Elephant in the Room - Episode 401 - Robert Pradolin

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[00:00:00] Veronica: In this episode, we sit down with Robert Pradolin, founder of Housing All Australians, a national for purpose organization, representing the voice of the private sector, creating [00:00:10] business led actions to deliver housing solutions for Australians in need. And we're gonna explore three big areas why Australia must treat housing for all as essential [00:00:20] economic infrastructure, how institutional investment could unlock large scale solutions for affordable and social housing, and how innovation in construction.

[00:00:28] Veronica: Particularly around engineered [00:00:30] timber could radically reduce costs and carbon emissions. And really what's holding us back from achieving all of this. [00:00:40] [00:00:50] [00:01:00] [00:01:10]

[00:01:15] Veronica: Our guest today is Robert Pradolin, whose 40 year career in residential development [00:01:20] spans everything from greenfield subdivisions to high-rise apartment towers, and after decades building communities, Robert has shifted his focus.

[00:01:27] Veronica: To addressing the systemic issues behind [00:01:30] Australia's housing crisis. With experience in both the private sector and at the policymaking table, he brings a rare depth of insight into why housing affordability isn't just a [00:01:40] social problem, it's an economic imperative. We are looking forward to a very big discussion today about how the private sector can play a very crucial part in solving our housing issues.

[00:01:49] Veronica: Thank you so much [00:01:50] for joining us today, Robert.

[00:01:51] Robert: It's a pleasure.

[00:01:51] Chris: Robert, I've been doing this for a while, obviously in the development sort of construction industry, but I mean, you've also been on this mission for the last. [00:02:00] Seven years. So it's, this is not an overnight thing that you've started, what sort of got you in the first place to really take action?

[00:02:06] Chris: Because you sort of had to go in a whole different direction and where are we up to in [00:02:10] that journey? 'cause I feel like maybe we're a little bit more aware than, maybe where you were, say seven years ago.

[00:02:14] Robert: Look, it's actually been going on for a lot longer. In fact, someone republished an article that I wrote 10 [00:02:20] years ago about a frog boiling in water in terms of the housing crisis that I saw back then,

[00:02:25] Robert: and really 10 years later, nothing's really changed. [00:02:30] That just concerns me. But to go back to address your question as to why, when I was at Fraser's and selling apartments, housing, and land to people that can afford it, [00:02:40] like most Australians, I assumed that our governments were looking after our vulnerable people, and I discovered that they weren't. And the more I learned, the more I got [00:02:50] concerned about the future, and I'm actually in the industry. And I came to the view that if I didn't know that. What other Australians didn't know that. So it started off as a very [00:03:00] humble approach to say maybe if I start something, there might be a few more people like me out there. I've gotta tell you, I'm overwhelmed by the private sector concern [00:03:10] about the our vulnerable community, and we've collectively now termed it compassionate capitalism because profit and purpose do not. Need to be mutually exclusive. [00:03:20] They can add value. And unfortunately we've allowed ourselves as the private sector to be tarnished by the few, and therefore we are all perceived to be [00:03:30] greedy bastards when the reality is 95% care, but have never had a conduit to demonstrate that through.

[00:03:36] Robert: And that's what I think we've become. So, so yeah, we, we view [00:03:40] things with an economic and business lens, but the public policy outcome.

[00:03:44] Chris: you, how do you sort of go about that? is it trying to,bring together the private sector in terms of the [00:03:50] construction industry to sort of come up with solutions and you, rather than rely on the government doing that? I mean, how are you bringing it all together, and making sure that everyone's in on this, not just one developer, for example.

[00:03:59] Robert: [00:04:00] Yeah, look, at the end of the day, I've just got to be over government. I'm actually tired of waiting it. It is a train crash that's been coming for the last 10, 20 years, but no one's really looking at [00:04:10] that way. So we started off with a one page strategy, right? Very simple. We had four ideas up there.

[00:04:15] Robert: The first one is, let's look at all the existing empty [00:04:20] buildings that are out there that developers are holding for the next phase of development cycle and use them as short term shelter. because we're in a crisis, and this is our private sector [00:04:30] response, short term shelter, while we build the hundreds of thousands of additional homes our country needs. The second one was. There's no economic business case for housing. We [00:04:40] have, cost benefit ratios for roads, for schools, for hospitals, not for housing. I wonder what an economic study would look like if it says, what is the long-term cost to Australia of [00:04:50] this housing crisis continuing, and what is the future cost to future generations and what is the cost benefit ratio?

[00:04:56] Robert: So that was pillar number two, and we've done that study and [00:05:00] happy to share that study. The third one is, can we create a mechanism that would unlock private sector capital to drive a affordable housing for our workers? [00:05:10] So that was the third pillar. And the fourth one is we've got so much empty land out there in terms of church and community land, that we should be unlocking that on a [00:05:20] long-term lease.

[00:05:21] Robert: So the church doesn't lose the land, but society could use the land to build affordable housing and again, help the housing crisis. [00:05:30] So there is no one solution. It's a number of them, but that was the one page strategy that. Started our journey and if I can elaborate on the first one, 'cause you asked me that [00:05:40] question, how did we get engaged?

[00:05:41] Robert: Well, when the idea was first touted and the A, B, C heard about it and I was on the A, B, C news and then I was on Neil Mitchell the next day and we started [00:05:50] to talk about this housing stuff. We, again, using the empty building scenario, I started to get phone calls from a whole range of people from a very wealthy family. All the way through to [00:06:00] a home guy that found me on LinkedIn and he said something like, I'm one of the great unwashed, but thank you for trying and everything in between. And they all [00:06:10] said the same thing. We know we've got a problem, just tell us what you want us to do. So the first, um, what big term pop-up shelter was an old age care facility in [00:06:20] South Melbourne. It was owned by CaSPA Care. It was a 30, a 52 room facility and we refurbished 32 rooms with Metricon and all their [00:06:30] staff and subcontractors for free. We gave it to the YWCA because we do the building part, but we don't do the difficult part, which is about the people. So we [00:06:40] always work with a not-for-profit.

[00:06:41] Robert: So we gave it to the YWCA and in four years, the YWCA had helped over 140 women stabilize their [00:06:50] lives at zero capital cost to government. Since then, we've done 12 in St. Kilda with Mirvac 31 empty apartments in South Melbourne that were [00:07:00] empty and better living group from Coburg, refurbished it all for free.

[00:07:03] Robert: We're on current affair. We did another one in Box Hill and the last one we did in Victoria was, [00:07:10] in sad rehab where, mercy were the owner and was part of an Expanded property portfolio for the future expansion of the hospital. The old convent had been lying empty, so [00:07:20] we signed again, a peppercorn lease for five years with good Shepherd and Henley.

[00:07:24] Robert: Went through and refurbished the whole thing and furnished it for free. And,that [00:07:30] is what I term compassionate capitalism. We've done it in Tasmania. we've got a building under construction in Perth. We've launched one in Queensland with Queensland Rail, [00:07:40] and this week we launched our first one in New South Wales with Urban Property Group, again, empty buildings.

[00:07:45] Robert: They went through and did it all pro bono and we're gonna hand it across to, women [00:07:50] community shelters.

[00:07:50] Robert: Now. I think this is just a drop in the ocean, what the private sector can do.

[00:07:54] Chris: So these are a bit of a win-win, right? Because the private sectors, this is future development land [00:08:00] potential that they're gonna develop. At one point they've just land banked it. They don't wanna spend a lot of money on the building, they don't wanna put on the rental supply. so it's kind of just gonna get vacant and just sort of I'm not getting used right, [00:08:10] and it's just gonna get run down and then they're gonna knock it down anyway.

[00:08:12] Chris: Is that sort of the target? piece of land or building that you're looking for and saying, well, I know you're gonna build that in five, 10 years time. Can we [00:08:20] just house, you know, and solve a bit of a social issue at the same time?

[00:08:23] Robert: Correct. That is the principle is some of these have been not-for-profit organizations that owned the land, but the principle is the same. If I'm the [00:08:30] property owner and I've got an old aged care facility that's gonna take me five years to get a planning permit, let me use that for the community use at no additional cost. They pay all the normal [00:08:40] outgoings as if it's empty. And the variable cost is paid for by the operator, which is a not-for-profit, but they get the property free. So they've got no overheads other than running [00:08:50] costs. And to be quite frank, as a developer, as a compassionate capitalist, it adds value to my discussion with council.

[00:08:56] Robert: I'm helping you know, one project we got delayed by [00:09:00] local government. 12 months and it was ready to occupy. As soon as the state government heard that in Victoria, they said, we are fast tracking all of these developments. So we get fast track planning [00:09:10] approval because we are helping community. And the more people that hear that across the country are gonna tell you, the more people that come and reach out and say, how can we help you? [00:09:20] We agree with your values, we are capitalists, but we care about our community. And if you think about it. Philanthropy are compassionate capitalists. [00:09:30] They've got a successful business that now they're giving back. So we're just jelling with Australia's business values, in my view.

[00:09:36] Veronica: Well, there's a whole movement called conscious capitalism, so I mean, this sort of fits in [00:09:40] very well with that, whole. so not everyone is a, not every capitalist is a capitalist pig. but I think what's interesting though is that a, you've gone and done something about [00:09:50] it. I'm curious about a few things.

[00:09:51] Veronica: One is really, I guess the economic imperative, because you set off there, you know that you're coming at this from, it's a business case or it's an economic [00:10:00] case rather than a socialist case. and I like the fact that these two things don't have to be mutually exclusive.

[00:10:05] Veronica: Because we do have to care for those in our society that aren't able to care for themselves. But I'd be really [00:10:10] keen to hear, I guess you know your case for that. but also just before we get to that, a smaller question. in a situation where you've got hold of a, or a building that maybe has five years, it was gonna [00:10:20] be unoccupied and, you can stop squatters moving into it.

[00:10:23] Veronica: You can stop being. Derelict and graffiti and there's lots of damage that can happen even though a building might be demolished. You know, there's a lot [00:10:30] that can happen in the intervening time. So there's lots of reasons, why you might actually prefer that your building to be used in such a way.

[00:10:35] Veronica: What happens though when the planning approval comes through, particularly if it's accelerated, so you [00:10:40] actually get less of an opportunity to, for this social good. and then you've got people that need to be rehoused. is there enough of a sort of a, a supply of, of opportunities coming [00:10:50] that you're able to rehouse those people?

[00:10:51] Veronica: Or is that, that create a sort of bottleneck problem while just kicking a can down the road?

[00:10:55] Robert: it's, they're very good questions. The first one we did, we had to address that problem because at [00:11:00] some point in time the owner may want the building back and they didn't want their name to be front page of the paper saying, kicking grandma out.

[00:11:07] Veronica: Yeah.

[00:11:07] Robert: So as part of the agreement with the [00:11:10] non-for-profit, there's a six months what they come decanting strategy.

[00:11:13] Robert: So there's a six months notice period, and in this case, the YWCA has to rehouse those women elsewhere and [00:11:20] make the facility empty, just like a normal agreement between the

[00:11:23] Robert: private sector. But to go back to your question, we always try and line up the builders before we, really start, because as soon [00:11:30] as the planning permit's ready, we'd like to hit the ground running. So it is really a bit of a coordination, things. We're still learning as we go because every state has its nuances [00:11:40] and how it's doing in Queensland is a little bit different to Victoria. But ultimately it's all about relationships and spreading the word. Because normally at the end of every [00:11:50] conversation I have with an individual or a company, it generally works out the same. They say, how can we help? Because ultimately, going back to the [00:12:00] original question, it isn't all our economic and social interests to do this because whilst it's a housing affordability problem that we're all aware of, because the current [00:12:10] media. The real underlying concern I've got is we are heading for civil unrest at a point in time. And even the right wing capitalist, the dirty [00:12:20] pigs that you mentioned, it's not in their family self-interest to have civil unrest happening. So unless you contribute, be careful about what you leave your descendants. So it is all about [00:12:30] aligning self-interest, but getting back to the economics, just to put some numbers to this. There was a report done in 2020 run by Chris Leptos for what they called [00:12:40] Nfic at the time, which is now called Housing Australia. Federal government actuaries quantify the shortfall of investment needed over the next 20 years in just [00:12:50] social and affordable, not the 1.2 million they're talking about now to social afford as 290 billion. That represented [00:13:00] 44,500 social and affordable homes built every year for 20 years. Housing Australia is currently aspiring to build [00:13:10] 11,000 homes every year for five years. Where's the 33 and half thousand shortfall gonna be coming from? We have to innovate and step outside the box 'cause it [00:13:20] just is not working for the future of our society. I was talking to someone just yesterday about, the front page of the papers in Tasmania going back a couple of years ago. I [00:13:30] remember the headline with just four letters, help.

[00:13:33] Robert: That's how bad it got in Tasmania and that's reflective of Australia. But since then, we've normalized it. [00:13:40] We're expecting homelessness to be there. Therefore, we're allowing it to actually happen underneath our nose. It's gonna get a shit load worse until one day we end up [00:13:50] like LA and there's homeless people everywhere, which makes people and businesses feel

[00:13:55] Chris: Yeah.

[00:13:55] Robert: This is a business

[00:13:56] Veronica: are parts of Sydney, you know, where,

[00:13:58] Veronica: where you feel that [00:14:00] now actually, to be honest. we know this and governments have been, dramatically reducing their investment in social and public housing for decades now. and, you know, you alluded to it in your [00:14:10] opening sentences basically, that the developers have been branded as being greedy.

[00:14:15] Veronica: Individual investors have been branded as being greedy, and yet. in many [00:14:20] cases we're part of the solution and individual investors effectively have been actually providing the solution for the last decades. but what would you say would be the main structural barriers that would be stopping institutional [00:14:30] capital from flowing into affordable housing in Australia at this stage, at this point of time?

[00:14:34] Robert: At the end of the day, Australia's not economic develop as it currently sit.

[00:14:38] Robert: Right. And unlock [00:14:40] a little bit of that in America. Bill Multifamily homes have. Been going on for a long time, but the landscape in America is very different to Australia. We are very, our land [00:14:50] component is very, very expensive. And our building cost, you've seen go up.

[00:14:54] Robert: So from an investment return point of view. For overseas capital, we are expensive [00:15:00] and that's why the current Housing Australia remit where we have got international capital, it needs a top up by the federal government to make sure they get reason, return for risk. But it's still a very [00:15:10] limited way of doing it because it's through a grant application, through Housing Australia. you must use a community housing provider and they are the salt of the earth. [00:15:20] I've gotta tell you, if we're gonna solve this $290 billion problem, we cannot solve it through a niche market called a community housing provider. We have to engage the real estate ecosystem [00:15:30] in delivering things that are economically viable for the market to drive the solution. ' cause if we do not get the market to drive the solution, we will never solve Australia's [00:15:40] housing crisis. And if I could just touch on the economic study that we did, which was the first. On an average for Australia, and this is in some way a little bit irrelevant because every state just looks at [00:15:50] their cost benefit ratio, but on an average, it's a two to one cost benefit ratio in terms of building affordable and social housing and it's [00:16:00] payback to future generations. It's better than any investment in roads and schools and hospitals. It should be classified as fundamental infrastructure. [00:16:10] For a future prosperous country in Victoria, it's one to 3.3, which means for every dollar we spend, we save [00:16:20] $3.30. The concern that I've got, again for the future. That we did an economic study, cash flow on that report. And it says, as of, from today, in today, dollars [00:16:30] by 2032, the additional costs. Additional costs is an extra 25 billion per anniversary in the unintended [00:16:40] consequences. Now, knowing and understanding the industry as I, as I do now, my real concern, then by 2032. They can't afford it 'cause government's got limited budgets and [00:16:50] therefore we start, cutting back the support we have offering for a greater number of homeless people. So in my view, that ends up we are going to, for a lose lose [00:17:00] scenario, our values are being eroded slowly and we're not even realizing it.

[00:17:04] Chris: Robert, new South Wales seems to be jumping on the front foot a little bit in terms of, like you said, there's [00:17:10] no economic case for a lot of developers to just build affordable housing. Right. They, you know, their economics aren't there. and people can't afford to buy, you know, at those levels and make a profit.

[00:17:19] Chris: I'm not sure if [00:17:20] councils or governments basically, Almost did pro bono and they reduced the cost to develop, or they gave funding to developers at a cheaper rate. I don't know if there's a [00:17:30] case where if there's some tweaks to the proposition for developers, you can make it, more enticing for them.

[00:17:36] Chris: Or is it better to do what Chris Mins is doing and saying, well, okay, you can [00:17:40] develop that site within these limits if you are gonna build it a hundred percent to build, to sell. But if you build a certain portion for the affordable sort of housing market, we allowed you [00:17:50] to build a lot more, on that site.

[00:17:51] Chris: Do you think that's one of a good policy and do you think you're supportive of what they're doing?

[00:17:55] Robert: Yes. Look, let, let me unpack that a bit. The answer answer is yes, right? Because again, if you take the view that [00:18:00] majority of developers are compassionate capitalists, there's a couple of things that they look at. Even though they do philanthropy in the business sense, they're not philanthropists, they're not charities.

[00:18:08] Robert: So as long as I am, [00:18:10] no worse off. I'll do some key worker housing. Social housing's different, right? Key worker housing for Australian workers. And what premium means is doing is exactly what our economic model [00:18:20] does, which is provide additional value in the land by saying a 30% uplift that creates additional land value and that additional land value becomes the [00:18:30] subsidy for a number of affordable homes. To be able to be leased before below market rent for a period of time of say, 20 or 30 years. So the developer's cost neutral, but at the [00:18:40] moment, they need the community housing sector to buy those under our economic model using technology and creating a central digital register. The developer can then package [00:18:50] that those, let's say there's 10 affordable homes, that's 70% of market rent. I can put a restrictive covenant on those homes and sell it to my mom and dad investor database, [00:19:00] but always monitor compliance on the digital register to make sure that the, it's being used for the right purpose at the right market, rent, et cetera, et cetera. I've just unlocked [00:19:10] private sector capital to drive essential worker housing at scale. Nationally. So we've been talking to the federal government and the state governments and everyone is, well, the [00:19:20] federal government discussion just this week have acknowledged, Rob, you're right, we need to register. we're now gonna go and talk to the states to see whether they all wanna be part of this.

[00:19:28] Robert: I'm saying it's taken bloody four [00:19:30] years to get here to date.

[00:19:31] Veronica: I was about to say, is that part of the problem

[00:19:33] Robert: Absolutely part of the problem. They do not want to risk anything.

[00:19:37] Robert: and my view is we can't afford to wait for all [00:19:40] the boxes to be ticked that can make sure we're not gonna make mistakes. We have to be pursuing this through the private sector. And whilst we need to get government on board and the [00:19:50] Municipal Association of Victoria, they sign a letter of support for this. We have to bring as many stakeholders on board as possible. And we've done that over the last several years. Property Council, [00:20:00] UDIA committee from Melbourne, Sydney, Brisbane, real Estate Institutes. Everyone agrees, but government wading through reco. That's the description I do. Just [00:20:10] wading through reco, but it's part of our process unfortunately. We wanna try and work together.

[00:20:16] Speaker 2: I'm on a personal mission to help more people make better property decisions. You know, [00:20:20] most people don't realize that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need. [00:20:30] And what I do is help people with tricky real estate problems, which offer masqueraders simple questions like, should I sell my investment property because the interest re payments are hurting, or should [00:20:40] I buy before I sell?

[00:20:41] Speaker 2: Or the other way around. You could connect with me and access all of the tools that I've created to help you make better property decisions at Veronica Morgan dot com au. [00:20:50] And there you'll find resources for first home buyers, details about my buyer's agent mentoring program. You could connect with my Sydney based property management and buyer's agency teams, [00:21:00] Australia wide vendor advocacy.

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[00:21:23] Veronica: So how does Australia's approach to social and affordable housing compare to other countries like the UK or the US [00:21:30] because they've obviously got different funding models, but also different sort of models of government as well, at the same time, we, we are told, and, and this seems to be a home crisis or a development crisis [00:21:40] or a rental crisis, let's say.

[00:21:41] Veronica: Widespread across the world at the moment. So this isn't just a, an Australian thing. So I guess what's unique to us and what isn't what can we learn from other [00:21:50] countries?

[00:21:50] Robert: the best way to describe that, I think we're coming from the furthest point behind compared to some other than maybe the us. in the uk they've had inclusionary zoning, [00:22:00] which obligated a developer to actually provide some social affordable housing as part of their development. But it's been ingrained.

[00:22:06] Robert: So therefore, when you buy the site, you factor in how [00:22:10] much less you pay the landowner to make sure you can fund the subsidized housing here. Where on average, less than 4%. In the uk it's probably more like 10 plus, right? [00:22:20] Europe's even greater, less than 4%, and you just can't include another cost to development without them being able to take it off the landowner because it's [00:22:30] ultimately someone has to pay.

[00:22:32] Robert: And if you introduce an additional cost, once I bought the site. I'm gonna push my prices up because I can't afford to carry it. [00:22:40] So, and I had this discussion with the Victorian government when I was still at a Australand or FRAs at the time, over 15 years ago. But they wanted to introduce it in their term. Now, they never [00:22:50] introduced it, but if they would've listened to my advice, because all the developers that you would expect were thumping the table to say, you cannot introduce this now, et cetera, et cetera, et [00:23:00] cetera. And I said, stop, stop. Stop. What happens if the government says, we're gonna introduce it today, but it's not gonna take effect until 10 years from today? Who around the [00:23:10] table would object? Not one because they hadn't bought the site.

[00:23:14] Robert: So if they would've enacted it 15 years ago, we would've had inclusion rezoning [00:23:20] five years ago. The cost to industry would've been. Basically zero because you bought it for less and we would've had more housing supply in this very, very important [00:23:30] space. But no one looks more than three and four year past their electoral cycles, unfortunately, and that's part of the problem.

[00:23:35] Veronica: Which is sort of bizarre, isn't it? Because you think, well, the government has shirked their own responsibility, [00:23:40] like you, you said you identified that a decade ago or maybe more. I mean, we can see it in that there's, it's irrefutable evidence that public investment has gone down in housing [00:23:50] and yet they don't have an appetite to support, Developers pri the private sector being part of the solution. It, it sort of beggars belief.

[00:23:57] Veronica: it does

[00:23:57] Robert: be a belief, but it's a fairly simple, [00:24:00] Analysis Really. And I'm quoting a politician that I won't mention, that I spoke to over a decade ago. He said, Rob, until the general public actually demand it, we're just [00:24:10] gonna be playing lip service. Right.

[00:24:12] Robert: So, and as part of the problem,

[00:24:14] Veronica: Yeah. Is the public demanding it enough now? Is it's still not loud enough. but also [00:24:20] when you think about it is the most disadvantaged se sector of our society that is impacted by this. And so I guess your argument here is, well, we're all gonna be affected if we don't do something about it.

[00:24:29] Veronica: [00:24:30] But again, at what's the tipping point, do you think?

[00:24:32] Robert: I'm not sure. part of our approach from a marketing point of view is we wanna create respectful unrest to educate the Australian [00:24:40] public about what they don't know. Because with without respectful unrest, there's never any political self-interest on both sides of politics. And part of that is why, I'm not sure if you saw that link of [00:24:50] that, the film Undercover, which is, was narrated by Margot Robbie, and it's about a story about how Australian women of 50 are becoming the fastest

[00:24:58] Robert: growing code of homeless in [00:25:00] Australia.

[00:25:00] Chris: Yeah.

[00:25:01] Robert: It is now on Netflix we listeners to look at, and it's quite disgraceful how we've allowed women to sleep in class all around the country. [00:25:10] We don't see that. Therefore, it does exist. We've now been part of another documentary that just got released on binge just this week called Sold. It's a very [00:25:20] different view on it.

[00:25:20] Robert: It's more of a comedic but serious, place on it. And again, it's just trying to educate the public about what the issues are in our country and then try to get it [00:25:30] respectful, uprising really, because without that sort of, unrest. There's no real interest in politicians because whilst they say they're doing stuff and they are, don't get me wrong, [00:25:40] we are much better now than where we were. But if you go back to my original figures, we need 44 and a half thousand social affordable. We've only contracted the bill at 11. Where's the other 33 and [00:25:50] thousand? It should be on the agenda.

[00:25:52] Veronica: Yeah, we first interviewed Michelle Adaire, back in 2019. we started thinking, well, this is something that needs to be talked about. And we have [00:26:00] talked about it progressively across that time. And of course, COVID hit and then after that, everyone's suddenly aware of this problem that's been brewing for a long time as you've been saying.

[00:26:08] Veronica: but there have been some [00:26:10] projects, you know, we've interview, interviewed Nightingale. there's a number of different, Organizations that are in a small scale trying to do something about it. And I guess it's all these small activities, a bit like, what you are [00:26:20] talking about.

[00:26:20] Veronica: here's a project. You were involved in the Green Project in Parkville. Can you walk us through some of the key lessons from that and why it's such a game changer?

[00:26:28] Robert: Yeah. Again, let's put it in [00:26:30] context too. The green is part of a Commonwealth Games Village development where we got introduced to public housing. So we had to deliver 20% as public housing, but the green was really a, [00:26:40] a step change, which hasn't really been, embraced by the industry. And I'll go through why in a minute, what the green was. Part of my history, I used to work for AV Jennings, [00:26:50] right? So building houses. Then I worked to work for a cafe called Hudson Conway that developed the casino, but I was focused on the multi-story residential. Then I went back to Aus Australand at the [00:27:00] time, which became Frasers going back to domestic building. And what I said at the time is that why can't we build five story buildings like we do houses with sticks. [00:27:10] So the green is a five story lightweight building with what I'm saying, domestic residential construction methodologies and subcontractors. That was built [00:27:20] at 25% less than concrete,

[00:27:22] Veronica: It's so interesting because you hear a lot of people saying, oh, well we need to employ more commercial, building the techniques [00:27:30] using in commercial industrial building. Into a residential, more prefab walls and all that sort of palava. But you are actually going the opposite here to say that you've gone back into that more [00:27:40] artisanal, if you wanna call it that method of building.

[00:27:42] Robert: We, we, without getting political in this conversation, you've got two, workforce streams. One I call [00:27:50] domestic residential.

[00:27:50] Veronica: It does houses. The other one's commercial, residential that does multi-story with the CMEU workforce. Yeah. Okay.

[00:27:57] Robert: the cost difference is [00:28:00] so significant that, when governments say, we're gonna curb the urban growth boundary, 'cause we're gonna go up vertically. The cost to deliver a six square apartment is the same [00:28:10] cost as a townhouse. Why and how can a family live in a six square apartment? When the family wants a townhouse, and that differential in cost delivery [00:28:20] is why we haven't got the housing diversity because the I, I did a paper going back years ago when Fraser Brown was looking to do a multi-story at Ringwood Station. I said, it'll never get [00:28:30] built because the cost to build that in Ringwood is the same cost to build in South Bank, but it, and I had to sell at the time, a six square apartment for 130. So for [00:28:40] $330,000, which is the cost of a townhouse. Why would anyone pick a six square apart and when you can buy a townhouse next door for the same cost?

[00:28:49] Robert: That is a [00:28:50] sleeper. That is a sleeper.

[00:28:51] Chris: so back to the green project. What you are pointing out is the method of construction and, am I putting words in your mouth here, necessitated a different [00:29:00] set of trades on site that not necessarily, organized in the same way What did that allow?

[00:29:05] Robert: Well, we used the same trays that we used to build houses, but we just did it very [00:29:10] safely with, the whole commercial approach of hardhat, safety, all that stuff. And we just educated and uplifted their safety skills

[00:29:18] Robert: so we could use their [00:29:20] labor and their designs on a mid-rise tower in timber. At the same time, Len Lease was doing Forte, which you might recall, and between Forte and the [00:29:30] Green, we changed the building code nationally for Dean to satisfy with timber. ' cause the other benefit of timber is a carpet capture, right? So if you really think about it, and I'm, I [00:29:40] did a keynote address to the timber framing industry a couple of years ago, and I said, because I was the builder and developer licensed, licensed builder for phrases. I said since we, since Fraser's closed the [00:29:50] building arm, pretty much where I left, the industry's done nothing. ' cause it's very much still a cottage industry. The commercial side is actually quite sophisticated and they have a lot of [00:30:00] good construction processes. Just the labor force differences are what they are.

[00:30:04] Robert: that's the fact of life. But don't expect them to deliver the same product, which is what government thinks [00:30:10] should happen, but it won't.

[00:30:11] Veronica: I mean, timber. Okay. So, but you've gotta chop down trees in order to use timber in construction. are you saying

[00:30:18] Robert: have you, you gotta harvest [00:30:20] trees. This is plantation

[00:30:21] Robert: timber. It's pine.

[00:30:22] Veronica: Yeah, carve, that's a good, good distinction there. does a timber beam fragments like, or a truss does. To [00:30:30] capture carbon even though it's no longer living.

[00:30:32] Robert: Oh, look, I'm not a hundred percent fable, all this stuff, but it does capture carbon. The RMIT did analysis of what we did with the green and what Forte did for [00:30:40] Lendlease and uh, there's a huge carbon opportunity there as well.

[00:30:43] Veronica: can you elaborate, I guess on, on modern some of these modern construction techniques and. Like mass timber, I guess [00:30:50] play. How does that play a role in reshaping the economics of residential development?

[00:30:54] Robert: Mass timber is very different to what I'm saying is lightweight timber mass. Timber is [00:31:00] more from the sustainability point of view. It's aesthetically pleasing and comforting, but it's probably the same cost, if not a little bit more expensive than concrete, right? So there's no real cost [00:31:10] difference, but there's more aesthetics in niche market. Lightweight timber go up to five stories. It's not only as sustainable, it's also cheaper.

[00:31:19] Robert: You [00:31:20] gotta follow the money.

[00:31:21] Veronica: I'd imagine that there's only, like you couldn't build or could you build in a light in a earthquake area or whatever. I mean, there's obviously gonna, or cyclone, there's gotta be [00:31:30] certain climates and zones that would lend itself to that as a construction.

[00:31:34] Robert: As a, as an engineer, that's my profession, right? You can design all that stuff as long as you know the assumptions, you can [00:31:40] design anything. The whole thing is lightweight is

[00:31:43] Robert: easier, simpler to construct. And if I really had my wishy wand, I'd love lightweight five story timber [00:31:50] buildings, a be built by women. Because they are clean, quiet. It really fits the brand of a, the female workforce. 'cause they are more detailed, they're more, [00:32:00] particular, and you know, the commercial construction, the more the perception of it's welding, it's concrete, it's dirty, it's men, lightweight, timber built by women. How many construction [00:32:10] jobs would you to get from government? So I think there's a huge opportunity there. Huge opportunity.

[00:32:14] Veronica: you just reminded me when I was at school and, and I was doing metalwork and I was picked on by the boys 'cause they told me that I [00:32:20] should be doing woodwork not metalwork. So, you've just done the same thing, I think. but jokes aside, what are sort of,innovation in construction, methodology, materials, and [00:32:30] techniques. Could we be embracing or what exists or what's in development? because really, I mean, there's been lots of talk about our productivity in construction sector being [00:32:40] stagnant or going backwards because we're still relying on old methods.

[00:32:43] Veronica: is that a fair, fair characterization? And if not, what's the real picture? What, what should be

[00:32:48] Robert: It look, it, [00:32:50] it is a fair characterization and the green for goes back more than nearly 10 years now, was a lot of it was prefabrication in the factories. So prefabrication has been around for a long time and [00:33:00] now it's talked about as part of the solution and it definitely is, but what's lacking the prefabrication is not the innovation. It's the pipeline. I've known many prefabricated who spent [00:33:10] millions of dollars getting the proper equipment, but unless they get a continuous pipeline of work, they all go broke.

[00:33:15] Robert: So government needs to give a few people, 'cause you can't do it across the whole board, [00:33:20] the pipeline to actually allow them to move, mobilize private sector capital at scale. So we can do these things in numbers and what's lacking is the continuity of [00:33:30] work. 'cause even Lendlease set up their own, factory. In, new South Wales, they're not closing it down and selling it because they couldn't get enough economies of scale to make it actually economically work.

[00:33:39] Veronica: [00:33:40] Wow. But as the New South Wales State government just came out very recently with prefabricated, housing, so it seems to be as a government, they're looking at [00:33:50] ways in which they can embrace somewhat this type of technology. so you talk about the pipeline, so, so where can that pipeline come from?

[00:33:57] Veronica: Is it only government?

[00:33:58] Robert: It's not only government, but governments are [00:34:00] one that underpins the economic liability of a large factory.

[00:34:03] Robert: and there are some, Bowen's got one in Geelong. there's fabrication in Albury, Wodonga. We just have to have enough to actually allow them to get a [00:34:10] pipeline. 'cause that will definitely help. But we need to unlock new capital because let's say we've got all the prefabrication we can, government's money is limited. the 33 and a half thousand [00:34:20] shortfall. It has to be funded somehow. We need to step outside the box. As I said earlier,

[00:34:25] Robert: use digital technology to make sure that people are accountable and they're qualified to receive below [00:34:30] market rent and allow the private sector to drive the delivery of affordable housing rather than waiting for governments to provide a grant and the whole process and et cetera, et cetera, et [00:34:40] cetera.

[00:34:40] Robert: We must find a market mechanism that unlocks the private sector to drive the public outcome rather than just wait.

[00:34:47] Veronica: So effectively what you're talking about is a [00:34:50] giant collaboration, right? And What needs to happen for these groups to be able to collaborate efficiently and effectively? Because, when, I guess people look to government [00:35:00] and overarching, particularly on a national scale here, but like you've said, if you wait for government, it's never gonna happen.

[00:35:04] Veronica: So what does need to happen?

[00:35:06] Robert: given, I know, a fair bit about

[00:35:08] Robert: this and how and why I'm [00:35:10] concerned about it, and again, everyone at housing, all Australians, other than our CEO, which is the first full-time employee, are doing this out of the love and the concern for the future.

[00:35:18] Robert: Right. So that's, that's the main thing. [00:35:20] If I had my wish, I would actually declare war on homelessness as a country, and I'll use that too very deliberately when we are at [00:35:30] war. Enemies come together. This is

[00:35:32] Robert: how important it is because we're normalizing this. We're

[00:35:34] Robert: not seeing it, but enemies have to come together to work in the long term national [00:35:40] interest, not for us, but for our grandkids and their

[00:35:43] Robert: descendants, and, through warts. you put aside your differences. We have to collaborate. this is too big for [00:35:50] any government to solve on its own. It is a community-wide problem And, that? includes business. Let me just expand a bit of at the, business side. this is now a [00:36:00] national business problem 'cause there are businesses that

[00:36:01] Robert: are not efficient 'cause they cannot find workers 'cause the house is too expensive. This is the product fundamental productivity issue for our country. It's [00:36:10] a GDP issue because you can't maximize your GDP if can't find the workers to fill the roles. And we're close to a few organizations. and There's one that's not-for-profit called Tourism [00:36:20] Northeast. They represent the tourism industry in the eastern part of Victoria. They're trying to encourage key workers to go into Regional Victoria to fill

[00:36:28] Robert: the jobs that I mentioned before are [00:36:30] missing. They did a survey.

[00:36:31] Robert: They'll get key workers going to regional Victoria in one condition. 90% said the job must come with a house.

[00:36:37] Robert: Now if you don't get a house, you don't get the worker.

[00:36:39] Robert: [00:36:40] It's such a fundamental issue that we have to

[00:36:43] Robert: address it as such, which is why I think we should declare war on housing and homelessness. If I could just make one more point about this, [00:36:50] and you can tell I'm pretty passionate. Homelessness is the

[00:36:53] Robert: canary in the coal mine to a

[00:36:55] Robert: much bigger issue in the housing continuum. And if we don't go upstream [00:37:00] and solve the affordable housing for workers, our homelessness is gonna go through the roof.

[00:37:05] Robert: 'cause I'll keep on dropping in.

[00:37:06] Veronica: Yeah,

[00:37:07] Chris: I mean

[00:37:07] Chris: the other sensitive topic here, is probably around [00:37:10] migration and, growing our population. And,how do you vision that? I mean, you'vedone the cost of benefit. this would've been part of the conversation. there's two sides to it right?

[00:37:18] Chris: So how, how do you.

[00:37:19] Robert: Look, [00:37:20] I think

[00:37:20] Robert: immigration is an important part, but we need to be sensible as to how and what we do, and key workers are a part of it.

[00:37:25] Robert: But let me give you some of the potential solutions, right? And again, there's always hairs on some of these, but just hear [00:37:30] me out. There's 13 million empty bedrooms in this country. And a lot of 'em are probably with pensioners that are in great locations, but their family's grown up to read one single home, but they've got two or three [00:37:40] bedrooms that are empty. Now there's a security issue which has to be,

[00:37:43] Robert: solved, but one 1% is 138,000. So 1%. But a [00:37:50] pensioner's not gonna put someone in the spare room because the accountant tells them, you get

[00:37:54] Robert: $1 of income, you lose your pension, and you use your capital gains tax free.

[00:37:59] Chris: Yeah.

[00:37:59] Robert: Why [00:38:00] don't we incentivize

[00:38:01] Robert: them in the national interest to open up 1% of those empty bedrooms for key workers that are productive close to where [00:38:10] society needs them. While we build those homes, we've gotta look at the empty buildings that exist and provide carrots. You gotta unlock some of the empty bedrooms, at least for a decade.

[00:38:18] Robert: Allow

[00:38:19] Robert: until we build [00:38:20] the housing.

[00:38:20] Robert: These are long-term strategies and we have to align the public

[00:38:24] Robert: interest. With all the mechanisms we can, including pensioners, you've got 10 [00:38:30] years, you can get an income for that bedroom and we

[00:38:32] Robert: won't even pay tax on it

[00:38:33] Robert: because the cost

[00:38:34] Robert: benefit ratio is in the government's interest.

[00:38:36] Chris: Yeah, I mean, Scott Keck brought that out right back in COVID days. It [00:38:40] was, concern around that, but you obviously barked that up that tree a few times. how do the governments,feel about that? Because,

[00:38:46] Chris: that to me is like a real low hanging fruit And I agree. and not just pensioners, it's [00:38:50] people of all different ages even just current homeowners like if you wanna rent a room out, then you're thinking, I was just chatting to a mate just a couple of hours ago, he is renting downstairs. I was like, is that gonna go on your books?

[00:38:59] Chris: That's gonna [00:39:00] affect your capital gains tax? it makes so much sense for him just to. He's got a whole downstairs that he can rent out. But it's I've gotta think about the tax consequence of that and should we just evolve our tax system because [00:39:10] that's a very small tweak.

[00:39:11] Chris: and what are the governments, when you do bark up that tree, what do the governments say?

[00:39:14] Robert: Waiting through tco. To me, it's such a low hanging fruit.

[00:39:18] Robert: The cost benefit ratio is [00:39:20] just, it's

[00:39:20] Robert: a sound business case.

[00:39:21] Robert: Surely while the industry is imploding

[00:39:24] Robert: and we're not building the housing we

[00:39:26] Robert: need, we have to look at lateral solutions to say how do [00:39:30] we relieve the pressure? These are

[00:39:31] Robert: pressure relief valves. I'm not saying to keep it forever,

[00:39:34] Robert: but

[00:39:34] Robert: do it for a decade while

[00:39:36] Robert: we build some of the homes we need and, uh, population adjusts and that might cater [00:39:40] for some of the immigration pressures, right?

[00:39:41] Robert: We need to look laterally as opposed to thinking still inside the box. 'cause that ain't working.

[00:39:48] Chris: they've got all the data there, right? 'cause they do [00:39:50] the census every five years and then. Census basically shows that we've got a massively underused housing stock, right? Of dwellings. We've got 11 million dwellings and we should be able to [00:40:00] house everyone, but it's just all in the wrong order.

[00:40:01] Chris: And I think about people with 40 mortgages, right? if you don't have to pay tax on renting out a room and it gives you an extra $300 a week, can. that's a real big saving for a family. [00:40:10] And they would do it, but then they know they've gotta pay tax and it's gonna affect their capital gains tax.

[00:40:13] Robert: And and maybe the government thinks, well, all the people who are already doing that, I'm not gonna get tax on them. But maybe the government's just gotta think, well, what's the overall or the problem they're [00:40:20] trying to solve here? Well, our objective is to keep on talking to

[00:40:23] Robert: businesses and government podcasts

[00:40:24] Robert: like yours to spread the message

[00:40:26] Robert: out because if there's enough of

[00:40:27] Robert: it that says they can't ignore it,

[00:40:29] Robert: [00:40:30] so it's getting that

[00:40:30] Robert: respectful unrest happening.

[00:40:32] Robert: I.

[00:40:32] Veronica: Yeah, it's not, it also, in terms of whether you'd free up room or two in your house, it's not just that, oh, I have to pay tax, and it may, and [00:40:40] because it kama it complicated too, apart from the fact that yes, you gotta do it, then it becomes, you gotta pay more to, for accountants and all the rest of it to work it all out.

[00:40:47] Veronica: But, you know, I think myself, I think, I've got two free bedrooms in [00:40:50] my house now, and I'm rattling around there and I'm thinking. Well, I could put a couple students in there, but then if I'm gonna do it off the, I'm not doing it, so therefore don't come at me the a TO. [00:41:00] But if I was gonna do it off the books, then there's no security checks and there's no, there's no protections for me.

[00:41:04] Veronica: So, so that's the other side of it. So people might go, oh, look, I'll do it, but I don't want the complications of the [00:41:10] accountant, et cetera, et cetera. But then I don't wanna take the risk of bringing people into my house without any protections and no bond, no nothing. So you can just see the way, the hurdles that if they do, if they legitimize that [00:41:20] put systems in place.

[00:41:21] Veronica: To facilitate that, I imagine it would, could free up quite a lot of space.

[00:41:25] Robert: Or again, that's the issue. And you know, I knowPeter Mars suggested you have a chat to me and

[00:41:29] Robert: [00:41:30] Peter's rightly on, the whole tax issue, which is fine.

[00:41:32] Robert: But we've seen how slow any change there is.

[00:41:35] Robert: What we try and do is saying, these are the current scenario, these

[00:41:39] Robert: are the current [00:41:40] rules.

[00:41:40] Robert: How do we operate within the rules to actually get shit done?

[00:41:44] Robert: and that's what we're trying to do. So to me, this empty bedroom, even if it does only half a [00:41:50] percent,

[00:41:50] Robert: it's all 50,000. let's

[00:41:52] Robert: think laterally

[00:41:53] Robert: people,

[00:41:54] Veronica: Well, I mean, look, you know,

[00:41:55] Veronica: they've been prepared to look at land tax. The state governments have been prepared to look at land tax to facilitate bill to [00:42:00] rent as a whole industry. That's a lot more complicated and there's potentially bigger cost to government for that, in terms of, what they're forgoing, the different governments.

[00:42:07] Veronica: Of course, I get that. back to the [00:42:10] collaboration, story though. So you, so your message is to basically beat the jungle drums, raise the awareness, which we are doing, but that's this long, slow thing which asked earlier about tipping point. I guess we don't really know what that [00:42:20] tipping point is, but I guess what we suggesting here, the ground swell of discontent and the groundswell of awareness that there is this major problem is what is [00:42:30] needed to grow.

[00:42:31] Veronica: Or the grounds well of discontent for those who really are disadvantaged by this situation tunes into civil unrest. Is that sort of, is that you'd IV sum it up,

[00:42:39] Robert: pretty [00:42:40] much. if I can maybe put a call out to any of your listeners that are in businesses that can add something towards refurbishing some of these empty buildings. Had to come on board as part of the compassionate Capitalism [00:42:50] army. to please reach out through our website because we are constantly adding companies.

[00:42:54] Robert: You know,quest, depart Hotels, Metricon Henley MVAC Interface, Dulux has been [00:43:00] so generous across the whole country. That's unbelievable. And

[00:43:03] Robert: it's all for helping others.

[00:43:05] Veronica: We will put.

[00:43:06] Robert: capitalism exists.

[00:43:07] Veronica: Yeah, we will put the link in the show notes because I think this [00:43:10] is really important. before we wrap up though, Robin, we really appreciate this discussion. It's been a good one. have you got an example of a property done by for us?

[00:43:17] Robert: Well, probably not. Probably Dumbo. 'cause I had a bit of a [00:43:20] think about what I heard over my career, but it's, there's something that I did do and I didn't do it a hundred percent Well, which you wouldn't mind sharing is that. When I bought my first sort unit site when I was [00:43:30] 23 to build my set of units. you know, you normally measure, the front and you

[00:43:34] Robert: measure the length of the block to make sure it's the right lot. And I did that and it actually married up. But when I [00:43:40] started to developing, I realized that rather than straight lines, the block was actually slightly skewed and I was out by 400 millimeters.

[00:43:47] Robert: So I had to go through adverse possession to [00:43:50] my neighbors.

[00:43:51] Robert: Which took two years, and luckily the neighbor next to me was there for

[00:43:56] Robert: 30 years. Otherwise I couldn't prove it.

[00:43:59] Robert: So [00:44:00] my, recommendation to

[00:44:01] Robert: all your listeners get a surveyor

[00:44:03] Robert: to reestablish a lots before you settle because if

[00:44:07] Robert: you find it out before settlement, it becomes the [00:44:10] o responsibility to give you the title that you've just bought. I was lucky that I got rounded, but I gotta say it could have been disastrous.

[00:44:17] Veronica: It's an interesting one that there is such a thing as [00:44:20] title insurance. So for an individual, property owner who buys

[00:44:23] Veronica: it like a house, you can take out title

[00:44:26] Veronica: insurance against such things like that. But as a

[00:44:28] Veronica: developer,[00:44:30] you are very

[00:44:30] Veronica: reliant on, particular wits and setbacks to maximize the site, obviously. So that could have been absolutely catastrophic. and I don't know any state or territory in this [00:44:40] country where a survey is,a vendor disclosure, a man, a prescribed document that needs to be provided by a vendor. So really, quite a huge amount of properties that are [00:44:50] purchased without a survey, one doesn't even exist.

[00:44:52] Veronica: and nobody wants to undertake the cost to get one during settlement. So it's an interesting one. But from a developer's point of view, I would imagine that it'd be well worth [00:45:00] the money getting a survey done.

[00:45:02] Robert: definitely especially before settlement. 'cause then the obligation can go on the vendor provided

[00:45:05] Robert: before you settles.

[00:45:06] Veronica: Yeah. Is that in every state and territory that that's the case? Or just Victoria?

[00:45:09] Robert: [00:45:10] Uh, I'm pretty sure it's every state and territory, but I can't be a hundred percent sure. I know

[00:45:13] Robert: definitely Victoria.

[00:45:14] Veronica: So Victoria. Yeah. And well done on at the age of 23,

[00:45:17] Veronica: bunga Development site.

[00:45:19] Robert: long time. I could never [00:45:20] do it now. I could never do it now.

[00:45:21] Veronica: So we won't let our, our younger listeners, please don't bash on, pilot Rob for that. been a great chat. Look, thank you so much for your time, Robert, [00:45:30] today. I'm sure our listeners will find this, you know, some of the solutions I guess that you're putting forward are really interesting.

[00:45:35] Veronica: And, we would definitely, as I said, please, if

[00:45:37] Veronica: you're interested in contributing in any way or finding out [00:45:40] more, we'll have the link in the show notes. for.

[00:45:42] Robert: Great. Thank you. Thank you very much for the opportunity to share the story.

[00:45:46] Chris: Thank you, Robert.

[00:45:47] Speaker 7: If you have a question that you'd like us to answer in an [00:45:50] upcoming q and a episode, you can send us a voicemail or written question via the website. The elephant in the room.com au. Or you can email us directly at [00:46:00] questions at the elephant in the room.com

[00:46:02] Speaker 7: au.

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