Local boosts social, affordable housing, backed by Macquarie

While the federal and state governments were taking steps to boost the country’s stock of social and affordable homes, build-to-rent developers could still reach their own arrangements – such as through this NAB-funded project – to boost affordable rental housing supply, Mr McLennan said.

“We’re going to lose a bit maybe on income, but we think those dwellings have less vacancy risk, so stickier tenants,” he said.

“It makes our project more attractive from a financing perspective.”

Social housing, made available to renters mostly reliant on social security, has a larger rental income shortfall for landlords than affordable housing. Homes are rented to qualifying low-income workers for a fixed discount – such as 20 per cent – to market rates.

The partnership with Women’s Property Initiatives to create new affordable housing for women and children with insecure tenure and low-income women over 55 – the fastest-growing group of homeless Australians – would boost the supply of much-needed homes immediately, Mr McLennan said.

“This is the first time there’s been an instance of including privately funded institutional social housing without any government subsidy or tax supports,” he said. “We think this is scalable in terms of our own growth prospects.”

Local Residential, part-owned by Macquarie Asset Management, currently has 900 homes under construction. A second, 406-home project is under way at 245 Normanby Road in South Melbourne with a further 42 social and affordable homes. Local aims to have 1500 such dwellings in the portfolio of 10,000 it is targeting to build over the next decade.

“Local’s ethos is closely aligned to ours,” WPI chief executive Jeanette Large said. “Everyone deserves a safe, secure and affordable place to live and single women, particularly older women, are among the most disadvantaged cohorts when it comes to accessing a secure home.

“On any given night, there are 54,000 women who are homeless in Australia, and a considerable number of them have grappled with exorbitant rental costs associated with the private housing sector.”

Local head of corporate and ESG Clare Tayt said there was also a business strategy at play to stand out in a growing build-to-rent market in the eyes of financiers and customers.

“Our institutional investors expect not only market returns, but also a positive social impact, all backed by a meticulously crafted execution strategy from the get-go,” Ms Tayt said. “We are one of few developers in the build-to-rent space that can demonstrate a plan for achieving this.

“The next generation of tenants and staff are actively seeking brands that resonate with their values and embody authentic social commitment. When presented with a choice, these discerning audiences will select a brand dedicated to creating community impact over one that isn’t.”

Privately funded projects could provide only part of the much-needed stock, however, and publicly subsidised projects, with funding through the federal government’s $10 billion Housing Australia Future Fund, were crucial in creating higher proportions of subsidised rental housing, Mr McLennan said.

“If you want to go beyond 10, 15 per cent and want to be in the 30-100 per cent range, the blend-out of income starts becoming too difficult to absorb and maintain financial returns,” Mr McLennan said.

“We think there’s a lot of need for government support.”

The different types of housing would be spread among commercial build-to-rent apartments at the 350 Macaulay Road site in Kensington, out of Local’s belief that wherever possible, social and affordable housing should be mixed with commercial build-to-rent homes, Mr McLennan said.