Consumer demand for sustainable apartments not being met

Australian developers of apartment buildings need to build sustainable buildings that appeal to the demands of a wider variety of longer term buyers, including owner occupiers, ‘Build-to-rent’ investors and social housing providers, new AHURI research has found. The research, ‘Delivering sustainable apartment housing: new build and retrofit’, undertaken for AHURI by researchers from UNSW Sydney and RMIT, investigates how Australia can build new, and retrofit older, apartments so that they are sustainable - that is they maximise comfort and energy efficiency while minimising consumption and waste.

The research clearly reveals that the apartment buildings built for the prevalent speculative development sector, widely known as ‘Build-to-sell’ (BTS), are often designed to only meet minimum standards, and that the sector’s reliance on investor demand, which is especially vulnerable to economic cycles, works against developers delivering innovative, sustainable apartments.

‘BTS developers are driven by the need to build and sell as quickly as possible with ‘anything that gets in the way of making it more expensive’ rejected. One consultant we interviewed noted ‘Developers are in the business of selling apartments, not managing energy supplies,’ says research author, Professor Hazel Easthope from University of New South Wales (UNSW).

Currently, the supply of new sustainable apartments in Australia is seen as a niche market largely geared towards luxury product, with sustainable new developments offered at a price premium that excludes lower and mid-market buyers and renters. 

‘Our analysis of apartment development and upgrades in metropolitan and regional areas of NSW and Victoria shows that less than 5 per cent of building projects exceed minimum standards for sustainability, and that those developments are concentrated in higher value areas of Sydney and Melbourne,’ says Professor Easthope. 

The research found that sustainability is rarely embedded in project feasibility calculations for build to sell developments and changes are frequently made during construction to reduce costs. ‘The fact that sustainable building performance is not adequately reflected in property valuation compounds the problem’ says Professor Easthope. 

The research identified several key changes that are needed in how the design, construction and adaptation of apartments occurs to produce more sustainable apartments across the development sector, including: 

• development teams need to be encouraged to embed sustainability priorities in project feasibility, supported by improved regulations and access to green finance
• the construction of delivered apartment buildings needs to reflect what was designed and approved, supported by standardised tools, measures and regulations for building performance
• property valuation needs to better reflect building performance
• consumers need better access to adequate information about building performance.

‘Build-to-rent’ and Community housing demand more sustainable apartment developments

Developers who want to embed sustainability in their projects could also look to organisations that have a longer term commitment to the ownership of their apartments, such as community housing providers (CHPs) and, maybe more so in the near future, businesses operating Build-to-rent (BTR) apartment developments.

These businesses have stronger financial imperatives to ensure that their buildings operate sustainably well into the future and that their tenants have the best possible living environments. Both BTR and CHPs may also benefit from having access to to ‘green’ capital, such as through National Housing Finance and Investment Corporation funding, which can help reduce the time developers need to look for finance. 

‘Indeed, during our research, a planning consultant suggested BTR could become a major driver for sustainable apartments across all development models, as it could boost the scale of sustainable development and therefore could ‘push’ the whole apartment sector forward,’ says Professor Easthope.