A new apartment development in North Melbourne, designed by Fender Katsalidis, is the subject of a financial model that could help long-term social housing tenants into affordable home ownership.
The project, dubbed the Barnett Model (formerly Melbourne Apartments Project), is managed by the Barnett Foundation and delivered by a private developer, with the support of Melbourne City Mission. The City of Melbourne and Resilient Melbourne were also supporters of the project. It comprises 34 units, 28 of which were sold to social housing tenants, while the remaining six were sold on the open market.
The Barnett Model requires at least a $25,000 deposit from the purchaser and a standard mortgage of approximately 63 percent of the apartment’s market value. It subsidizes the remainder of the cost with “a deferred second mortgage” – a no-interest, no-fee loan (a “Barnett Advance”) that the purchaser is not required to pay until the homeowner sells the apartment.
While a standard homeowner builds equity in their home over time, a purchaser using the Barnett Model builds equity in their Barnett Advance, thereby reducing the loan value over time.
Researchers from the University of Melbourne’s Transforming Housing Research Network evaluated the model and found it “responds to two key barriers to home ownership: high deposit requirements and capacity to qualify for and make repayments to service a large mortgage.”
“Our research shows that most of the residents who bought into the Melbourne Apartment Project had been long-term social housing tenants,” said Katrina Raynor, researcher at the University of Melbourne’s Faculty of Architecture, Building and Planning and lead author of a report on the project. “They had been dreaming of homeownership for a long time but had never had the capacity to buy a home until now.”
The researchers also found, through a survey of the residents, “most participants articulated their happiness with the apartment design.”
“While some participants, particularly those with children, expressed initial desires for a house rather than an apartment, they expressed satisfaction with the size of the apartments and its proximity to services and transport.”
The report states that the model “supports the movement of high capacity social housing tenants into home ownership and the ‘freeing up’ of their dwellings for new social housing tenants.”
It concludes, “The Barnett model is both scalable and appropriate for a subsection of social housing tenants that are likely to benefit from the opportunity to transition into homeownership.”
The researchers found that projects delivered under the model are achievable without government subsidy if savings are achieved through foregone profit, in-kind contributions from not-for-profit partners and tax concessions.
Raynor wrote in an article for The Conversation, “For the Melbourne Apartments Project, we estimated that for every A$1 of cost to the government, it receives A$2.19 in benefits from the project. This is mainly due to new households being able to move into vacated public housing units.
“If every public housing unit made available as a MAP participant moved out were reallocated to a high-needs applicant on the waiting list, the government could save $27,458.22 in costs per MAP participant per year.”
The trial development is a partnership between the University of Melbourne, Melbourne City Mission, Resilient Melbourne and the City of Melbourne. Plans are underway for another Barnett Model development in Brunswick as well as a crisis accommodation project in Frankston.