The shortage of housing in New Zealand cities has focused attention not only on building more houses, but the sort of houses that enhance the wellbeing of those who live in them.
As cities become denser, the challenge is to create buildings that deliver on space efficiency, but are also in line with new ideas about how people live, how they interact with others and their impact on the environment.
This is every bit as true for rental properties as it is for owner-occupied buildings. With an increasing number of Kiwis — around 40 per cent of households — now renting, there is an enormous opportunity to raise the bar in quality, affordability and intelligent design.
A great example of this is 26Aroha, a build-to-rent complex which was recently completed in the inner-city Auckland suburb of Sandringham.
For inspiration, its developers, Blair and Jules MacKinnon, travelled the world looking at the most innovative and successful modern rental apartment projects.
What they came up with — a low-rise 13-apartment complex on a standard 923sq m section — is designed to fit in with denser housing allowed for in Auckland's Unitary plan.
As well as being one of the country's greenest apartment buildings — it's currently awaiting confirmation of a 9 Homestar rating — the project also aims to put the wellbeing of tenants at its core.
Its developers were driven by the view that, rather than being a second-class option, rental apartments should be as nice — if not nicer — than owning your own home, and should offer tenants long-term security.
The building has "wrapped" insulation, double-glazed windows, solar hot water and power, along with rainwater harvesting, making it highly efficient and shaving up to 25 per cent off tenants' household costs.
There is an intensive recycling programme for water and waste, along with e-bike charging points and scooter parking, and a shared electric car available for tenants to use.
As well as these strong sustainability features, the building is also designed to encourage a sense of community among tenants. There is a guest room for tenants to book, allowing family and friends to stay, and instead of using the roof as a penthouse apartment, Blair and Jules created a communal lounge and barbecue area, which incorporates a shared laundry.
The buildings are designed to encourage a sense of community. Photo / Dennis Radermacher (http://Lightforge.co.nz)
Along with a coffee machine and great views across the city, this common space on the roof is intended to bring residents together, and it does.
Internationally, there has been strong demand, especially from Millennials and the younger Gen Z for new ways of living, many no longer seeing home ownership as viable.
Among the younger generations, there is an expectation of sustainability and properties that offer shared community living spaces, including kitchens and games rooms, appear to be in strong demand.
Along with the desire to be close to amenities such as transport hubs, entertainment and shops, the fact tenants don't pay rates, maintenance or insurance makes this new style of apartments an attractive prospect.
In this respect 26Aroha is a truly 21st century building, and one that challenges the way we build and live in New Zealand.
Re-thinking finance
Just as Blair and Jules rose to the challenge of finding a new way of building rental housing, the project also required ANZ to re-think its approach to lending on such projects.
Our lending usually relies on pre-sales of apartments and an acceptable margin, but with a built-to-let project like 26Aroha, that clearly wasn't going to work.
Instead, we had to take a wider perspective, taking into consideration long-term cash flow, the size of the debt on completion and the income from the apartments once tenanted.
In this case, we looked at cash flow forecasts for the next 20 years, including the building's overall running costs and expenses.
This helped us understand how the project could work from a financing perspective.
There were also the additional costs of sustainable materials and the innovative technology and techniques that made the project so environmentally friendly and energy efficient.
These added to the cost of the build, but taking a long-term view allowed us to factor in the payback from these features and acknowledge the value they provided in reducing the overall running costs of building.
In many ways, it has provided a proof point for us, showing that the environmental and social aspects of developments can and should play a strong part in our funding decisions.
Since completing the project, Blair and Jules have been inundated with requests from people wanting a tour of the building — and it's easy to see why.
From architects to schoolchildren, local councillors to Kainga Ora, in many ways 26Aroha has become a flag-bearer for how green and tenant-focused apartments can work.
It's great that Blair and Jules were able to bring ANZ in on the project early in the process and that we were able to work with them to achieve such an amazing outcome.
They were meticulous in their planning and engaged some of the top professionals in the field to help, so it's no accident the project came in on budget and ahead of time, and with all 13 apartments now leased.
In many respects — especially its social and environmental credentials — 26Aroha has raised the bar, and more than fulfilled the brief of making rental housing a first-class option.
It's also likely to inspire other developers to think in different ways, especially as they focus their energies on build-to-rent developments in the coming years.
While no one initiative will solve the country's housing crisis, it is clear that every additional high-quality home will help in a small way to rebalance the housing equation.
Stuart McKinnon is Managing Director, Institutional Banking, ANZ NZ.
