food gardens.
The company will also provide the infrastructure to enable people to live “an active community life”, Mr O’Callaghan said.
This includes both the hard infrastructure such as common spaces, and the soft infrastructure of governance and activities such as hosting shared meals for the first two years of occupancy.
Employing long leases
Instead of selling the dwellings, they will be retained by Smart Urban Villages in the form of a real estate investment trust and leased out on long, perpetual leases.
Long leases, generally not available in Australia, are common in Europe. Mr O’Callaghan said they have many benefits, including the ability to create community links.
“Millions of people rent in Australia and every 12 months they get stressed over whether their lease will be renewed. Europe solved this years ago.”
Fundamentally it is crash-tackling the myth that only a mortgage can give someone a sense of security around where they live.
“People shouldn’t have to have a mortgage,” Mr O’Callaghan said.
The projects will be internally funded via a mix of institutional investors and some debt financing.
Mr O’Callaghan said there were already talks underway with a large investment fund that has a considerable amount of capital it needs to spend on long-term ethical and impact investments but has not so far found a place to put its money.
Returns of 6-12 per cent expected
It is expected the villages will deliver returns of between 6-12 per cent for investors, he said.
The long leases will be open ended, he said, so if someone wants to rent for 50 years that’s possible. It’s also good for the investors to have that kind of security of rental income.
There will be no strata body corporate, however the aim is to have residents involved in decision-making.
He said the outcome has to be high quality in terms of both the buildings and the lifestyle, which will leverage the sharing economy trend.
“I think that’s the future – shared gardening, share cars in the basement, sharing services and assets.”
That might include people sharing items like computer printers, for example. They can also share services, such as babysitting for each other.
These “non-tangible” elements help ensure the developments can provide affordable living rather than affordable housing, Mr O’Callaghan said.
Sustainability and liveability prioritised
A sustainability consultant by trade, he said the design and construction will aim to achieve NatHERS ratings averaging eight stars for the dwellings.
Specific initiatives will include passive solar design, thermal mass inside the homes, natural ventilation strategies, rainwater harvesting and reuse, solar PV and energy efficiency.
Elements such as eaves for shading and a substantial amount of insulation will also be built in.
He said during research for his masters degree at the University of Sydney, he surveyed 75 homes in South East Queensland and found that passive design elements contributed more to energy efficiency than operational and behavioural elements.
They have at least double the effect, he said.
The operating expenses for residents will be very low. In combination, all the sustainability elements are expected to make the houses function at “virtually net zero” for energy and water.
Liveability is also a consideration, and the design will aim to achieve a Silver or Gold standard under the Livable Housing Australia guidelines. A Green Star Communities rating may also be sought.
He said the design aspect was “easy compared to the soft stuff developers get wrong”.
The market is there
Since the company launched its idea to the public 18 months ago, 700 people have registered expressions of interest in renting one of the homes.
“There is enough demand to keep us busy for 20 years,” he said.
Mr O’Callaghan said the company was not only looking at undertaking developments in Australia. He envisions the model being replicable and scalable in the US, New Zealand and the UK, for example.
Wherever there are no long-term leases, and sense of community is lacking, it could work.
“We need more diversity in the housing space.”