No Cookie Cutters: Finding Feasibility in HAFF Projects

The pace of affordable housing development is about to go up a gear and the time to prepare is now, the sector has been told. A third round of the highly successful Housing Australia Future Fund is imminent, further unlocking affordable and social housing across the country. But the devil is in the detail for project feasibility, speakers at The Urban Developer’s Affordable Housing Development Summit said, stressing the need for a tailored approach to make a scheme viable. Traders in Purple director Charles Daoud told the audience there was no “secret sauce or magic formula”. “Every project has to be studied and considered on its merits,” he says. Presenters at the summit, held in Sydney on August 23, praised the HAFF and other recent policy measures, saying the sector is undergoing an evolution in the speed and scale of project delivery. Housing Australia chief executive Scott Langford says “there is an incredible desire to bring things together and create some long-term structural shifts in the system”. “We committed $14 billion in Commonwealth capital to support the market, in the last financial year, in the social and affordable housing space alone,” Langford says. “So, it is extraordinary. It’s exciting. It is also 24/7 because the scale of the ambition has to be matched by a sense of urgency to get things delivered.” ▲ Bridge Housing chief executive Laurie Leigh with HAFF administrator Scott Langford, who says the next funding round will be delivered on a rolling basis. And that speed is likely to shift up another gear with the third round of the HAFF, expected to open later this year. “The guidance we would give is that we are much more likely to run procurement on a rolling basis, or an on-demand type model, that enables us to engage differently with market,” Langford says. “This is going to be about speed of commitment, speed of commencement, speed of delivery … I would suggest to the market that over the next few months is the time to be thinking about the partnerships that you can put in place now.” With a target of 40,000 new social and affordable homes, the HAFF has already allocated support to deliver more than 18,000. No decision has been made on whether the remaining 22,000 will be allocated in round three, or if additional rounds will follow. Feasibility, finance under the magnifying glass The variables in social and affordable housing make attention to detail critical for project feasibility, speakers agreed. While the HAFF has helped lay the foundation for successful developments, the mix of stakeholders, incentives and outcomes mean each deal requires careful consideration. Government support is essential, though not in the form of direct financial subsidies, according to Daoud. “If the private sector is going to participate the delivery of affordable housing, and they should, there needs to be a modicum of return,” Daoud says. “I use the term economic profit, not development profit, and I use that term because I acknowledge that developers shouldn’t make development profit delivering affordable housing. “Because the subsidy will need to be far too high. It’ll cost the government far too much.” ▲ The Urban Developer managing editor Taryn Paris with Traders in Purple director Charles Daoud and Deicorp executive manager Robert Furolo. Instead, government can provide guarantee in the form of secure take-out—reducing sales and marketing risk—or by providing other incentives. Deicorp executive manager Robert Furolo says permissive planning to allow greater FSR or height in response to increased affordable housing, for example, could help get borderline-feasible projects over the line. “It won’t take an unfeasible project and wave a magic wand and make it feasible,” Furolo says. “But it makes projects that are barely feasible, worthwhile doing, and it makes a good project even better. “To be able to enter the market, buy a block of land, finance it, build it, approve, improve it and operate it, there needs to be a subsidy somewhere along the way to make that work … either you need free or discounted land, or an operating subsidy, or an availability payment of some description.” The right combination of planning, finance and context is needed to bring affordable housing to areas with high land values and historically low density, speakers agreed. “If you do not have scarcity of supply, and if you do not have amenity at your doorstep, mixed tenure does not work” Daoud says. “Don’t try and make it work. Work on something else that’s going to give you a result,” Daoud says. CHPs need bespoke partnership deals Off-the-shelf contracts and partnership arrangements will not work for social and affordable housing projects, presenters at the Summit said. Langford says the structure of partnerships—and particularly risk allocation at different stages of development and operations—is a key element of successful HAFF projects. ▲ 9Springs managing director Belinda Bentley with Sustainable Development Group managing director Richard Ollerhead at the summit. “There is no single actor that can deliver the end-to-end solution at the scale that we’re talking about, in the diversity of locations across the diversity of typologies,” Langford says. Developers, builders and institutional investors, in particular, need to absorb the risk they are being compensated for, rather than offloading it onto Community Housing Provider partners. “We’re very keen to see partnership structures that are sustainable and robust through the whole lifecycle,” Langford says Faith-based CHPs are increasingly professionalising and lobbying for reform to better pursue partnerships and opportunities. Sustainable Development Group managing director Richard Ollerhead says stakeholder management can be complex. For stakeholders, property development represents “brutal programs; the pace is significant, the uncertainty is hard to navigate”. 9Springs managing director Belinda Bentley asks that councils assist churches to unlock the potential of their assets. “Please do not put heritage listings on churches … These community spaces: who’s going to be providing that in the future? Is that you, councils? Is that you, state governments? “Who has the funds in order to do that?” Sydney Anglican Property chief executive Ross Jones agrees. “We’re really proud of our heritage. But our heritage is more than just our buildings, and that’s not recognised in the New South Wales system. “Come to an old church and sit in a 1910 pew for an hour, and see how you like it.”

No Cookie Cutters: Finding Feasibility in HAFF Projects

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