Innovation

The Assemble Model is a twist on the build-to-rent model in which the developers design and build residential properties but instead of holding on to the building and eventually selling it off to another superfund or pension fund, instead it is sold to the residents. The Assemble Model is made up of the following steps:

1. Before construction begins, the resident secures a 5-year lease with the opportunity to buy the home at the end of the lease, by paying a 3-month rental bond.
2. The purchase price for the home is set upfront based on today’s prices with a fixed increase of 1.75% per annum.
3. The rent is agreed upfront at the market rate, and construction takes around 2 years.
4. After construction, the resident has 5 years of their lease but only needs to commit to 12 months.
5. If the resident decides they want to leave after the 12 months, they only need to pay the 3-month rental bond.
6. After 5 years, the house can be purchased by the resident at the agreed price and the 3-month rental bond is returned.

Ben Keck (left) and Eric Prajogo (right)

Inspiration

The inspiration for the Assemble Model came from the desire to provide an alternative to “the traditional off-the-plan development model where the building is designed, a planning permit is given, and then the building is marketed off-the-plan before the building has even been built,” said Ben Keck. This model has been the norm in Australia for over 20 years. However, one of the challenges with the model is that once the revenue is locked in (as the building is sold before being built), the developer may have an incentive to reduce costs to earn even more profit. As a result, the quality of the buildings may be reduced, and the expectations of those that have bought the buildings are not met. The Assemble Model combats this “as the developer continues to hold on to the buildings after construction, thus giving an incentive to make the buildings high quality,” said Ben Keck. The inspiration comes from making sure buildings are of high quality at an affordable price.

Overall impact

As with all innovations, the research and development costs for Assemble to develop and implement the Assemble Model have been high; however, there has been great interest in expanding the model to other places, as it can be scaled. The model is on track according to Assemble’s estimates and has furthered Assemble’s endeavors to provide high-quality buildings at an affordable price. The impact the model has had on the Kensington area where it is first being implemented has resulted in “66 apartments being subscribed to in the project and 6 extra apartments being offered specifically to key workers such as tram drivers or nurses,” noted Ben Keck. It has enabled workers who may not have been able to find affordable accommodations to be able to do so with a 10% discount on the rent.

Related to the environment, Ben Keck said that the buildings have “higher sustainable credentials than normal buildings,” and as a result the buildings will have a longer term benefit as the infrastructure is more environmentally friendly for the area. In the short term, the model is on track per Assemble’s schedule, with all of Macaulay Road in Kensington subscribed to the program. Long term, the plan is to implement the model in other areas such as Brunswick in a more substantial way than had been done in Kensington, which shows faith and goodwill for how the model is going in Kensington.

Business benefit

The Assemble Model has benefited the business by allowing it to stand out from its competitors, as the model “has not been done before, so it’s not been done by other competitors,” said Ben Keck. The model gives the business an alternative pathway into the housing market that other businesses are not currently involved in. New projects are being committed to because of the model and its success in Kensington.

Social and environmental benefit

The benefits for society include providing home buyers with an alternative for buying a home that is both affordable and high in quality. The model is “largely for first home buyers” (Ben Keck) as it provides them with another option to buy a home while being affordable in terms of how much is needed to invest. The model also enables workers such as tram drivers, bus drivers, or nurses, who are considered key workers by the City of Melbourne, to stay in the area, which greatly helps the community as they need those key workers. Quality of buildings will also be higher as the model encourages high-quality residential areas, which is in line with Sustainable Development Goal 9, Industry, Innovation, and Infrastructure.

For the environment, the benefits include more sustainable buildings that will have a longer life span, which fits Sustainable Development Goal 11, Sustainable Cities and Communities.

Interview

Ben Keck, Strategy Director