As the cost of stand-alone Auck­land houses has rock­eted out of the reach of many buy­ers, at­ten­tion has turned to apart­ments.

As the cost of stand-alone Auck­land houses has rock­eted out of the reach of many buy­ers, at­ten­tion has turned to apart­ments.

Metro Magazine NZ - - Contents - TEXT — FRANCES WALSH

For the past year, Beatrice Clarke and Emma Quigan have been wil­fully home­less. Ev­ery few weeks, they have packed their Mit­subishi Colt to the gun­wales and criss-crossed Auck­land to house-sit and min­is­ter to Bub­bles the bor­der col­lie, Lulu the minia­ture poo­dle, Jess the blue heeler cross, var­i­ous cats, two chick­ens, etc.

Clarke, a full-time me­dia stu­dent, and Quigan, who works for a non-gov­ern­ment or­gan­i­sa­tion, ini­tially hatched their plan to live rent-free in re­turn for cus­to­dial du­ties in or­der to save a de­posit for a house. At the time, they were rent­ing a Lil­liputian one-bed­room apart­ment with a coin-op­er­ated shared laun­dry in Pon­sonby for $460. The ex­pe­ri­ence is il­lus­tra­tive of the need for rental re­form: on the first night of their ten­ancy, their bed fell through the damp floor into the ceil­ing cav­ity of the down­stairs neigh­bour. “The chip­board floor had turned to Weet-Bix,” says Quigan. The pair were forced to sleep on a mat­tress in the kitchen for a week, with no rent re­duc­tion forth­com­ing, their land­lady telling them that the apart­ment was al­ready a good deal. “Which, sadly, it was,” says Clarke. At night, in their bed­room, from the walls and be­yond they heard things: the wor­ry­ing sounds of wa­ter drip­ping, and the less-wor­ry­ing sounds of lovedup neigh­bours. Then there was the tem­per­a­men­tal el­e­va­tor. When they left af­ter a year, notes Quigan, the land­lady “whacked up the rent by $100 a week and had 50 peo­ple ap­ply­ing for it”.

By then, the twenty-some­things had re­alised that buy­ing a house in their town was the stuff of dreams. Auck­land is ranked the fourth-least-af­ford­able hous­ing mar­ket in the world, ahead of Lon­don (num­ber 12) and New York (num­ber 21).

As­set prices have de­cou­pled from in­comes: a me­dian-priced house now costs 10 times the me­dian house­hold in­come, ac­cord­ing to the De­mographia In­ter­na­tional Hous­ing Af­ford­abil­ity Sur­vey; the av­er­age price for a three-bed­room house is $920,000. And 40 per cent of res­i­den­tial prop­erty is held by own­ers who have mul­ti­ple prop­er­ties. Un­sur­pris­ingly, the rate of home own­er­ship, 63 per cent, is at its low­est since 1951.

The fig­ure gains in sig­nif­i­cance when con­sid­er­ing con­text. The pro­por­tion of fam­ily as­sets tied up in prop­erty in New Zealand has his­tor­i­cally been greater than in many other coun­tries, the United King­dom in­cluded, mean­ing a size­able seg­ment of in­ter­gen­er­a­tional wealth has resided in houses, and that fam­ily net worth is higher when prop­erty is owned. And then, length of hous­ing ten­ure im­pacts on health. Rent­ing, in this coun­try at least, is as­so­ci­ated with greater mo­bil­ity, a fac­tor which on its own is detri­men­tal to health and well-be­ing, par­tic­u­larly of the young and old.

But wait, there’s more: a body of re­search has found that rentals are of poorer qual­ity than non-rentals. In Au­gust, a sur­vey con­ducted by the Auck­land Univer­sity of Tech­nol­ogy and Buzz Chan­nel re­vealed that mould, and the damp con­di­tions that al­low the fungi to flour­ish, was present in 50 per cent of rental prop­er­ties — and that a lean four per cent of land­lords iden­ti­fied the health risk as “im­por­tant”. Hous­ing New Zealand looks to be among them: sev­eral weeks ago, a woman who has lived for a year with her four young chil­dren in a Hous­ing NZ semi-de­tached wooden house in Otara found a mush­room grow­ing in a crevice of her kitchen wall, and on in­form­ing her hous­ing man­ager was told that de­con­tam­i­na­tion and re­pairs would be “a 21-day job”. In short, own­ing has de­cided ad­van­tages.

All of which ex­plains why Clarke and Quigan have per­sisted. Af­ter in­her­it­ing money last year, they se­cured a toe-hold in the mar­ket: they paid a 10 per cent de­posit of $62,250 for an el­e­gant Cheshire Ar­chi­tects-de­signed 51sq m apart­ment in the city-fringe Skhy project with an 8m bal­cony, a stor­age unit and a car park, due to be ready by 2020 at the lat­est.

The deeds are pos­si­bly in the boot of the Mit­subishi and are likely to be for the fore­see­able fu­ture as they save to ser­vice their im­pend­ing hefty mort­gage.

Auck­land’s apart­ment mar­ket is lively. Two years ago, 70 apart­ment projects con­tain­ing 4700 units were be­ing sold off plans, or had build­ing con­sents, or were un­der con­struc­tion. This year, num­bers

It is damn near im­pos­si­ble to buy land, fund the pur­chase, de­sign and at­tain con­sents, build apart­ments and make a profit.

have swelled to 120, with 8600 units. Low-rise walk-up apart­ments (ver­ti­cally at­tached) and also ter­raced hous­ing (hor­i­zon­tally at­tached) are ap­pear­ing — both styles usu­ally cost­ing less than tra­di­tional apart­ment blocks, which if four storeys or more by law re­quire pretty-penny el­e­va­tors and sprin­kler sys­tems, for in­stance. The pro­lif­er­a­tion is a sign of our ma­tu­rity, says Ludo Camp­bell-Reid, the gen­eral man­ager of Auck­land Coun­cil’s de­sign of­fice: “New Zealand is a young coun­try and Auck­land was a bit like a ju­ve­nile delin­quent, un­sure of its per­son­al­ity.”

Apart­ments pro­vide adult op­tions, Camp­bell-Reid says. Baby boomers, for ex­am­ple, “can spend their lives mow­ing their lawns, trim­ming their hedge and cre­at­ing top­i­ary [he’s from Eng­land], or they can live in the cen­tre of the city, where they can walk to the opera, to the phil­har­monic orches­tra, to the wa­ter­front, to shops”.

Auck­land needs qual­ity four- to five-storey apart­ment blocks to fill “the miss­ing mid­dle”, he adds — the tran­si­tional area, that is, be­tween the quar­ter-acre sec­tions and the mul­ti­storey apart­ment blocks in the cen­tral busi­ness dis­trict. With the Uni­tary Plan now op­er­a­tive, such me­dian-den­sity hous­ing is per­mis­si­ble. Many Ki­wis, says Camp­bell-Reid, are aware of the virtues of apart­ment liv­ing hav­ing trav­elled to Syd­ney, Mel­bourne and be­yond, where such hous­ing is de rigueur and of­ten as­so­ci­ated with vi­brancy, di­ver­sity and af­ford­abil­ity.

The ur­ban plan­ner was ap­pointed to the job 11 years ago, shortly af­ter a nadir in CBD apart­ment build­ing and the en­su­ing pub­lic outcry over the hel­loNorth-Peck­ham-Es­tate-mi­nus-the-green­ery tow­ers hurled up in Nel­son, Hob­son and Union Sts. (“Apart­ments threaten to turn into ghet­tos,” the Her­ald de­clared in 2005.) Re­port­edly and fa­mously, one of the devel­op­ers re­spon­si­ble said that he would never live in a city that al­lowed him to do what he does. An in­dus­try source, who for rea­sons re­lated to job re­ten­tion prefers to re­main anony­mous, sheds light: “You’ve got to re­mem­ber there’s a kind of a so­cio­pathic qual­ity to some devel­op­ers. They just don’t give a shit: it’s just about money. Eco­nomic ar­gu­ments are very con­ve­nient be­cause they are eas­ier ar­gu­ments to make, but for a de­vel­oper to take on the eco­nomic ar­gu­ment and the aes­thetic ur­ban ar­gu­ment is very brave and bold.”

Ted Man­son, pa­tri­arch of the dom­i­nant Auck­land com­mer­cial prop­erty devel­op­ers Man­son TCLM Ltd, elu­ci­dates fur­ther: “It is damn near im­pos­si­ble to buy land, fund the pur­chase, de­sign and at­tain build­ing con­sents and then build blocks of apart­ments and make a profit.” The rea­sons be­ing that land is ex­pen­sive, bank fund­ing is hard to get, and con­struc­tion costs have in­creased by 18 per cent in the past year alone. As a re­sult, “devel­op­ers take short­cuts … and as we know, when times get tough or prop­er­ties leak, they all go bank­rupt”. It’s a sit­u­a­tion, says Man­son, that needs lo­cal and cen­tral gov­ern­ment in­ter­ven­tion (more later).

But Camp­bell-Reid has faith: “Hand on heart”, ev­ery sin­gle new apart­ment de­vel­op­ment that’s gone up across the city and in the re­gion in the past six years is well de­signed, due in part to the coun­cil’s peer-re­view­ing Ur­ban De­sign Panel, he says. It’s a view cor­rob­o­rated, sort of, by Richard Goldie, di­rec­tor of Ped­dle Thorp ar­chi­tects, cur­rently at work on five apart­ment blocks, including two in the tran­si­tion­ally sit­u­ated Mt Eden. “The dif­fer­ence be­tween an ugly build­ing 15 years ago and an ugly build­ing now is that it prob­a­bly won’t leak be­cause the checks and bal­ances in place now are ex­tra­or­di­nary.”

But be­fore we get car­ried away and reimag­ine Auck­land as a city pop­u­lated by beret-wear­ing, crois­sant-eat­ing Le Fi­garo read­ers, the present bus­tle in the mar­ket re­quires qual­i­fi­ca­tion, al­luded to by Man­son above: 15 per cent of apart­ment projects fall over, re­ports Tamba Car­leton of CBRE Re­search. The mul­ti­mil­lion-dol­lar Flo apart­ments in Avon­dale are a case in point, fold­ing last year re­port­edly be­cause of fi­nanc­ing is­sues and ris­ing con­struc­tion costs. Most apart­ments are

fi­nanced by a com­bi­na­tion of pre­sales and bank loans. The for­mer, says de­vel­oper Mark Todd, di­rec­tor of Ock­ham Res­i­den­tial, are com­mon­place through­out the world. “It’s the only way to get it done. No one is go­ing to spend $60 mil­lion on an apart­ment build­ing with no pre­sales.” As for bank fi­nanc­ing, it’s gen­er­ally ac­cepted that the sec­ond-largest cost af­ter con­struc­tion is fi­nance, says Goldie. In the case of a large-scale apart­ment block of 20-30 units, banks re­quire a 25 per cent re­turn on costs, says Todd, shunt­ing the mean­ing home: if the project is worth $100 mil­lion, it can’t cost a de­vel­oper more than $80 mil­lion.

That the banks are risk averse is un­der­stand­able, says Todd. The sec­tor is rem­i­nis­cent of the share­mar­ket in the late

80s — all yee-haw! with “un­con­scionable” con­tracts that favour devel­op­ers, lead to “spec­tac­u­lar train wrecks” and re­sult in loss of con­fi­dence (the pub­lic’s and the banks’), which in turn drives costs be­cause the banks then re­quire that 25 per cent re­turn. Con­se­quently, notes ar­chi­tect Goldie, few devel­op­ers (Todd be­ing one of them) can make a project fea­si­ble with­out sell­ing apart­ments at less than $12,000 a square me­tre, which means a mod­est two-bed­room unit of 80sq m costs al­most a mil­lion dol­lars.

Todd paints an ex­plana­tory pic­ture: af­ter view­ing the plans and/or mod­els of an apart­ment project at a dis­play suite, a per­son signs a con­tract, which goes un­con­di­tional in five to 10 days. Mean­while, the devel­op­ers have 12 months to de­clare their side of the con­tract un­con­di­tional, de­pend­ing on whether pre­sales and bank fi­nance are se­cured. By then, the pur­chaser has been on the hook for a year. If the project then pro­ceeds, says Todd, the devel­op­ers can ask the pur­chaser for an­other 15 per cent de­posit 18 months in — which has hap­pened on a num­ber of projects around Auck­land in the past year, he notes — and pos­si­bly can­cel the con­tract. Sure, the de­posit — held in a lawyer’s trust ac­count that yields about two per cent — will be re­turned, but cru­cially the blood­ied pur­chaser is back to square one.

Es­ca­la­tion clauses and ex­tended pe­ri­ods of due dili­gence just shouldn’t be in pre­sales con­tracts, Todd says. Nor should projects go to mar­ket with­out re­source con­sents and/or with no real com­mit­ment from fi­nan­cial in­sti­tu­tions, both of which oc­cur. “There’s no pro­tec­tions in favour of the pub­lic, which makes it a boom-or-bust cy­cle, be­cause ev­ery­one is scram­bling to get projects sold ... be­cause you’ve got to get them sold to get fi­nance.”

What New Zealand lacks is pa­tient capital, says Graeme Scott, an ASC Ar­chi­tects con­sul­tant and chair of one of Auck­land Coun­cil’s de­sign pan­els. Or, landown­ers/in­vestors who will forgo the quick buck in an­tic­i­pa­tion of sub­stan­tial re­turns down the road, in three cen­turies or much less. Scott en­lists the ex­em­plar of the Howard de Walden Es­tate, which owns most of Maryle­bone in cen­tral Lon­don, in ex­is­tence in one form or other since 1715. The copy be­low the head­ing “Longevity” on the es­tate’s web­site reads like an iwi mis­sion state­ment: “The Es­tate’s ap­proach is far-sighted and highly

strate­gic, with an em­pha­sis on build­ing value over the long term rather than max­imis­ing short-term prof­its.” By con­trast, says Scott, here the de­vel­oper has to buy the land, us­ing bor­rowed money from the bank, ramp­ing up costs dra­mat­i­cally. That’s why time is the enemy of the de­vel­oper, be­cause the more time it takes, the more it costs to fi­nance. But if the im­per­a­tive is for swift sales, says Scott, so is the im­per­a­tive to adopt a low-risk strat­egy — to just hold onto the land, do noth­ing, and watch the value climb.

But to rewind to those pre­sales con­tracts, Todd’s num­ber-one tip for those con­tem­plat­ing buy­ing off plan is to “check out the cred­i­bil­ity of the de­vel­oper”. Goldie has other sug­ges­tions: scru­ti­nise the sale-and-pur­chase agree­ment as the de­vel­oper may have flex­i­bil­ity in terms of what they ul­ti­mately de­liver. They may, for in­stance, have the right to sub­sti­tute re­con­sti­tuted stone for mar­ble, but prob­a­bly not to in­stall a bloody great pil­lar in the bed­room (as hap­pened in a 14-storey New Lynn tower in 2014, the im­pos­ing struc­ture a sur­prise for buy­ers, who claimed it was not on the orig­i­nal plan). In­ves­ti­gate the de­vel­oper’s track record, or bet­ter still, whether they have one. There is a mis­con­cep­tion that de­vel­op­ing is a wind­fall game. It’s not, says Goldie. “The best devel­op­ers are busi­nesses and they do de­vel­op­ment af­ter de­vel­op­ment af­ter de­vel­op­ment be­cause it’s fun­da­men­tally a cash-flow game. Sure, they make a profit but they carry big over­heads.” Then, ad­vises Goldie, check out the ar­chi­tects, the en­gi­neers and the builder “be­cause none of those peo­ple get there on their own”.

An al­ter­na­tive hard-line po­si­tion to that of the de­vel­oper and the ar­chi­tect is of­fered by Bill McKay, a se­nior lec­turer at the Auck­land Univer­sity School of Ar­chi­tec­ture and Plan­ning: “Don’t buy off plan.” Buy on the sec­ondary mar­ket, where you know what you are get­ting and can do due dili­gence by rum­mag­ing through the body cor­po­rate records. But note that body-cor­po­rate leg­is­la­tion is a mess, and the le­gal en­ti­ties are of­ten rent with fac­tions and prone to high­jack­ing by “a cou­ple of mem­bers who get a bee in their bon­net” about re­plac­ing per­fectly good car­pet in com­mu­nal ar­eas, for ex­am­ple, and land you with a stonk­ing bill.

If feel­ing au­da­cious, how­ever, McKay ad­vises heed­ing the New Lynn pil­lar episode — be­fore buy­ing off plan, en­gage an ar­chi­tect or build­ing sur­veyor to study the build­ing-con­sent draw­ings, not the draw­ings put about by the re­al­tors. And one thing about those banks, says Eey­ore McKay. They are all Aus­tralian. Word on the street is that the big four — ANZ, ASB, BNZ and West­pac — are over­lever­aged in Mel­bourne and Syd­ney and as a con­se­quence are not lend­ing here. “So

In­vestors are the pri­mary rea­son for res­i­den­tial prop­erty in­creases in Auck­land since the early 1980s.

you look at all the cranes build­ing apart­ments on Great North Rd. That’s not the begin­ning, that’s the end.”

For many rea­sons, then, apart­ments ap­pear a high-risk, ex­pen­sive busi­ness for all con­cerned. Some are call­ing for a ma­jor re­jig of the land­scape, and for a show­ing of po­lit­i­cal clout. In Au­gust, at the Pull­man Ho­tel, 100 peo­ple, re­ferred to in pro­mo­tional ma­te­rial as “the devel­op­ers, the sup­pli­ers, the in­flu­encers, the thinkers, the pol­icy mak­ers, the fun­ders, the com­mu­nity-hous­ing providers and the pub­lic sec­tor”, met to dis­cuss Auck­land’s hous­ing cri­sis, quan­ti­fied by a short­fall they were told was 35,000 dwellings and a need to build 10,000 so­cial houses in the next decade. Par­tic­i­pants sat at ta­bles — la­belled for a laugh “Screw­driver”, “Allen Key”, “Stud Finder” — and lis­tened to Ted Man­son, who may have un­der­gone a Pauline con­ver­sion.

Man­son, fam­ily worth es­ti­mated at $550 mil­lion, heads up a char­i­ta­ble foun­da­tion and is one of those rare char­ac­ters de­ploy­ing pa­tient capital. Con­struc­tion was un­der way, he told the au­di­ence, on 260 apart­ments in cen­tral Auck­land and in Glen Eden. Sixty per cent of those will be re­served for so­cial-hous­ing ten­ants, who will pay no more than a quar­ter of their in­come on rent. The rest will be sold to owner-oc­cu­piers: “I don’t want to sell to in­vestors if I can help it,” said Man­son, who also gave an un­com­pli­cated serve to the Not In My Back Yard crew abroad in Glen Eden: “They have got to get over them­selves. The rich can live with the poor ... we need to build more houses and we can’t build them on quar­ter-acre sites any­more. If the zon­ing al­lows for three or four build­ings on an ex­ist­ing state-house site, that’s the way life is.”

While Man­son sup­ported the Re­serve Bank’s re­cent up­ping of the LVR (loanto-value ra­tio) min­i­mum for in­vestors to 40 per cent, he wanted more: the in­tro­duc­tion of a mus­cu­lar capital gains tax, char­ac­terised by for­mer prime min­is­ter John Key as a hard sell in an elec­torate with half a mil­lion swing vot­ers, most of whom are baby boomers who own mul­ti­ple houses. “Prop­erty in­vestors are the pri­mary rea­son for res­i­den­tial prop­erty in­creases in Auck­land since the early 1980s,” Man­son tells Metro.

“In­vestors only ever buy for capital gains. If they say they buy for the re­turn, they are not be­ing truth­ful. With re­turns av­er­ag­ing three per cent, what’s the point if there’s no capital gain as well?”

Man­son is fa­mil­iar with the be­hav­iour: in­vestors buy a rental, watch it in­crease in dou­ble-digit fig­ures in value per an­num, have it reval­ued, raise more money against the in­crease in that value, and buy other rental prop­er­ties. Any losses along the way can be claimed

In­vestors only ever buy for capital gains. If they say they buy for the re­turn, they are not be­ing truth­ful.

against per­sonal in­come. Cur­rently, there is a capital gains tax by any other name, Man­son says, on prop­erty other than the fam­ily home if sold within a two-year pe­riod. In­crease it to 10. “If dou­ble-digit capital gains were stopped, it wouldn’t be the end of the world for in­vestors. The law of na­ture would re­set who buys prop­erty in Auck­land and why. It’s time for the wealth to be shared out more equally be­tween the haves and the have-nots.”

Man­son has many other ideas, prom­i­nent among them the need for lo­cal and cen­tral gov­ern­ment to make pub­lic land avail­able for so­cial hous­ing, ei­ther re­tain­ing own­er­ship or sell­ing it at re­duced prices.

A few days af­ter hear­ing Man­son’s turn at the Pull­man, Ock­ham’s Todd was due in Welling­ton for a meet­ing with Prime Min­is­ter Bill English. Todd, like Man­son, is look­ing to the fu­ture, build­ing a capital base for the Ock­ham Foun­da­tion, a char­ity with an ed­u­ca­tional baili­wick. He an­tic­i­pated his spiel to English would go some­thing like: “There’s a rea­son that we’re build­ing only 7000 houses a year. It’s be­cause the av­er­age price, including for apart­ments, is north of one mil­lion dol­lars. Auck­lan­ders can’t af­ford that, and you can’t dou­ble sup­ply of the wrong thing. The real is­sue, sir, is that you’ve got to en­cour­age the in­dus­try to build the right thing.”

De­pend­ing on how things go, Todd might let rip. The hous­ing cri­sis, he says, is not, as is of­ten re­ported, about a short­age of land. The gov­ern­ment is too ready to fund greenfield in­fra­struc­ture, cap­tured as they are by those keen to make an easy killing chop­ping farm­land into $800,000 sec­tions — yet there are few in­cen­tives for devel­op­ers build­ing where peo­ple demo­crat­i­cally de­cided to live. “As a cit­i­zen it pisses me off big time.”

The Uni­tary Plan, pro­duced af­ter demo­cratic con­sul­ta­tion, con­cluded that 70 per cent of new hous­ing should be built in the ex­ist­ing hous­ing foot­print, says Todd, be­fore get­ting lyri­cal: “Peo­ple don’t nec­es­sar­ily want to live in Al­bany or Kumeu or Flat Bush or Pa­pakura or Drury or Still­wa­ter or Orewa. They want to live in Eller­slie or Browns Bays or Birken­head or Taka­puna or Glen­field or Hen­der­son or New Lynn or One­hunga or Otahuhu or Orakei or St He­liers or Pan­mure.”

The case study: Ock­ham has an eight-storey apart­ment block un­der con­struc­tion in New­mar­ket. To con­nect to the wa­ter sup­ply, it paid $11,000 for each of the 60 units. “So I wrote a cheque to Water­care for $660,000 to con­nect this thing to the wa­ter network that is al­ready here,” Todd says, be­fore point­ing to a

pic­ture of a green­fields site: “These guys go and build 60 houses, pay the same fee and Water­care has had to take all their lines all the way up there. They’re sub­si­dis­ing these guys, who are al­ready mak­ing heaps of money, and pe­nal­is­ing those who are build­ing what peo­ple need, where peo­ple need it.”

An­other thing: some in the in­dus­try have been slow to cot­ton on to the im­pli­ca­tions of the Uni­tary Plan, which no longer eco­nom­i­cally pre­cludes build­ing smaller units, and many of them, for con­sid­er­ably less than a me­dian-price house. Ock­ham has re­cently gained con­sent for a 14-unit block on the site of a for­mer state house in Mead­ow­bank. It paid $1.33 mil­lion for the land and will sell each unit for an av­er­age price of $670,000. Last year, 10 houses were built in the sub­urb, sell­ing for an av­er­age $2 mil­lion each.

“So with just that one site un­der the new rules,” says Todd, “we’ll dou­ble the hous­ing sup­ply next year in Mead­ow­bank at .3 of the cur­rent cost of a new house in the area.” Todd re­ports the neigh­bours are well pleased. “They don’t want a de­vel­oper to buy four or five sec­tions and build a hun­dred units — they want in­ner-city Syd­ney or Mel­bourne sub­urbs, with three-storey char­ac­ter units in vary­ing scales, shapes and sizes.”

Over in as­pi­ra­tional Mel­bourne, things, how­ever, look to be shift­ing in a di­rec­tion at­trac­tive to those with Utopian sen­si­bil­i­ties and who want well-de­signed but af­ford­able $8000-a-square-me­tre, me­dian-den­sity apart­ments. Nightin­gale Hous­ing has five apart­ment projects un­der con­struc­tion — four in Mel­bourne, the fifth in Fre­man­tle. The not-for-profit came about as a re­sult of ar­chi­tects “shar­ing their frus­tra­tions”, says Dan McKenna, de­vel­op­ment re­la­tion­ship man­ager.

Nightin­gale li­censes a model of al­ter­na­tive hous­ing that en­ables a num­ber of cost-sav­ing mea­sures, including the ex­cis­ing of devel­op­ers and real es­tate agents from the equa­tion, but also pos­si­bly car parks (“Well, they’re in Mel­bourne, we’re in LA,” says the univer­sity’s Bill McKay), pri­vate laun­dries, and air-con­di­tion­ing units. “Banks are risk-averse so there are rea­sons why things are done the way they

Water­care is sub­si­dis­ing these guys, yet pe­nal­is­ing those who are build­ing what peo­ple need, where peo­ple need it.

are done, but we’re try­ing to dis­rupt that process,” says McKenna.

The model works like so: an ar­chi­tect ap­plies to li­cense a project (for $600). A board — “we’ve got the state gov­ern­ment ar­chi­tect and a num­ber of other heavy hit­ters” — as­sesses whether the project is an eth­i­cal fit. If it is, ar­chi­tects are given ac­cess to Nightin­gale’s in­tel­lec­tual prop­erty, including a list of wannabe pur­chasers, which in turn saves money on pro­mo­tional ma­te­rial and dis­play suites.

Nightin­gale’s sup­ply is sig­nif­i­cantly less than their de­mand; 3000 wannabe pur­chasers/owner-oc­cu­piers are stand­ing by. Then there are the in­vestors — projects may have 25. Their prof­its are capped at 15 per cent a year for the pe­riod of the build. “Our fea­si­bil­ity stud­ies are weighted so that we know the bot­tom line on the spread­sheet.” Once that point is reached, says McKenna, money is shaved off the pur­chase price for the end users, who may be Abo­rig­i­nal peo­ple, Tor­res Strait Is­lan­ders, peo­ple with dis­abil­i­ties, full­time car­ers, fire­fight­ers, teach­ers, po­lice of­fi­cers or am­bu­lance work­ers — 20 per cent of apart­ment stock is re­served for

those iden­ti­fied as strug­gling to mount the prop­erty lad­der in Aus­tralian capital cities.

In­volve­ment in a Nightin­gale project is not for the faint of heart, or for those low on al­tru­ism. “We do an ex­ten­sive pur­chaser en­gage­ment process,” McKenna says. Af­ter the project has a site and ar­chi­tect, fund­ing, and pur­chasers, fu­ture oc­cu­pants are sur­veyed about “what they de­sire or need” in de­sign terms — bees may need to be ac­com­mo­dated on the rooftop, for in­stance. McKenna and his girl­friend have bought in Bruns­wick’s Nightin­gale 1 — five storeys, 20 apart­ments, ground-floor re­tail space, rooftop com­mu­nal gar­den. “We all get to­gether once a month and go through the site and talk to the builders. They show us what they’ve been do­ing. If you can make it, you make it, if you can’t, you can’t. You might get some cof­fee with some peo­ple af­ter­wards. It’s not ev­ery­one hold­ing hands, but you get to know these peo­ple.”

The model dis­cour­ages the view­ing of hous­ing as spec­u­la­tive fi­nan­cial as­set by plac­ing a covenant on fu­ture sales, en­sur­ing “you’re not just the lucky guy who gets in at the start … and gets this re­ally af­ford­able prod­uct and then sells it on the free mar­ket in six months’ time”. Ven­dors may sell, but only for the apart­ment’s orig­i­nal pur­chase price plus the price of any capital ad­di­tions, and any in­crease in the sur­round­ing sub­urb’s hous­ing in­dex since pur­chase. That the ro­bust and well-de­signed apart­ments are linked to hous­ing rather than apart­ment prices is only fair, says McKenna. It’s ap­ples with ap­ples: there’s cur­rently an over­sup­ply of poorly built apart­ment stock on the mar­ket in Mel­bourne. Nightin­gale Hous­ing has fielded half a dozen in­quiries from New Zealand ar­chi­tects to date.

Back home, one of the ar­chi­tects of Clarke and Quigan’s soon-to-be bolt­hole, Pip Cheshire, is dis­avow­ing his pro­fes­sion’s reach. “You can ar­gue the de­sign is­sue, get ef­fi­cien­cies of space, and work around code con­straints. It’s triv­ial, when we need 100,000 dry, healthy houses with good fresh air — like the state houses built by the first Labour gov­ern­ment were. They were acts of na­tion-build­ing, not the re­sults of mar­ket machi­na­tions. We need a shit­load of good houses be­cause they’ll re­solve health is­sues and go a long way to stop do­mes­tic vi­o­lence. How are you go­ing to do that? You’ve got to use the pub­lic purse.”

Post­script: The peri­patetic Clarke and Quigan are look­ing af­ter seven-year-old Archie the west high­land ter­rier in Free­mans Bay for the next week, and are open to of­fers there­after.

We need 100,000 dry, healthy houses like those built by the first Labour gov­ern­ment. They were acts of na­tion-build­ing.

BE­LOW— The 14 apart­ments Ock­ham plans for a Mead­ow­bank site once oc­cu­pied by a sin­gle state house will sell for an av­er­age price of $670,000.

ABOVE— Nightin­gale Hous­ing projects in Australia have ro­bust rules that pre­vent the dwellings be­ing treated as spec­u­la­tive as­sets.

ABOVE— This Ted Man­son Foun­da­tion project in Liver­pool St in the CBD will in­clude so­cial­hous­ing apart­ments.

ABOVE— Apart­ments such as those in this Ar­chi­tec­tus-de­signed project at Wyn­yard Quar­ter are prov­ing pop­u­lar with baby boomers.

LEFT— Medium-den­sity projects of­ten in­crease the sup­ply of af­ford­able hous­ing.

ABOVE— In­ner-city apart­ment liv­ing is an at­trac­tive op­tion for peo­ple want­ing to be within walk­ing dis­tance of CBD the­atres and restau­rants.

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