Community-focused property development is the sector’s most significant trend of the last five years
Genevieve Brannigan, Communications Collective | 30 March 2018
The demand for values-led, people-oriented and sustainable development is arguably the most significant shift across property, architecture and design in the past five years, argues Genevieve Brannigan, who will be part of a panel on this topic on Thursday 19 April at The White House in Melbourne.
To help understand the rise of community-focused developments, it’s useful to take a quick look at how Australians are choosing to live. Population growth and densification have reshaped our cities, with the result that more people are living in apartments. In my hometown of Melbourne, almost half the population growth in the past decade has occurred within 20
kilometres of the city centre, with an extra 400,000 people moving into the inner and middle suburbs. Melbourne’s population is expected to double over the next 30 years, to eight million by 2050.
Most of these people are moving into medium-density developments, with large multi-residential skyscrapers remaining the preserve of the CBD. The result of this intensive population growth concentrated on apartments is a maturation of the market. Following a decade-long growth spurt and widespread development, buyers now have unprecedented choice, and they’re more informed than ever.
Add to this the recent expert commentary that the residential sector is now in a cooling-down cycle, and what we see is a buyers’ market. Developers need to listen very carefully to where the demand is coming from or there is a real risk they might be left behind.
Tribes, communities, shared values
It is no coincidence that as our cities get ever bigger people long for more meaningful connection with those around them. People want more than somewhere to live – they want to belong. Much-lauded projects such as The Commons (Brunswick and now Hobart) and Nightingale align affordability and sustainability, and in doing so naturally attract a community of like-minded people.
When Breathe Architecture founder Jeremy McLeod first proposed The Commons Brunswick in 2007, it was a radical departure from the standardised, and often low-quality, developments that had been going up across Melbourne throughout the housing boom.
Following “deep green” passive environmental design principles it would feature double glazing and adjustable sun shading; there would be no air conditioning and – controversially – no basement carpark (but there are 76 bike spaces for just 24 apartments).
Toxic, high-VOC or environmentally harmful products and finishes were eliminated throughout. There were neither agents nor a costly showroom. These initiatives allowed the designers to pass on savings to purchasers: the one- and two-bedroom apartments eventually sold for between $390,000 and $590,000.
Yet, as you might expect in an architect-led project, design quality was paramount: brass tapware, not chrome; recycled timber flooring; exposed concrete on the walls and ceilings providing thermal mass. Potential residents were closely consulted on design features and budgets. For example, when asked if they wanted individual laundries (costing more and meaning a loss of living space) all residents opted for communal facilities.
Now completed, there is a café and an organic wine store on the ground floor, and a communal vegetable garden and beehive on the roof. Residents get to know each other – they trade gardening tips or bump into each other in the laundry. These kinds of communities might not be for everyone but, by attracting like-minded individuals, they speak to the modern need to find our tribe, the people who share our values.
The Nightingale effect
Partly due to timing, The Commons had a difficult birth – the financial crash of 2007 meant bank financing was suddenly withdrawn – but fortunately ethical developer Small Giants, who our agency would go on to work with on The Commons Hobart, stepped in.
The Commons became the model for Nightingale (with Breathe and McLeod being involved in several projects since). Nightingale has since deployed The Commons’ principles at scale and has 12 active projects in various stages of completion.
To say the idea of The Commons and Nightingale has caught on is an understatement. There are reported to be more than 5000 people on the ballot list for Nightingale projects.
Two design presentations for The Commons Hobart – Australia’s first ever carbon positive development (it returns sustainably generated energy to the grid) – were booked out in record time, and sales were extremely strong from the first release, with buyers entering into a ballot to compete for the opportunity.
More traditional developers are taking notice, too, and we are seeing several projects that were already in progress being reverse engineered to become more community focused.
Why aren’t there more of these kinds of developments?
Of course, many people would love to live in a well-located, high-quality apartment with great sustainable credentials. Unfortunately, Australia’s market and regulations are still weighted against these kinds of developments. Unlike countries such as Germany, where the baugruppen (housing group) model of collective housing is quite mainstream – over 500 projects have been established in Berlin alone over the past 15 years – Australia’s laws actively encourage property speculation.
Negative gearing for investment properties and discounted capital gains tax on primary residences have the effect of driving up land prices. Banks are unwilling to lend housing collectives finance without restrictive joint and several liability loans.
Nor are they keen to lend to developers who intend to deliver less than the golden rule of 20 per cent profit, which can rule out those such as Nightingale, which wish to cap profits at about 15 per cent (Nightingale also has a similar cap on owners profiting from selling on their properties, which has the effect that most buyers are owner-occupiers rather than investors).
Then there are the bureaucratic bodies that tend to look with suspicion at any development that departs from the norm: Nightingale has consistently had to appear before VCAT to defend its carpark-free approach.
Fortunately, there are many innovative players who have found ways to drive sustainability and community forward despite these barriers. Property Collectives brings together home buyers, in what is effectively a baugruppen, to deliver significant savings (in the vicinity of 15-20 per cent) by internalising developer margins for high-quality townhouse developments.
When Nightingale was considering how to scale its affordable housing model it partnered with Lucent Capital as the first developers to be offered a licence for the Nightingale model. The result was Little Miller being built next to Nightingale Brunswick East, largely to the same principles, with the higher yield on Lucent’s project lifting the profit margin just high enough for bank lenders. Lucent will make a reduced profit on Little Miller, approximately $1.2 million less than on a similar project, but benefitted from being able to sell the development into the Nightingale waiting list.
We are also seeing more projects that emphasise community consultation, such as 122 Roseneath Street in Clifton Hill, Melbourne. Development partners Wulff Projects, ICON Developments and Assemble had a vision for “small-footprint living”, with well-designed dwellings and community-friendly spaces including a multi-purpose workshop and a large shared room for dining and entertaining.
Reversing the traditional development model, Assemble steered a democratised design consultation that gained feedback from prospective purchasers at key stages prior to construction, maximising flexibility and customisation. Extensive engagement with the wider community also led to a less oppositional development process – Clifton Hill residents were happy to support the project and it avoided VCAT arbitration. Beyond building positive sentiment, these initiatives led to record sales, with 53 of the 65 available apartments and townhouses selling in just 12 hours, almost entirely to the owner-occupier segment.
Deliberative versus speculative development
Currently, the housing market encourages investment properties, which account for about 80 per cent of new apartments and are inherently weighted towards lower quality, less sustainable developments.
Andrea Sharam of RMIT University has coined the term “deliberative development”, in opposition to speculative development. Architect-led projects can encourage owner-occupiers and suit a deliberative model where speculation and profit is not the only goal. Nightingale’s cap on resales is one example of this.
But unless Australia’s overall framework for property development changes significantly we are unlikely to see the widespread creation of baugruppen-style housing collectives or the mainstreaming of low- or not-for-profit deliberative developments. The barriers are just too high, not least because a speculative property market means only the richest developers can afford the few sites that become available.
Fortunately, ethical companies such as Small Giants and Lucent Capital are stepping in. They are creating projects of the highest sustainability, which are affordable and bring together people in active, happy communities.
They understand their markets and recognise that there is a growing demand for these kinds of developments. They also gain the satisfaction of creating acclaimed projects that will leave a lasting legacy. It’s fair to say they are the new generation of developers.
Genevieve Brannigan is director of Communications Collective and has 15 years of experience working with leading property, architecture and design brands.
Communications Collective’s panel ‘The rise of ethical, community-focused property development” is taking place on Thursday 19 April, from 6.30pm at The White House, 11 Princes St, St Kilda, Victoria. Speakers will include Dave Martin of Small Giant Developments, Sophie Whittakers of Lucent Capital, Andrew Hoyne, Tim Riley from Property Collectives and Katherine Sundermann of MGS Architects.