This year the Sydney Architecture Festival is focusing on affordability. Architects and affordability. My first reaction was to laugh out loud. You’re kidding right? Exquisite oxymoron. Talking to the taxman about poetry. Thank you, Billy Bragg.
Can you think of any group less qualified to discuss affordability? A profession obsessed with designer bling and an institute dedicated to giving awards to ever more expensive houses with ever more elaborate spaces, materials and ideas. Beautiful yes, but affordable? Nah.
To give them credit, the festival organisers have tapped the progressive zeitgeist. Affordability following hard on the heels of sustainability. Addressing inequality is very much the question of the day, as it should be. So, let’s put the cynicism to one side to answer two questions: what do we mean by affordability, particularly affordable housing, and how could architects help?
Australia's income imbalance
What a household can afford for accommodation is often said to be about a third of their income, and one way to measure income (and wealth) is to divide all households into quintiles (20 percent each). This gives a snapshot of income distribution in Australia, as well as highlighting inequality.
Households in the top quintile have on average $260,104 in income (and $2,514,400 in wealth). Affordability here is about not so much whether one owns a house, but rather how many. Architects are the handmaidens to the holiday shack in Byron or Torquay.
In the second quintile households have on average $124,956 in income (and $830,600 in wealth). Affordability for architects here is the struggle to get the builder’s quote for the alts and adds down to a more ‘acceptable’ level. As above, move along quick, nothing to see here.
The third quintile households are in the middle, the very definition middle class. They have an average income of $80,704 (and $462,500 in wealth). Formerly able to buy a house at a young age, with four to five times the average income, they were the bedrock of our obsession with property as wealth and savings. They underpinned Australia as a property-owning gerontocracy. These are the home buyers who took Australia to world leaders of home ownership at near 75 percent. As property prices went past 10 times income, houses became ‘unaffordable’ and home ownership shrank past 65 percent. This is what politicians think is an affordability crisis, and the clumsy attempts by conservative governments to promote ‘first home-buyer’ subsidies only drove up prices for Gen Y and Gen Z.
Architects are playing an interesting role in affordability here through promoting designs that cut down the brief to make savings and lower the purchase price. The Nightingale projects do that, and then go further with a form of ‘co-operative’ development to ensure that the savings are held in perpetuity, running entirely counter to Australia’s long-held desire to ‘get rich quick’ through rising property prices. Innovative and valuable, but it does not address a more desperate affordability crisis in the lowest two quintiles.
In the fourth quintile households have on average $47,944 in income (and $206,100 in wealth) and in the fifth quintile they have on average $22,620 in income (and $35,000 in wealth). This puts them well out of range for home ownership, and makes them renters – which, in a country obsessed with property as wealth and status, has made them virtually invisible.
This is the level of inequality in the country of the ‘fair go’: the average of the top quintile has almost 12 times the income and 70 times the wealth of the lowest. If, as we assumed at the beginning, the maximum to be paid for accommodation should be 30 or 35 percent of income, then we can quickly see that the weekly rental available for the fourth and fifth quintiles is way below almost everything in our current market economy, particularly with the slashing of social housing in every state and territory.
In Europe and Scandinavia, the tables are turned: there are many more renters than owners, leading to a strong tradition of ‘build-to-rent’: modest dwelling sizes with high quality and durability. Planners and policy makers in Australia are only recently coming to terms with this change in approach and architects need to re-evaluate how to derive affordability in this ‘new’ environment of build-to-rent.
There has always been a large proportion of Australians who rent their accommodation rather than own it, and they were not always ignored. We had flourishing social housing schemes, at Council level prior to WW2, and in state Housing Commissions after. But the last two decades of neo liberalism and privatisation have killed off most of that, and with it the strong architectural culture of quality and innovation. So where to now?
To answer this second question, what part can architects play in ‘build-to-rent’ affordability, we need to look at how housing schemes are procured. Most projects can be be roughly divided into thirds: land for the building; finance for the project; and a designed building. In all but a very few projects architects are only involved in the last part, which means that they can only control a fraction of the costs in design and construction.
Nevertheless, architects concentrate their talk on innovation in materials and design as a source of cost savings, when everything suggests the contrary. New techniques and materials seem to be the source of recent building failures in apartments, putting costs up rather than making savings. And even if there were ‘value management’ benefits, as project managers love to say, they address only a small part of the costs.
Let’s say you have a dream innovation, to build in prefab in using ‘plonk-on-plank’ (thanks Roy and HG), which saves 10 percent in construction costs. Sounds great, but it will only lower overall costs by 3 percent unless the land and finance costs are addressed as well. Despite great flexibility in plan and section in modern design, it is unsurprising that few savings derive from building design, short of radical reductions in space.
Real inroads in affordability of built-to rent can only come where the land costs are driven down and where financing, and the profit motive, is restructured over a longer term. We need to find ways to ‘free up land’, and to have better finance terms.
There are very few institutions that can do one or both. Large holdings of suitable land are in the ownership of the federal and state governments and should be used, at heavily discounted to nil rates, for build-to-rent housing. At present, on the contrary, right-wing conservative governments have an obsession to sell off all their assets, privatizing as much as possible, assuming that the market will provide.
Architects and planners need to step outside their current support for market mechanisms to demonstrate how governments could develop ‘unusable’ parcels of their land for housing, and how to follow the lead of some not-for-profits, such as the churches, to recycle their land for community uses.
Financing has to change, and be on the long horizon, the kind that traditionally was undertaken by governments for social housing. The current market horizon of 8 to 10 years needs to be stretched to a 25-33-year investment level. It is unclear what role architects might play in this.
Strategic cost reductions in affordable housing will come not from architectural designs, but from a drastic lowering of land costs, and a restructuring of financing and profit. If each could reduce costs by say 66 percent then the cost of a project could be 50 percent of current levels, giving a real chance to deliver a project that could be rented to fourth and fifth quintiles at 33 percent or less of their income.
An alternative housing affordability festival
To return to the Sydney Architecture Festival, there is one standout speaker on these issues of land and finance, combined with design, Paul Karakusevic, from the UK. His book Social Housing, Definitions and Design Exemplars is a great starting point. Britain has traditionally had a strong social housing approach, and his book draws and builds on this work. Some of the other speakers, (see: http://www.sydneyarchitecturefestival.org/speaker) have pearls on innovations in land and financing for build-to-rent. It’s not all oxymoronic on this topic in Australia, and I’m sure lively debate will ensue.
But I’m dreaming of an alternative housing affordability festival featuring architects with deep involvements in the land and financing process as well as design for build-to-rent. I’d start with Community Housing Providers such as Compass Housing’s Donald Proctor, the instigator of the Stucco project (where today’s students pay just over $100/week). Or Peter Phibbs and Lisa King at the University of Sydney researching proposals for older women’s’ housing. Or Jason Twill at UTS and Louise Crabtree at WSU working on a land trust policy, Andy Fergus at the City of Melbourne and Katherine Sundermann at MGS architects and the University of Melbourne, Linseen Lee and Eddie Ma of Vigilanti working on an equity housing model, (the last three are all finalists in the City of Sydney Alternative Housing Competition).
It's not true that architects have no affinity for affordability, it’s just that far too many are too far below the radar line for real change.
The views expressed are solely those of the author and are not held or endorsed by A+D.