When housing affordability becomes an economic risk

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Nexus, Publish By GHD.

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Where ideas connect.

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Many communities around the world
are facing a housing crisis.

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How can practical solutions, technological
developments and major reforms

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help us make headway
on this intergenerational issue?

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Today, we're looking at new,
unexpected developments

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in the affordability
and accessibility of housing.

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I'm really delighted to be joined
by Hugh Utting in London,

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who's an urban planner,
strategic consultant and recent Sir

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John Monash Scholar
at the University of Cambridge.

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I also have with me
the Director of architecture, Craig Muir,

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a specialist in urban design and urban
infrastructure.

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Craig has been recognized
by Curtin University alumni

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for his professional achievements
in the humanities

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and joins me from Perth, Australia.

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It seems that every generation in recent
memory has experienced a housing crisis.

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How are the challenges today
different to what we've seen in the past?

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Craig, what's your perspective?

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Oh, Jill,

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I think in today's environment,
the impact of climate change is paramount.

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It's impacting communities and housing,
particularly in a number of ways.

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From, energy cost,

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and sustainability issues, right
through to,

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events such as floods and droughts

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that are impacting communities
and housing dramatically.

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And, as a result of that,

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we're seeing a range of challenges
that, we've not experienced in the past.

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And, Hugh, you know,
you're in another part of the world.

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What's your perspective
on, how the challenges that we face today

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are different to what we might have seen
in the past, in the housing sector?

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Well, look,
I completely agree with Craig that

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I think climate change is going to be
the biggest issue of this century.

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And really, this generation in regards
to housing, I think particularly

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also around insurance and the ability
to get more mortgages as climate change

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impacts, be it freak events, create
sort of a and more unstable climate.

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Big banks, financial institutions
are going to be reviewing

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if people can afford to leave in places

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such as in fires, irons
or in coastal properties.

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I think linking to something else
in a more global context here in the UK,

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I think the housing bubble,
when the financialization of the housing

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market from, record low interest rates,
I think this generation

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is going to have a real test
as those interest rates increase,

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and it will be something to watch about
how the strength of the market

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continues,
as borrowing costs increase as well.

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Yeah.

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And so you've both spoken there
about both the, physical, and impacts

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of climate change and the financial
or economic perspectives.

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What, unexpected solutions or innovations
are you saying in response

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to these challenges?

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Here.

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Well, I think what's most interesting
is actually

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the institutions
getting involved, in housing provision.

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But so here in the UK,
because of the record house price growth

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that has happened over

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the last couple of decades, institutions
like the transport for London

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and Cambridge University,
two very different, public sector

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public sector institutions are investing
in major housing projects,

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to help provide revenue streams
for their respective sort of businesses,

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but also accommodation.

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So in the university of Cambridge's case,
the academics and students,

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but for transport for London for
the social affordable housing provision.

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Why are they doing this?

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Well they've got the excess land

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and they've also got the capital
and sort of the, strategic intent

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that for these businesses to survive,
they've got to get new revenue streams

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and housing and particularly affordable
and social housing provides a stable

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but also social benefit stream,
for these respective organizations.

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And we're seeing around the world
similar patterns occur.

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You know,

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we might do a little bit of a deeper dive
on that affordability piece in a minute.

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But, Craig,
your perspective will be quite different,

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I think because of the work you do
in, remote regions in Western Australia.

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What, what unexpected solutions
or innovations are you saying in response

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to those challenges
that the housing market is facing?

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Look,
you're seeing in certainly in Australia

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the rise of the build to rent model,
which is really about providing

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a long term secure rental solution,
for portions of the community across

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all demographics, and to the extent
that in some states in Australia,

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you're seeing subsidies
come from state government to those build

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to rent communities,
to enable them to be affordable,

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and, as Hugh alluded to, you know,
across the US, the rise of you bricks

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or university based retirement communities

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has been enormous
over the last few decades.

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To the extent there's over

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100 in the, in the US,
which has substantial land holdings,

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they've used that to provide,
accommodation on site, as a community

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benefit to their alumni and the broader
community we're now seeing that

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also occur, across Australia

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and some of the universities
in terms of their housing offer.

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That co-locate, by student housing
and retirement, living on a university

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campus as a way to, provide vitality
and options to a broader community.

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In the regions,
what we're seeing, is a struggle

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for key worker accommodation,
as, the cost of housing increases.

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And as a result, you're seeing
many businesses provide accommodation

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as part of packaging,
in order to make those affordable

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and then state government initiatives,
around, key worker affordable

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housing complexes again to support
that key component of the economy.

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I think that that, piece
around the housing for key workers

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is a worldwide phenomenon and challenge
that we're facing.

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Hugh, have you seen that as a key issue
in the UK?

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Absolutely, Jill.

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I think also
the definition of key worker has changed.

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I think in previous

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sort of decades it was regardless of lower
socio economic workers

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now, middle class professions
such as doctors, nurses

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working for the NHS,
white collar professions

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and now regarded as struggling
to enter the housing market.

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And I think one of the big changes
in approaches is that this is now

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become a family, middle class problem
in a lot of developed countries,

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and so it means political actors,
institutions,

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financial organizations
are actually having to recalibrate.

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This issue is not from sort of
a social good.

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Affordability perspective to do.

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You actually have a housing market
that facilitates broader

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economic and social objectives.

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You can't have a functioning economy
if all functioning members of society

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unable to enter and access good housing

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close to shops, amenities, workplaces,
transport links.

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And I think how this will change is that
there will be much more adaptive uses,

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looking at more short term
utilizations of land pop ups,

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particularly around the provision,

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of housing in response to major events.

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So, for example, post bushfires, post
fires, the point around

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where are we going to get the changes
is that we're already seeing changes

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in response to climate change events
to create pop up, accessible housing.

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And these sort of temporary models,
I think, are going to become more common,

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as they're seen as quick, high quality,

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reliable ways to house populations
in broader urban centers.

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Yeah.

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And look, if you've come to the nub of it
for me, at the moment and that is

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how do you think the way
we are approaching that whole pace around

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affordability and therefore accessibility
will change in the future?

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What needs to be different?

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You I'll come to you.

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I think the biggest change is sort of
within our political economy.

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Previously, affordable housing
is sort of been regarded as an issue

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for lower income,
individuals and housing groups.

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I think what we've seen in recent decades
is that the issue is now a firmly middle

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class, issue for people
across developed countries.

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And as a result, political actors
and institutions

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have to take a much stronger role
in creating new models,

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but also facilitating the best land uses
for housing.

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And as a result of that,
I think we're going to see much more

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generous and creative ideas
and sort of the temporary housing

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which we've already seen in response
to climate change events

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and these sort of structures,
ways of working around government,

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I think, is going to become a bigger part

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of how our cities are designed
and shaped to create new housing stock.

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Yeah.

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And that really leads me
then to ask you a question, Craig.

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And that is, as an architect,
how do you think the way we approach

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that affordable and accessibility
will change in the future?

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What do you think
the architect of the future will be doing?

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Oh, look, I think there'll be
a reevaluation of planning frameworks,

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and the use patterns of, of

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of land and property,
as we've seen the rise of,

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you know, the short stay accommodation
over the last decade and the displacement

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of long term rentals, that's
distorted the market in some locations,

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and has an impact on housing
affordability

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and accessibility
for those wishing to rent.

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And what
we're seeing now, you know, reaction

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of some local authorities
imposing higher levels of taxes on those,

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those properties, some are saying
structural changes around zoning,

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and all of those things,
will, will develop over time to try to,

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I think, to find some balance around,
short term

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accommodation that supports an economy

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from a tourist perspective
and that those longer term, leases

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that provide that key worker accommodation
that he was referring to.

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I think also,
there are opportunities around

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the volumetric modularization of housing.

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It's certainly in Europe.

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It's, it's a, an established pathway
to housing development, less

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so in Australia is used in remote
and regional locations,

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and for some highly repetitive
building types.

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But I think, as we,
as we are looking at the circular economy

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and efficiency and production techniques
that design for manufacturing assembly,

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is a pathway to more cost
effective buildings,

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that are more accessible and,
and also offer much higher

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sustainability credentials.

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And one of the things that, you know,
we're seeing with, with the current,

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energy crisis, increased utility bills,
becoming unsustainable

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for many at the, at the lower
end of the socioeconomic tree.

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And, you know, those those,
households really need

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high performing buildings that are energy
efficient, water efficient,

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that make the most of their resources,
and reduce their running costs.

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And, yeah, that's the direction,
I see the market hitting,

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to the extent
that banks are now offering,

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you know,
a, a discount on mortgages, wind,

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you can provide a more highly sustainable
dwelling.

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And,
you know, that institutional investment

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of encouragement
and incentive, will only drive,

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you know, innovation in the future.

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You all throw this one to you.

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What unexpected solutions or innovations
are you saying in response

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to these challenges?

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I think the potential entry of this
translates superannuation funds into

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the housing sector is going to be
a really interesting development,

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for our international audience,
these superannuation funds,

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have trillions of dollars in assets
and are looking for sustainable

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financial assets

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that that are also delivering a common
good, particularly the ones that have

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union links and housing,
I think offers a really interesting,

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diverse asset base that allows long term

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revenue streams and

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because of the high entry costs
into the Australian,

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but also around New Zealand, UK
markets to be properly players,

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superannuation funds are one of the few
major institutions available

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that actually have the capability,
and the funds

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to deliver mass housing.

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It's very contingent at that moment
if they should or if they should leave

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that to major institutions
like Lendlease and be a shareholder.

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But I think the increasing
commentary around superannuation funds

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needing to have a bigger common
purpose in Australia,

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as well as providing a financial return,
means that the housing equation

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is something that more more funds,
I think, are going to be looking at

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as part of their diverse investment
portfolios moving forward.

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And you I think it's probably worth
pointing out that, particularly

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with the built rent sector
as opposed to build to sell,

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the build to rent center requires
very high levels of capital

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because you've got to build
the development,

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before you can rent it,
because there are no purchases.

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So it lends itself
to superannuation funds.

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I think they're a great candidate
for that social benefit,

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because you're talking about projects

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in the order of between,
you know, 150 and 500 units.

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And obviously, the capital to develop
integrated communities of that scale

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is very significant.

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And the average developer,
requires on sale

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pre-sales and bank funding to, organize
those kinds of projects.

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So having, a large capital base
is essential to developing,

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a broader, platform for housing.

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And in, you know, in the US,
you know, over over 30% of, rental

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housing is through institutional investors
in the build to rent segment.

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So I, you know,
I think that sends a message about

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where Australia might go in the future
and, and also the UK for that matter.

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And what's really interesting about that
100 to 500 sort of unit development mark

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is that the ideal medium density
development, ideally along a track,

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which planners, architects
and a lot of government

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officials around that 20 minute city
have been advocating for.

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But very few market,

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competitors right now
delivering that product.

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So it sort of hits
that perfect balance between

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achieving the

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broader holistic urban planning
sustainability goals, as well as providing

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investment and, most importantly,
homes and communities that people want,

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which is in existing suburbs
with close access to infrastructure.

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Yeah, it really does
link to that piece around accessibility.

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So we started this conversation
by thinking about the generational issues

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around housing and affordability
and accessibility, and climate change.

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Was at the peak of your thoughts?

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We then wove our way through the social,
economic, financial

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and political issues around,
housing affordability, accessibility.

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And then we kind of ended up, back
talking about the impact of,

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climate change
and the resilience of communities.

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I think the exploration we've done
today has been a really good summary

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of those contemporary issues around
housing affordability and accessibility,

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and ones that we all really need
to put our minds

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to, to solve for the future.

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That was Hugh Utting and Craig Muir
exploring housing

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affordability and accessibility.

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I'm Jill Hannaford.

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Thanks for joining us.

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Brought to you by Nexus, Publish By GHD.

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Where ideas connect