Imagine, for a moment, that you are a developer, or even just a property investor who has found a way to guarantee the properties you own are hotly contested on the open market.

This includes both those properties you build new and those you are upgrading. When you build residential developments, interest is so intense that you need to use a ballot system to ensure fair access to all bidders.

Even though you are spending around five to 10 per cent more on the build process than your competitors, these costs are fully recouped and your bottom line is thriving. Your tenants are extremely satisfied with their accommodation, and their cost for heating and cooling is less than $50 a year, although apartments do not even have electricity meters as the cost to install and bill tenants far outweighed the cost of the energy used.

You now spend nothing on marketing, as the market comes to you, demanding your product with fervour. Your projects serve as icons in the market – architecturally brilliant, energy efficient, low-to-zero vacancy rates and ultra-low operations and maintenance costs.

You also use this model to deliver social housing – the kind that provides excellent living spaces for those who need them most, healthy and with very low occupancy costs. Money previously spent on essentials such as heating, light and power are now spent on other aspects of living. And there’s even evidence to support the notion that these homes are actually enhancing the health outcomes of the residents, reducing the burden on local health system. How fantastic is that?

The main portion of this unbelievable success story is that of the ABG Frankfurt group, one of Germany’s largest developers. When they first decided to trial a Passivhaus development, their CEO predicted that they wouldn’t sell at all, with the five per cent higher capital investment demanding a higher selling price.

It turns out they were unprepared for the response and were forced to use a lottery system to handle the demand. The decision not to install electricity meters was one of logic – the costs for installation and billing administration was many times greater than the energy cost itself. This move required the company to lobby local government to change local regulations requiring the meters.

Vacancy rates are almost negligible, and the company has now built 4,000 new Passivhaus apartments and has a policy that they will never do otherwise. Of the 50,000 apartments ABG owns in Frankfurt, two-thirds have been retrofitted for energy efficiency in line with the principles of the standard. ABG now calls itself “the Passivhaus Maker.”

The part of the story that discusses social housing is largely hypothetical, although ABG does great work in this space. However, the broader opportunities are being explored by a number of developers and social housing providers.

Social housing that entrenches poor fortune

Some of Australia’s worst housing is reserved for those who can least afford to be in it. Despite their low quality, these are homes that some people literally plead for, at least to keep them off the streets. Public or social housing in Australia is generally not to a standard that begs for pride from occupants; despite this, there are nearly 225,000 people on the waiting lists for these homes in Victoria and NSW alone.

A recent study from RMIT’s Centre for Urban Research detailed the extent to which high-quality social housing can impact the occupant’s hip pocket, but it’s the indirect and hard to quantify benefits that will have the most impact on the community at large. As identified by the study, “narrow cost-benefit analyses could stop these houses from taking off.” But studies from overseas have detailed the societal and public infrastructure benefits of such homes.

The study examined the implementation of simple, passive measures to improve housing efficiency, such as optimising solar orientation in conjunction with improved glazing, insulation upgrades and optimised shading. Measurable benefits included the financial impact on occupants; they were able to improve their financial standing, able to feed into savings, service debt and even being able to afford common luxuries like Christmas presents and holidays. One household were able to remove themselves from all Centrelink payments.

So, despite many benefits being observed, what barriers still exist in delivering more of these dwellings for both the social housing sector, and then the wider market?

Despite best intentions, social housing is plagued by poor or misdirected investment, and has the potential to entrench disadvantage. This commonly means that housing has long-term impacts both direct and indirect, including:

  • high maintenance cost
  • low property market value, including residual value
  • high running costs
  • poor indoor environment quality
  • long-term health, economic and socio-economic impacts on occupants
  • reduced leverage for tenants to leave the social housing system
  • increased strain on the public health sector, due to potentially avoidable or worsened conditions including respiratory and integumentary conditions

Though the provision of social housing is not subject to the same demands of the free market, the concept of the ‘split incentive’ remains. The tenant has an immense amount to gain from the provision of a high quality product, but the simple, direct investment model regularly fails to consider the impact beyond the capital cost. There are fantastic aspirations identified in many government and non-government sector reports. However, the proven mechanism to achieve these outcomes is rarely established and long-term effectiveness remains to be proven.

The impact of such a situation includes negative results for the public health network, low opportunity for tenants to improve their financial situation (high fuel costs) and the on-flow effects of this on the wider community.

So, apart from the financial gains, what else is there to be gained from high-quality, high-performance affordable and social housing?

Health and well-being are the primary foci of high-performance housing; energy efficiency, building durability and longevity and the wonderful ‘side effects.’

A Passivhaus dwelling, for example, would deliver comfort and great indoor air quality as standard, with fresh, filtered air delivered through a ventilation system. The reduction in risk factors for respiratory illnesses and cold-related issues, as well as general quality of life concerns, is a major positive for the application of the Passivhaus measures.

Australians are almost twice as likely to die from cold weather than those living in northern Sweden, with 6.5 per cent of Australian deaths due to cold weather. Australian experts blame the high rate on the country’s poor housing; over 1,000 lives could be saved if Australian housing was better constructed and better insulated. The benefits have been identified by the community housing organisations in the UK, with cold, uninsulated home being responsible for an increase in deaths of around 20 per cent in winter. Largely avoidable, but critically linked to build quality and further exacerbated by severe fuel poverty.

At the other extreme, heat stress is reported as Australia’s number one natural killer, with more deaths than those caused by floods, cyclones, bushfires and storms combined. Risk scientist Lucinda Coates, from Macquarie University, places a lower estimate of deaths in the last 160 years at 4,500. Particular events, including Black Saturday’s (2009) peak temperature of 47 degrees Celsius present particular risk.

“While public education and emergency management is important, long term risk reduction must also consider urban planning, building design, community development and social equity,” Coates said.

Reliance on active systems such as air-conditioning, coupled with strained energy infrastructure, is, at best, an untenable approach. With the already measurable and further anticipated temperature increases due to anthropogenic climate change, the future looks bleak against current design and build practices.

Public health impacts linked to housing are perhaps hard to quantify, but the potential is significant and hard to ignore. The NHS in the UK has realised the benefit of prevention rather than cure. In Oldham, London – a town where 20 per cent of residents experience fuel poverty – the health service partnered with a social housing group to invest in comfort measures such as insulation and new boilers for 1,000 homes.

The investment recouped costs in under one year as they saved hundreds of thousands of pounds in hospital admissions and other social costs. As an added benefit, each home was projected to save up to ₤450 a year, alleviating direct impacts of fuel poverty. But, in addition, the proponents of the project also cited increased quality of life as a major benefit.

The flow-on benefits for social housing built to the Passivhaus standard – and let’s not discount alleviating health issues, fuel poverty and general quality of living – include lower maintenance costs, greater asset durability and flow-on economic benefits to the community in general.