Podcast: Is history against build-to-rent plans?

OK, it’s our stupid fault for crossing the ditch to New Zealand without taking even our basic recording gear.

We could have just about coped and recorded it on our return but our flight was delayed by an hour and a half and that mean that not only would we be later than planned in getting back to Sydney but we’d be tired and grumpy too.

Then I discovered my phone has an “interview” setting in its voice recorder app and all we had to do was talk into opposite ends of the Samsung to get a reasonably clear recording.

So, we recorded this week’s podcast in Auckland Airport’s departure lounge and, with most of the airport sounds edited out, and living with the occasional “plosive” pop and puff from using this basic equipment, we present it for your enjoyment.

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LISTEN HERE

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In it we discuss the new build-to-rent development controversially planned for an historic area of Sydney.

And we chat about the dramatic drop in apartment approvals – down 40-plus per cent according to the latest Australian Bureau of Statistics figures – and ask if David Chandler is doing too good a job of driving away dodgy developers (as if such a thing were possible).

Finally we dip into the Forum to ask if you can pass a by-law forcing landlords to evict bad tenants who constantly breach by-laws.

That’s all in this week’s podcast and if you can’t bear to listen to a recording that’s not up to your usual high standards, you can read the transcript right here.

TRANSCRIPT IN FULL

Jimmy  00:00

If you can hear strange background noises in this recording, it’s because we’re doing our podcast in Auckland Airport, where Sue and I are about to get on a plane (we hope), back to Sydney. But there’s a lot to talk about. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  00:19

And I’m Sue Williams and I write about property for Domain.

Jimmy  00:21

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

Okay Sue, there was some alarming news in the papers last week?

Sue  00:42

That’s right. There’s been a bit of controversy about this. Over in Harris Park, in the west of Sydney, there’s been an application for 483 apartments. A series of five blocks, I think, of four, six and eight storeys high and they’re all going to be build-to-rent apartments and I think a lot of people feel that it shouldn’t really happen, because it’s in a very historic part of Harris Park, which is very close to Elizabeth Farm, where Elizabeth MacArthur and her husband, John MacArthur, started the Australian wool industry.

Jimmy  01:14

That you wrote all about in your book, ‘Elizabeth & Elizabeth.’

Sue  01:18

Yes, absolutely. I went over there quite a bit. It’s a beautiful place. It’s kind of in the middle of nowhere, in lots of ways.  I haven’t looked very closely at the plans for this development, but if you actually built nice -looking, affordable build-to-rent housing in the area and linked in  Elizabeth Farm, with the other historic places nearby… It’s very close to Experiment Farm as well, which was the first European colonial farm that was set up in about 1834. Then there’s also Dumbledore Cottage just nearby.

Jimmy  01:57

Dumbledore, isn’t that from Harry Potter?

Sue  02:00

Same name!

Jimmy  02:02

Oh, is that where she got it, do you think?

Sue  02:03

Quite possibly, yes.

Jimmy  02:05

So, Dumbledore Cottage, and there’s a Maronite Christian Church; a Lebanese Christian church nearby, as well.

Sue  02:12

A cathedral. That’s just next door, as well. I guess it’s got lots of esteemed neighbours and many of them are actually protesting about these plans.

Jimmy  02:23

Are they just NIMBYs?

Sue  02:25

Well, it’s hard to know, isn’t it really? The build-to-rent sector is a really important part (and becoming an even more important part) of the Australian housing sector. To recap on build-to-rent; they are apartments which the developer retains ownership off, but it gives the tenants security of tenure. They can’t be just be kicked out whenever somebody wants to.

Jimmy  02:46

At six months, when somebody wants to put the rent up.

Sue  02:48

That’s right, or sell their property, or something. So they do get security of tenure. They can have pets; the rules are much more lenient. They can paint the walls whatever colour they want to and they can put up their own pictures; that kind of thing. Which often they can’t do in a private rental, as you know. The rent is pegged at a certain level; it can only go up by CPI, I think, after one year, or something like that. It can’t suddenly shoot up massively.

Jimmy  03:15

Just because somebody can make a bit of money out of it.

Sue  03:18

That’s right. And that’s becoming a really important part of the Australian housing sector; you know, when we’re so worried about affordable housing, it’s really filling a gap. I mean, the US investment firm, Blackstone has just come into Australia. They’ve set up their own dedicated platform, called Realm Australia, which is all about build-to-rent. They’ve got one project in Brisbane; they’ve got a second project in Melbourne and they’re now looking at expanding everywhere else in Australia as well, so it’s becoming a really dynamic sector. And, you know, in lots of ways, it really should be encouraged.

Jimmy  03:50

But it’s cutting out the middleman, isn’t it? It’s cutting out the mum and dad investor. But then, since they’ve all put their properties on Airbnb now anyway, maybe it’s not such a tragedy for people who were hoping to rent their apartments, or buy an investment.

Sue  04:08

Ernst and Young said over the next decade or so, that sector (the build -to-rent), has got the potential to grow to 10% of Australia’s rental pool. So that’s still only 10% There’s another 90% of the rental pool there, which will have private owners.

Jimmy  04:22

Yes, but for apartments specifically, 50% of our residents, if not more, are tenants. So these tenants are now going to be able to go off and find longer tenure, in places that are designed to be rented, rather than (supposedly), for people to live in, but are really for private investors.

Sue  04:44

Yes, that’s right in theory, but at the same time, when you say they will just go off and find other accommodation; we have a huge shortage of rental accommodation in Australia. So really, if you’re increasing the rental pool, that can only be a good thing.

Jimmy  04:58

These people who are developing this originally had a much bigger project in mind, didn’t they?

Sue  05:02

That’s right. When people were protesting, they were saying ‘well look, these are only up to eight storeys high.’ In their original plans, I think they were something like 32 stories high.

Jimmy  05:12

Wow!

Sue  05:14

That’s a big change, isn’t it? But then again, you never know with developers. Some developers might say ‘oh, look, it’s just a gambit claim.’ Sorry, ambit claim, not gambit claim!

Jimmy  05:25

Well, it’s the same thing. It’s a gambit.

Sue  05:31

If they got 32 storeys, it might be wonderful, but maybe they were thinking ‘well, if we say 32 and then we end up with 8, we look as if we’ve been really benevolent and accomodating.’

Jimmy  05:41

Accommodating you, because we’re  letting you allow us to build the number of apartments that we wanted to build in the first place, but we just kidded you it was going to be much bigger.

Sue  05:52

But obviously, Harris Park is just next to Parramatta and that’s a really important part of Australia. It is Sydney’s second CBD, after the main central CBD. But also, it’s got a really incredible history, because it was the second place that was settled in Australia, after Sydney. There was Sydney, Parramatta and then the Hawkesbury. So Parramatta has a lot of heritage sites there and they really need to be protected and looked after and considered very carefully, in the main planning of the whole region. So we kind of have to keep a very sharp eye open on that.

Jimmy  06:32

Putting your property writers’ hat on and your apartment dwellers’ activist hat on, do you think this project should go ahead?

Sue  06:43

Potentially, I think it’s a really valuable project and if the ground plan could be made to really include those historic sites, and blend in with those sites in a really thoughtful way, with landscaping and clear wayfaring, it could be a really great project.

Jimmy  07:04

And putting on your hat as the author of ‘Elizabeth & Elizabeth,’ your first novel?

Sue  07:10

Well, the first time I went out to Elizabeth Farm, I was amazed that it was really hard to find and it felt a bit lost. It didn’t have its rightful place in the streetscape. If it actually became much more obvious and self-evident and highlighted and showcased, then I think that could be a really good thing.

Jimmy  07:37

Elizabeth Macquarie was an innovator architecturally, and in town design; is that fair to say? You probably know more about her than the vast majority of Australians.

Sue  07:47

The wife of Governor Lachlan Macquarie, yes.

Jimmy  07:50

 And from whom we got Macquarie Street and some of the great classic buildings of Sydney.

Sue  07:56

Hyde Park Barracks…

Jimmy  07:58

Would she approve of this development?

Sue  08:02

Well, it’s interesting; she was a real egalitarian. Her and her husband were both very much in favour of convicts (once they’d done their time), being pardoned, and being able to take high positions of enormous responsibility.

Jimmy  08:15

Including architect.

Sue  08:16

Well, that’s right. Also, police officers. Under his reign, the chief constable was a former convict, which some people found absolutely disgraceful. They were great egalitarians and so building good, cheap, affordable housing, for a lot more people; I think she might have liked it, as long as it’s well-designed and well-thought out and beautifully landscaped. She was very much in favour of all her developments being well-set, in nice grounds. She built the… Well, it was her idea to improve the Domain and to build Mrs. Macquarie’s path around the Domain and obviously, we’ve got Mrs. Macquarie’s chair there, as well.

Jimmy  09:03

And Elizabeth Farm was named actually, after Elizabeth MacArthur. Would she have approved, because she was also an innovator?

Sue  09:13

Yes, I think as long as the essential farm and the farm lands were preserved, because when you go out there, there’s still some of the original vines there, that she planted. They have some of the first types of vegetables and fruits in Australia, coming from overseas. The European colonialists were always coming from afar on their ships, and they would bring experimental seeds with them. She planted many of them and nurtured them and cherished them there. So I think she might have been quite excited about it, about nurturing a new generation of buildings nearby.

I don’t think she would have been horrified.  There you go, developers… You have the defacto blessing of Elizabeth Macquarie and Elizabeth Macarthur. I don’t know how the current generation of MacArthurs might feel about it; slightly differently, I feel. Yes, but they’re mostly in the southwest of Sydney, around Camden Park. That’s the the other historic home of Elizabeth MacArthur. They’re a bit of a distance away, so they might not be too worried. I don’t know.

Jimmy  10:20

Okay. When we come back, we’re going to talk about (the thing I thought we were going to talk about when we started this podcast), which is the flight from development by developers, who say it’s just too hard to build apartment blocks in Australia. That’s after this.

[MUSIC]

Jimmy

And we’re back. Sue, it seems like developers are claiming it’s too hard to develop apartment blocks in Australia…

Sue  10:54

I think there’s been a lot of press around the fact that there’s a real drop in the number of building approvals in Australia for new homes, and they’ve been down 17.2% In July, for homes or dwellings. 17.2% down, this July over June. That’s a 25.9% drop over the year, which is quite huge and most of that is made up by the drop in apartment approvals. Apartments are down 43.5%, which is incredible.

Jimmy  11:30

Wow! That’s almost half.

Sue  11:33

And that’s the lowest level since January 2012, so that’s 10 years.

Jimmy  11:38

So my question about apartments is, given all the hard work (and excellent work), that David Chandler is doing, in tightening up the development industry; is he scaring off developers? Is he being too effective?

Sue  11:54

Do you think this is maybe just a blip; that the good developers will start filling the gap, and building more apartments to make up for the dodgy developers who have given up and taken up something more lucrative, like money laundering? If he is scaring off developers, he’s only scaring off the bad developers, isn’t he? Because he won’t be scaring off good developers, because they’ll be developing good stuff, no matter what. They won’t be scared of David Chandler.

But the bad developers; maybe he is scaring them off. If they want to deliver below-standard apartments, then they’ve got a lot to fear. I guess it’s possible, but I think the main reason building approvals are down so much… There’s a number of reasons I think, and one of those is that prices are down. Developers can’t sell apartments for as much as they were selling them, maybe, even six months ago.

When prices were really boiling, people were very willing to compete for apartments, and they would pay huge prices for them; often crazy prices. And also, building costs are really up by a huge amount and there’s been terrible supply constraints on a lot of building materials, and that’s caused real delays in building and that’s added to costs. And also, labour shortages within the building industry.

Jimmy  13:22

Where have all these workers gone? There’s nobody to pick the fruit, there’s nobody to hammer in the shuttering for concrete pours. I mean, they can’t be the same people, surely?

Sue  13:30

Some would be overseas workers who went home during COVID, and they haven’t come back yet. Because we’ve only just opened borders really, and maybe, some of them are a bit nervous about coming back; because they were kicked out so quickly before, maybe they are a bit nervous about coming back. They are enjoying spending time with their families. I’m sure the labour shortage is only a temporary thing, and people will come back, especially if wages start going up a little bit to attract them; that will really help.

But I think all those things together… I mean, there was one developer who said that with all the building costs, and the supply disruptions, the price of apartments is going to be about 20% higher in the future than they are now. Developers can’t afford to develop apartments for the prices that they are now. He’s saying prices are going to go up 20%, so therefore, demand might fall back, because people might not be able to afford a 20% rise. That’s going to create even more problems for developers. They might end up with an extra supply of apartments on their hands, that they can’t sell.

Jimmy  14:36

Is there room in the market do you think, for the cheap and cheerless developer? The one that’s going to say ‘look, we can build a lot of apartments. They are not going to have any frills; there’s no bells or whistles. They’re not going to have views. They’re going to be pretty tightly-packed, but they will all be built to building standards in Australia, and they will be cheaper.’

Sue  15:01

Well, no. I don’t think there’s a place anymore for cheap and cheerless apartments. I think there is a place for cheaper apartments, but really well-designed apartments. They might have smaller space inside. They might have smaller outdoor balconies. I think there is a place for smaller apartments, but one’s which are really, really well designed. We’ve got some fantastic architects, who have developed some really good buildings, and they have great floor plans.

And some of them, in the past, have had built-in furniture as well, so they don’t actually take up more room for the furniture. They have bespoke cabinetry, which is all part of the actual floor plan. So they work really, really well and they’re very small, and they’re very compact, but they’re actually really easy to live in. And also, the new generation boarding houses; there’s probably more space for them now too, and those places which are studio apartments, but they may have shared kitchens.

Right.

So this is the next stage, before we get to build-to-rent. These new generation boarding houses… You know, ‘boarding house’ is such an awful pejorative term, really, but they’re a bit like student accommodation. I mean, when I went to university, I lived in student accommodation. It was fantastic! I really enjoyed it. We had shared kitchens; we had shared bathrooms and I don’t think anyone has shared bathrooms anymore. You’d have shared laundries and shared communal spaces; you know, shared lounge rooms.

You might have shared working spaces, as well. So I think there’s more room for those kinds of developments, as well. I’d be a big advocate for them. All right. So it’s just a blip; once we get the building materials back into the country, and once we get the builders and joiners and concrete pourers and plasterers and tilers back into the country, then it will all take off again. 

I was talking to some economists last week, and they were saying that they think that we’re now about halfway through the downturn. So we’re not going to go down much further. The RBA will heist interest rates a couple more times, but probably by later this year, or early next year, they’ll either keep interest rates the same, or they’ll start to lower them, because they’ll have inflation under control. So really, the outlooks’ pretty rosy, I think. We shouldn’t get too depressed, because I think the downturn; there is an end in sight.

Jimmy  17:42

Great! When we come back, we’re going to do our new weekly feature of putting Sue Williams on the spot and asking her a question from the forum. That’s after this.

[MUSIC]

Jimmy

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Jimmy

And we’re back. This is possibly not Sue’s favourite part of our podcast. This is her chance to be a strata guru. So we’ve had a question, which has been debated quite hotly on the forum… Somebody says ‘I want to put a bylaw in place, that says if a tenant repeatedly breaches bylaws…’  I’m saying behaves badly, but it could be something like parking in other people’s parking spots, or parking in the common property visitor parking. If they do this repeatedly, the bylaw should say that the landlord is obliged to evict them. So you’ve got a serial bylaw breacher and the owners corporation cannot throw them out, but the landlord can.

Sue  19:32

Right. I think the first thing that I would say (and this may be wrong, but you will correct me no doubt, Jimmy, very quickly), is that you can’t have a bylaw directed against one particular unit, or one particular units’ owner. It has to apply for the whole building.

Jimmy  19:51

It could still apply to the whole building.

Sue  19:53

Yes, absolutely. So it has to be drawn up for the whole building. It has to be drawn up for all owners of the building and then it would have to say…

Jimmy  20:00

But if they don’t have tenants, then it doesn’t apply.

Sue  20:03

That’s right.

Jimmy  20:04

I think where you’re going with this is, you can’t discriminate against one group.

Sue  20:10

Yes, that’s right. So you have to say, any owner who lets out their lot to somebody who interferes with other people’s peaceful enjoyment of their own property, we’ll have to…

Jimmy  20:22

I don’t think you can do that.

Sue  20:24

Because that interferes with the business.

Jimmy  20:26

Also, it interferes with their freedom to decide what they want to do with their tenants. But what you can do, is say ‘if you don’t get your tenants to behave, we’re going to fine you and if you still don’t do it, we’re going to fine you again. And maybe, we will then go to NCAT, to the tribunal, and say “we want orders; we want you to order this landlord to control their tenant.”‘

Sue  20:54

And so that doesn’t require a bylaw, does it?

Jimmy  20:56

No, because the laws are already there.

Sue  20:58

Okay, well, that’s kind of what I said.

Jimmy  21:02

Alright. This is not an ideal situation for recording a podcast. Even in this location here, we’d be better off if we had a blanket over our heads, to record the podcast, but then…

Sue  21:17

Somebody might steal all our luggage.

Jimmy  21:20

Knowing our luck! Hopefully, you can hear through the noise and the scraping chairs and the screaming children and the people who phone other people by holding their phones at arm’s length and shouting at them, which usually means they don’t actually need a telephone at all. Thanks for listening. And thanks, Sue, for breaking into your quiet time, to record the podcast.

Sue  21:47

Pleasure Jimmy.

Jimmy  21:49

And we will talk to you all again soon.

[MUSIC]

Jimmy

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, flatchat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free, on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favourite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week, without even trying. Thanks again. Talk to you again next week.