Flemington Estate – what is it really worth to developers?

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The redevelopment on the Flemington Housing Estate is perplexing for many reasons. But one of the most confusing aspects of the public housing renewal program, being rolled out by the state government to replace dilapidated public housing dwellings, is the project’s budget.

What is the government investment into Flemington Renewal? What is the project worth to developers? How many new homes are being built in Victoria? At what cost? With what windfall – and to whom?

The Labor government has reiterated that the Public Housing Renewal Program is being funded with $185M – nominated in last year’s state budget – to replace 1611 old public homes with 1750 newly built dwellings.

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… Melbourne sites.

A figure of 1778 was referred to at the Upper House Inquiry into the Public Housing Renewal Program. This differs again from the 2500 figure cited elsewhere:

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Setting aside the confusion about the number of public housing homes being created/replaced/built using the $185M, 1750 homes from $185M is approximately $100K per home.

Of course, homes can’t be built this cheaply, and the financial model, as explained by DHHS Deputy Secretary Nick Foa at the Upper House Inquiry into the public housing renewal program, is based on leveraging the $185M into $800M through the sale of public land on housing estates on which private homes will be built.

“…you are looking at $800 million to $900 million required to get the 1778 houses in the same spot, and we are trying to turn $185 million, with the help of land value, which is incredibly important, into an $800 million to $900 million return for public housing.”

The submission by the government to the Upper House Inquiry clarifies this process:

“The government receives a payment from the sale of each private dwelling (representing its land value) through the developer, which is used in combination with the government funding to pay for the construction of an increased number of new public homes.”

Most of the new homes will be one and two bedroom homes. Although the floor space is not specified, if we assume the average floor space is (generously) 70sqm, at a cost of about $3K per square metre, dwellings will cost approximately $210K to build.

Discussion in the Upper House Inquiry used a figure of $300K per dwelling. It’s hard to know the approximate cost of building the dwellings, but if we take lifts, basement car parks, bigger dwellings, good design, rising costs etc into account, we could generously work on the basis of $300K per dwelling – all inclusive.

On this basis, building 1778 new public housing homes will cost just over $530M. If the government is investing $185M, it needs to raise $350M through the sale of land.

$530M, however, is not the same as $800M – which is what the government have said is the budget for the project:

“The Government is spending more than $800 million on housing and homelessness initiatives…”

So what of the missing $270M?

Fiona Patten, MLC, asked Foa about this during the Upper House Inquiry:

“…$185 million is what you have invested to renew 1778 properties at $300 000 per property, yet you have got about a $350 million shortfall. That is to achieve 1778 at $300,000. So that is how much you expect to get — $355 million?”

No clear answer was forthcoming – just a reiteration of the $800M.

To add further to the confusion, there are 11 sites involved:

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Foa didn’t make it clear which sites he was referring to at the Upper House inquiry. Although he did clarify the Prahran site is not part of the Public Housing Renewal Program:

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The Planning Minster has currently given the go ahead for six projects: Brighton, Northcote, North Melbourne, Brunswick West, Flemington and West Heidelberg – with Clifton Hill, Ascot Vale and Hawthorn on hold.

Further, as noted above, Flemington and Preston sites are also not funded by the $185M PHRP as spelt out by DHHS’ submission to the Upper House Inquiry.

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So, eight renewal projects are being funded through the $185M (leveraged to $800M). Five of these have the first stage of planning approval.

These five sites will provide 620 new public housing homes including those replaced.

Flemington delivers 218 new public housing homes – including 198 homes being replaced and 20 new homes. But this is not being funded through the $185M PHRP, so may or may not be part of the 1778 referred to by Foa.

This means Hawthorn, Ascot Vale and Clifton Hill will need to deliver 1158 public housing homes.

However, another government website indicates that the nine sites, including Prahran, Hawthorn, Ascot Vale and Clifton Hill will deliver 1210 homes (1100 plus 10% increase):

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This would mean Flemington and Preston are responsible for 550 public housing homes – IF they are part of the 1778 PHRP count. Flemington will provide 218. Is Preston providing 332? Not according to this site:

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How many homes are being built using the $185M? 2500? 1778? 1100? Or fewer?

Or is it the 1800 cited in the email sent out re Flemington Estate last week – which re-included Flemington in the PHRP funding pool:

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Depending on the number of homes being built, the proportion of the costs being funded by the sale of land is something less than $800M. What is the quantum of funding coming from land sales?

Which land sales are being included in these figures? Flemington? Preston? Prahran?

And … how much are developers making in the sale of the private dwellings?

Foa argued the properties would be sold for less than $600K to make them affordable. There are about 2000 private dwellings planned for the six sites approved by the Minister (including Flemington).

2000 x $600,000 = $1.2B (including Flemington)

838 x $300,000 = $250M (approx.) = cost of building public housing homes

It’s not clear what percentage of the $185M is contributing to the cost of these 838 homes – or 620 excluding Flemington. 838 is about 50% of the overall target (1800?). So if $90M is coming from the $185M for 838 homes, approximately $160M is required from the sale of the private properties – which leaves a lot left over for the developers, even after construction costs … otherwise, why would developers get involved?

And this is all including Flemington – which is of dubious status: is it included in the $185M (and $800M) or not?

So many questions, so few answers, such confusion. Please advise of any errors above – corrections and clarifications are very welcome!

What is clear is that different figures are referred to in different government publications and submissions, and the funding stream for Flemington is unclear.

We need some transparency on the public funds involved in this massive project before the diggers are switched on.

2 thoughts on “Flemington Estate – what is it really worth to developers?

  1. It would be nice if they put in decent money for an appropriate community centre to help break down the private/public barrier. You may even get your performing arts area 🙂

    Like

    • The community’s performing arts Centre – not mine!! Please ask questions about the funding model for Flemington. How much is the sale of land raising? How much if this is going directly towards Flemington renewal? How is Flemington being funded? How many new homes are actually being built for public housing? None of this is clear.

      Like

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