The state government has revealed plans to increase rental housing supply in the inner city by using investment from superannuation funds and property trusts to redevelop four sites in Northbridge.
Under the government’s model, the mixed-use sites – including the former Auto Masters site on Newcastle Street – would be sold by the East Perth Redevelopment Authority and developed into 52 long-term rental units.
The ground floor of each building would accommodate commercial or retail tenancies, with three to four storeys of residential units built above.
The project is subject to completion programs and is expected to be ready in 2011.
Property Council WA senior policy adviser Lino Iacomella said the plan’s investment structure was not unusual, but was more common overseas than in Australia.
Mr Iacomella said the government’s plan was likely to be an early example of the trend by superannuation funds and the private sector towards investing in affordable housing.
He said it followed the federal government’s invitation last month for the private sector to invest in low-cost housing.
“Institutional funds and even small groups of investors have been looking at residential units for a long time,” Mr Iacomella told WA Business News. “It’s never really taken off because the rental yield has been too low.”
Mr Iacomella said the Property Council had been advocating that government provide more incentives for the private sector to invest in affordable housing projects.
He said a key element would be the provision of funding to cover the estimated 3 per cent gap between building costs and rental yields.
“A 3 per cent top up would make projects, in theory, much more feasible,” Mr Iacomella said.
He said land tax concessions and zoning or planning incentives could also be used to encourage private investment.
Inner City Housing Developers Association president Laurence Goodman welcomed the government’s decision to encourage long-term investment in rental housing.
