BHC’s Chief Executive Officer Rebecca Oelkers on the social and affordable housing landscape
Our CEO Kirsty Chessher-Brown interviewed Rebecca about what the future holds for the provision of social and affordable housing in Australia.
The social and affordable housing landscape has changed significantly over the past decade. How have these changes shaped BHC during your thirteen years with the organisation?
It has and it hasn’t changed. Sadly the underlying situation is still pretty challenging because we’ve still got a decreasing number of social and affordable homes in Australia. That is largely because of the fact that we still haven’t got a long term investment framework, at either a Federal level or state level, that ensures we can build at a rate that keeps up with population growth and current demand. So the level of social and affordable housing stock continues to decrease as a proportion of the overall housing system. This also means that without something significant changing, we will continue to have a serious undersupply in the sector pipeline to meet future demand.
This is at the same time as we are seeing an increase in the number of people requiring affordable and social housing. The demand on the Queensland State Housing register is huge, like all jurisdictions, and across Australia, the data shows there are almost 200,000 households waiting for social or affordable housing. These people are just are not in a position to rent sustainably in the private market. Some of them, for example people on what was previously Newstart, or older people on the aged pension, can spend up to 70% of their income on their housing costs in the private market and that is obviously a cause of great concern.
Despite those challenges, during the time that I have been at BHC we have seen some fantastic things that have really shaped the evolution of the sector. We saw the Nation Building Economic Stimulus Plan come into being after the GFC, which brought a $5.2bn injection of funding into social and affordable housing across Australia. BHC was fortunate to obtain $93 million through that process, which enabled us to launch a construction program worth $200 million and create new partnership models for delivery. During that time, BHC was able to deliver 760 new units of accommodation, which was terrific and really important in being able to grow our financial and commercial strength.
The other big thing that came into being within that period was the National Rental Affordability Scheme (NRAS). And even though I know it has been criticised by a lot of people, we thought it was fantastic because it actually got new investors, and therefore supply, into the affordable housing space, and that’s what you need.
The other thing I’ve seen over this past 13 years is the advent of mixed tenure developments, and NRAS was one element of that. BHC led the way in Queensland with mixed tenure and it’s had a really positive impact for our tenants and portfolio. It’s absolutely the way of the future, having a component of social housing, a component of affordable housing, some market housing and maybe some commercial and retail in the one development. That diversity is what makes a community. And that’s what you really want to achieve when you’re doing any kind of development. So I’m hoping that over the next period of time we will see some real opportunities to refresh our collective focus on these kinds of models. Not just a little bit of stuff around the edges but a really big change in terms of the investment that we put into social and affordable housing for the future. It really comes down to what kind of Australia we want to live in.
Given BHC’s experience with delivering mixed tenure housing, what advice would you give to the industry?
Getting the mix right is absolutely crucial. When I talk about social and affordable housing, I’m talking about rental housing, which is what BHC provides. Those rental options can be included as part of a mixed tenure development that has some purchase elements to it for investors, owner-occupiers and even affordable purchase options. Many renters in the social and affordable housing system are not likely to be in a position to purchase, but some will, and others will move through the continuum from an affordable rental to a market rental over time. Others will need the stability of affordable rental over the longer term.
I think from our perspective the design is very important, that it respects the people who will live there. We spend a lot of money and time getting that right. We want to make sure that we’ve got welcoming communal spaces for residents, but also that the actual living areas that people have are beautiful, and are places that people across all tenures really want to call home. For example, thinking about our tenants who will be renting long term. You want their home to be somewhere where they’re happy inside the unit and they’ve got the right sort of design elements. You don’t need to have things like air-conditioning, we focus a lot on cross ventilation and a lot of other sustainability aspects so tenants are not spending as much of their money on heating and cooling. Similarly, from an external perspective, we use breezeways through the building so that the building isn’t overly enclosed and has lots of natural light. We are trying to provide comfortable spaces that also keep cost down as well, so it’s a difficult equation, but we find that people love living in the mixed tenure units we build. You’ve got this lovely mix of people and you don’t know whether your neighbour is wealthy or not, they are just your neighbour.
What role do you see for the private industry in supporting the provision of social and affordable housing?
I see institutional investment as one of the key ways that we’re going to be able to take provision of affordable housing from a very small thing to a much larger thing. So, in Australia, we typically see housing, even social and affordable housing, as simply a property transaction. But I see it differently to that. I see it as social infrastructure. And when I say social infrastructure, I mean that it is an essential component of all our communities, just like schools, hospitals and libraries. From an investment point of view, it’s got the same kind of characteristics as a typical infrastructure investment would have. It’s very long term. Yes, it’s got lower yields than more aggressive investments, but it’s also lower risk as there’s very high, long term demand for it, and the yield is very stable and non-volatile, delivering consistent and predictable returns.
Right now in Australia institutional capital is going overseas because we don’t have enough projects, or the right settings, for institutional investors. Projects that deliver the provision of affordable housing at scale would be perfect to capture that money here in Australia. We need a bipartisan government framework that has the right taxation and policy elements to give institutions confidence that this is a reliable long term investment prospect. We also need to work on those yields, which are typically low at around 2%. At this stage, it really depends on what yield an institutional investor would require to be able to get it to work. Let’s say an institutional investor requires 5%, where does that additional 3% yield come from? What are the levers that you can pull to get the right results whilst managing the risks? They’re the kinds of things that we’re working through with sector partners, government and investors, and that’s certainly where build-to-rent has a place as well. I think it will take a bit of lifting from all parties to land on the sweet spot that really unlocks this. Happily though, there is certainly a lot of goodwill and hard work going into it and already a number of really strong and collaborative models are being put forward by private industry and our sector alike.
There has been a push for government to take this opportunity to reduce some of the red and green tape that impedes the industry’s ability to create the communities Queenslanders want to live in. If you could take the proverbial scissors to that tape what would it be?
We would definitely like to see specific recognition of affordable housing in the Brisbane City Plan, perhaps through a specific land use code that recognises the benefit it brings to the community and therefore streamlines the development application process. If you can have affordable housing in each neighbourhood, then that is a much better way of doing it, rather than concentrating it in any one area. Whilst we do mixed tenure in our buildings it’s even better if you can have a provision for it across the city, and have it in each suburb, and encourage private providers to be part of that solution right across the city.
Perhaps also changes to how charges are levied on our sector, enabling us to instead channel funds towards delivering additional dwellings. Development assessment fees, infrastructure charges and utilities add up and can really affect the viability of an affordable housing development. Similarly, car parking requirements. In our experience, you don’t need carparking at the prescribed rates in affordable housing developments, and often substantially less than the planning framework requires. In fact, we make sure that our developments are near good public transport, shops and amenities, negating the need for having a car. What this means is that the car parking we are currently required to deliver often just adds a lot of extra cost, remains unused by tenants, and takes away from the productive space on a site.
Additionally, things like density bonuses across the city would be helpful. A general policy that looks at a density bonus for the inclusion of affordable housing could encourage private developers to get involved in delivery of new affordable homes, and help to normalise mixed tenure buildings. That’s how we’re going to get to these targets, not just through organisations like BHC doing it. We’ve really got to have more people active in this space, and incentives would go a long way to helping it become something that is done right across the city.
What does 2021 hold for BHC? Are you feeling optimistic?
I feel incredibly optimistic, I really do. It has certainly been a difficult year, don’t get me wrong, we’ve had a lot of challenges but actually what I’ve realised is how resilient people are. Our tenants and our staff have shown incredible strength and care for each other and they’ve all really banded together.
When became CEO last year I set two key goals for the organisation. The first was to grow the company. We had built roughly 2,000 units since the company was founded and I want us to get up to 3,500 within the next four years or so. The second goal I had was to enhance the lives of the tenants. Both of those goals are things I feel incredibly passionate about, and they will be priorities for us in 2021.
There’s been a lot of voices advocating to all levels of government around an economic stimulus package that focuses on the additional supply of social and affordable housing. It would be the best thing in 2021 to see a real increase in the numbers of social and affordable housing units provided, particularly given that we’ve seen during this time that having a roof over your head is just so crucially important. That would be an amazing silver lining come out of COVID-19.
I know that the UDIA Queensland and other groups have really put their voices behind these initiatives, and we particularly welcome the recent release of UDIA Queensland’s Housing Strategy, calling for further investment in build-to-rent and community housing. If we could come out of this stimulating the economy and the construction industry, as well as providing more social and affordable housing, that would be a really massive win.