Video: Finance options for housing alternatives – NENA Housing Week
I recently gave a 20 minute talk for NENA Housing Week on "Finance options for housing alternatives". The recording is below.
The presentation also featured:
- an interview with Emma Spano, Head of Impact Lending from Bank Australia, which focused on how the bank looks at alternative housing model projects when considering investing debt, and
- a talk by Linda Seaborn, Senior Policy Advisor on housing for the Business Council of Coops and Mutuals (BCCM), also talked about rental cooperatives and the role they could play as a "middle ground" solution between home ownership and rental.
My talk focused on the two key enablers that we see are critical to unlock the potential of the community-led housing sector:
- Early stage impact equity investment
- Early stage investment strategy and due diligence
Over the last few years our Advisory team have been involved in advising five aspiring community groups. Most of these emerging groups have wanted to create intentional communities of ~25+ homes for ~30-40 adults, which international research on communities in the US and Northern Europe indicates is the optimal size for a successful cohousing community. While each of these groups targeted different geographic locations (regional WA, regional NSW, regional Victoria, eastern and western suburbs of Melbourne), and had been in formation for different lengths of time (between 6 months to 4 years), they have all shared similar values and objectives around the importance of community, affordability and environmental integrity.
What has differed widely between these groups is the financial capacity of the individual members and therefore the collective. The different financial capacity and age cohorts of these groups, has meant we have had to develop different capital solutions and structures to support households to move to collective formation, to property acquisition and beyond.
While the capital solutions have needed to be different, the critical differentiator on progress to date has been the amount of equity each group has been able to invest in the early stages of group formation.
Entrepreneurial equity investment is critical to develop a sound investment strategy, not only for site acquisition, but for the development and operational stages of the community they want to create.
Without a sound end to end investment strategy for projects, it is very difficult to attract the equity (collective member or external investors) or debt required to build and operate an intentional community.
Early stage equity and a sound investment strategy is catalytic for any project, more so a community led one which my its nature in the Australian context is seen as innovative or alternative by equity or debt investors.
We think community led projects can scale to play an important role in the housing market.
In particular supporting middle income households (a cohort that is increasingly under financial stress as inequality increasingly becomes structurally entrenched in the Australian economy) to access quality and affordable housing.
Our current focus is on broadening the impact our building group model has managed to achieve over the last 12 years. A big component of this has been affordability. The average cost of homes across our 10 building groups has been ~$1.05m, with the average saving to market value for home being ~$150k. So while our building groups have been able to build more affordable homes, they have still been relatively expensive.
We are now are working on evolving the model to push the average cost down to ~$600-700k. This will create a scalable approach that can support more aspiring communities achieve their visions.
With support from the Lord Mayors Charitable Foundation (LMCF), our work is focused on using the building group model to create ownership and rental pathways for inter generational or retirement living communities with moderate and lower incomes.
As I reiterate in this talk, a critical factor in achieving this will be attracting more high impact early stage equity investment.
As Erin Dolan from LMCF points out in her recent article, we can look to good examples like the New York Acquisition Fund for how this has been achieved in other countries.
A few years ago we established Property Collectives Impact to play this catalytic role in this emerging sector. We are proud of the role we have played in co-creating Brougham Street CoHousing in Eltham. Unfortunately we were not able to create any rental pathways for this project. The initial vision was to create a mixed tenure outcome.
We need more awareness and partnerships to create this impact.
Our focus now, is broadening our network and identifying purpose driven households, investors, landowners, developers and organisation's that want to co-create more diverse and resilient mixed tenure communities.
Communities that will have an enduring positive impact for their members and for our streets, neighbourhoods and society.