AustralianSuper and HESTA team up to back Assemble in development of 17,000 homes

AustralianSuper and HESTA are backing Melbourne-based Assemble to develop affordable housing over the next decade in an effort to address the supply crisis.

The Assemble Community at 15 Thompson St, Kensington

Two of the nation’s largest superannuation funds have teamed up to back the development of $15bn worth of affordable housing over the next decade as they seek to address the supply crisis.

Fund heavyweights AustralianSuper and HESTA are backing the enlarged Assemble platform to develop and work with other companies and governments to help dramatically boost the supply of affordable housing.

They will look to get other investors on board to spark the building of 17,000 homes at a time when private developers have been hampered by rising costs and the difficulty of getting new traditional projects financed. At the same time, there is a squeeze on renters and prospective buyers due to high interest rates, with fears that a more permanent intergenerational inequality is being locked into the market.

From left: Assemble managing director Kris Daff, Assemble CEO Carolyn Viney, HESTA CEO Debby Blakey and AustralianSuper CEO Paul Schroder.

AustralianSuper chief executive Paul Schroder emphasised the need to address the housing shortage and for governments and investors to think outside the box to kickstart supply. He said the country had a housing supply crisis that could partly be addressed by having institutional investors being able to invest in a scaled way.

“We’ve all got to get more housing built, whether that is high-density housing, medium-density housing, all types of housing, but it’s hard as an institutional investor to find things that are scalable enough,” he said.

Some institutions have also been deterred by the low returns on residential housing, although that may change as rents increase and more players get comfortable with a sector that is mainstream in the US and Britain.

“We see an opportunity here to make good risk-adjusted returns for the members of AustralianSuper and get housing built, and therefore improve the prospects of people living in safe and secure housing,” Mr Schroder said.

He said setting up a larger Assemble platform would allow it to invest in a range of assets and use different funding mechanisms to allow more institutions to invest in housing.

AustralianSuper estimates the national dwelling deficit is about 230,000 houses a year, and Mr Schroder called for more land release and freeing up of regulations to avoid worsening the problem.

Thompson St in Melbourne’s Kensington is the first of Assemble and AusSuper’s specialist housing developments.

He called out the risk of intergenerational pressure, which would leave older people with housing assets and younger ­people without homes. This could be partly addressed by the housing group’s build-to-rent-to-own model, in which tenants shift to become owners.

“We’ve been challenging everybody to think freshly and think creatively and think collaboratively about this problem,” Mr Schroder said. “It’s definitely going to be a platform open to anybody with enough scale and size to do it.”

The Melbourne-focused Assemble platform will be taken ­national once the initial communities are locked down.

“We’ve got five sites that seem to be working very well. Let’s double that. Let’s triple that over time, and let’s go national,” Mr Schroder said.

Assemble and Australian­Super last month unveiled the first of their specialist housing developments in Melbourne’s Kensington. Construction on a second project in Melbourne’s Brunswick is under way, with another one in Kensington and others in Coburg and Footscray in the pipeline. HESTA is working on a separate BTR project, also in Kensington.

HESTA chief executive Debby Blakey said partnering in Assemble was a chance to develop “innovative solutions” that broke down barriers to large-scale investment in housing, and it would aim to deliver strong and stable long-term returns for members, who were also affected by the housing crisis.

“Australia’s housing shortage impacts our members who provide critical services and need to afford housing near their work, as well as economic productivity that presents broader systemic risks to long-term investors like HESTA,” Ms Blakey said.

Under the deal, housing developer and manager Assemble will merge with specialist affordable housing investment manager Super Housing Partner­ships, to form the new Assemble platform. AustralianSuper and HESTA have taken a majority ownership stake, helping position it to unlock more institutional capital to back its portfolio of housing assets using its end-to-end investment model.

Australia’s first super-backed build-to-rent-to-own homes. The Assemble Community at 15 Thompson St, Kensington.

The merger brings the pair’s current housing commitments under the platform to $740m. This includes the Australian­Super-backed pipeline of build-to-rent-to-own projects, and the HESTA-backed social, affordable, specialist disability accommodation and market build-to-rent projects.

The funds now share an equal majority stake in the business, alongside Assemble management. It is one of the first Australian housing companies to focus on middle and lower-income earners and offer affordable, ­social, essential worker, specialist disability and market-rate rental housing.

Assemble’s Kris Daff will stay as managing director, and property veteran Carolyn Viney has been appointed as chief executive. Ms Viney said combining the businesses scaled up the opportunities that could be presented to investment partners.

“Our working model is to get to about 17,000 homes under management over a 10-year plan through to 2034 and that should get us to about $15bn of funds under management at that time,” Ms Viney said.

This could include built-to-rent models, social and affordable housing, and SDA housing. Assemble will keep developing as well as taking on partners as it goes national.

“We’ve done a lot of work in establishing those partnerships with developers in all those other states,” Ms Viney said

Assemble will also work with governments to access sites and participate in state government housing programs. “All levels of government are doing something to try to shift the dial on how many homes we can get, and we see ourselves playing in most of those,” she said.