Boarding Houses – The Next Generation of Affordable Housing
A New Niche
As Australia’s population grows, so does it’s biggest cities and the need for more affordable houses within them. This trend is driving a new generation of boarding houses.
Ramshackled old houses no more, enter the new age of ‘micro-apartments’, attracting workers and young professionals. Low-cost & modern, these luxury studios appeal to a variety of tenants including singles, retirees, students and young couples.
This unique form of shared accommodation is attracting interest from mum and dads investors through self-managed super funds, usually managed by professional management organisations, like the Property Owners Association NSW, a non-profit peak body representing the interests of private landlords.
The number of development applications for boarding houses and student accommodation has surged in NSW in recent years. Applications more than doubled from 27 in 2017 to 65 in 2018, and then doubled again to 131 applications in 2019, Cordell Connect data shows.
According to the Australian Housing & Urban Research Institute, there’s an urgent need to develop affordable rental housing as the private rental market does not generate rentals at this level, even when there is an overall increase in supply. Sydney, which has been tipped by analysts to be set for a new boom, will require over 40,000 new dwellings each year to accommodate the current level of growth.
Stephen Moore, Director at The Site Foreman, believes affordable housing is required for lots of different people for various reasons, for short or medium term.
“In the past typical boarding house tenants, such as backpackers, low-income earners and welfare dependents, were stigmatised as neighborhood nuisances, leaving boarding houses with a bad reputation. With this new generation of boarding houses, we see a shift of tenant classification to include young students, single individuals, young couples and like-minded professional people who are living central to their workplace. These tenant demographics provide a more stable rental income and longer-term occupancies, and also an increased average rental rate per room”
What are the Benefits for the Developer?
“From an investor’s point of view, there are many benefits and incentives for providing affordable housing. A new generation boarding house is a lower risk from a developers’ perspective with a more stable income. Investors obtain a residential rating with the local council, are registered with NSW Fair Trading once complete, and also can become a member of POA-NSW” states Stephen.
The Site Foreman specialises in the design, tender management, and project management of boarding houses. Currently, projects include developments & constructions in Kingswood, Ryde, the Inner West & Redfern.
Where do I start?
A feasibility study is the first step to determine all the various development options for the building site. The property owner gains a thorough understanding of the project scope at this early stage of planning, providing a roadmap to achieving a successful building project.
A typical feasibility study includes:
1. Preparation of a brief
2. A site analysis
3. An assessment of Council requirements
4. Options prepared considering dwelling numbers and mix
5. Options assessed and compared
Case Study – Dulwich Hill
Victorian Terrace Conversion – Commercial (Class 3)
Current Dwelling – mixed use
2 bed, 1 bath, 1 car: $250 p/w
80m2 retail space: $650p/w
Land value: $1,200,000
Land tax 2019: $8,228
Boarding House – mixed use
9 rooms (4 floors): $350 p/w/rm
60m2 retail space: $750 p/w
Occupancy rental income: $3,750 p/w
Build cost estimate: $1,258,000
Case Study – Stanmore
Federation House Conversion – Commercial (Class 1)
4 bed, 2 bath, 1 car: $640 p/w
Land value: $1,830,000
Land tax 2019: $18,308
9 rooms (6 single, 3 double)
Avg rental income: $350 p/w/rm
Occupancy rental income: $3,150 p/w
Build cost estimate: $900,000