The high cost of land, particularly in urban areas, can be a significant barrier for collaborative housing projects. Here are some strategies that may be used to acquire land.
Land purchase on the private market
Groups taking out finance to purchase land in the private market will need to deal with a number of hurdles including requirements for loan security and equity contributions. Groups will most likely need an external guarantor and members will typically need to contribute 30-40% of development costs as equity up front. See secure finance for more.
Projects with a social or affordable housing component may be able to leverage contributions from government or community housing providers to ease loan security and equity requirements. Other projects will need to seek help from equity investors as the Nightingale model does. Those with a measurable positive social or environmental impact may want to target the growing impact investment sector.
Deferred settlement of land purchase
Deferring settlement of land purchase until construction is about to begin can be an effective way to help projects get across the line and reduce risk to households. Typically, residents would need to commit equity at land acquisition stage, before the development is approved and potentially years before construction commences. In Germany this has been an effective strategy for supporting baugruppe (building group) projects on government land and it is being successfully used in the Baugruppe WGV project in Perth, with partner Landcorp offering a deferred settlement on land purchase.
Other incentives government can provide
Government can assist by designating land for affordable collaborative housing and supporting demonstration projects. Offering affordable long term leases on government land may also be another option.
Long term ground leasing
An alternative to land purchase is long-term (99+ year) leasehold, which might be particularly relevant in areas where land is prohibitively expensive. This is a strategy being considered by the proponents of Nightingale Sydney, who are negotiating with some large institutional landowners. This option may be particularly suitable for rental collaborative housing projects offering long term leases to residents. Nightingale Sydney is negotiating with social impact investors who would build, operate and own the rental housing.
Community land trusts
A community land trust is a mechanism landowners, government and investors can use to provide land to housing groups in a manner that guarantees long term affordability. In a community land trust, the land component is owned by a community-based not-for-profit legal entity and the buildings are owned or leased long-term by individual households. Households receive many of the benefits of home ownership – such as security of tenure, transfer of occupancy rights and potential for wealth building – whilst capping resale to ensure affordability for future households. Read more about how CLTs work here and download the Australian Community Land Trust manual here.
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