If you’re hoping the future will be better, you might be disappointed.
Professor Scott Galloway, one of my favourite thinkers, makes the point that disruption happens in an industry when someone makes a worse product, not a better one.
A better product is just an extension of the dominant business model. But an inferior product, that offers consumers a whole new choice – that can disrupt an industry.
Think about Airbnb. Compared to hotels, staying on someone’s couch in their spare room is a far inferior option. There’s no concierge service, no gym, no pool. There’s even a chance that some toddler is going to walk in at 6a.m in the morning.
But for people who don’t mind trading those things for a cheaper option, it’s an easy sell.
Airbnb disrupted the hotel industry by making the experience worse, not better.
And with that in mind, how are we going to disrupt the property industry?
That is, how can we make the housing experience worse, but cheaper?
Let me introduce you to ‘Micro-apartments’:
As the Minns government scrambles to address a statewide housing supply crisis being felt most acutely in inner Sydney, the Nightingale development in Sydney’s Marrickville with 54 “micro” apartments is regarded by policymakers as a model which could be rolled out further across the city.
Under the model, the land is owned by the government or a faith-based institution, reducing a key cost. In this case, the local council agreed to scrap the development contributor fee, which saved Nightingale more than $1 million.
… The development is a tie-up between the Melbourne-based not-for-profit developer Nightingale and Fresh Hope Communities, the affordable housing arm of the churches of Christ NSW and ACT, and offers flats to rent at 20 per cent below market value to residents who meet strict income requirements.
The apartments are offered to the market via a ballot system, to a pool of professionals and families who are required to show proof that their income does not pass a threshhold of $97,000 for singles, $126,125 for couples and $145,500 for single parents. There is a separate asset test as well.
Is that what constitutes poor these days? A single person on $97,000p.a? No wonder my junior staff are so grumpy.
But the rents are affordable, given how crazy rents in Sydney are. But you’ve got to win a lottery to get one:
They are priced between and $395 and $440 a week. Applications are drawn from a hat to determine who gets apartments. The ballot opened on Friday, March 8, ahead of an open day and inspections on Saturday. It was oversubscribed by Friday. That number has now grown to more than 115, more than double the number of available apartments.
Nightingale Housing chief executive Dan McKenna said the wait list and expressions of interest from wannabe buyers and renters for the company’s builds in Sydney and Melbourne were strong enough to fill “tens of thousands” of homes overnight.
No kidding. If you could find a way to bring stock to market at that price, you’ll have no trouble selling them.
Relying on councils to waive their development fees is one way to do it. I understand they also have shared facilities, like laundries. Maybe that’s another way to do it.
But this is the future of housing.
Look for innovations that deliver a worse experience, not a better one.
JG.
Leave a Reply