Portfolio management

Overview

The housing portfolio is managed over a full life-cycle, from establishment of the housing requirement with Defence, to exiting when leases expire or properties are surplus to requirement. Ownership of some properties is maintained for strategic purposes and used as a financial benchmark to determine the makeup of the portfolio. Properties are also selected for DHA's property investment programs with the sale proceeds being the largest source of capital for financing business. DHA works closely with investors to manage their properties through the leasing cycle, from purchase, lease extensions/renewal to the return of their properties at lease end.

DHA is committed to ensuring that the quality and diversity of housing are improved as properties are replaced and refreshed. While this places demands on the capital program it ensures properties meet Defence and community standards. Success is measured by member satisfaction with DHA-provided housing exceeding the KPIs.

Housing is classified for provisioning and allocation purposes. This enables Defence members to select housing solutions in accordance with their rank and family composition entitlements. Since 1 July 2007, the system of housing classification has been based on market rents with properties assigned to rent bands by region. These are determined by Defence, in consultation with DHA, and updated annually. This system enables location to be factored into property classifications.

The majority of DHA's portfolio is detached three and four-bedroom houses. Townhouses, courtyard-style houses and apartments are increasingly being supplied in selected locations where detached housing is not available. These housing types are suited to members who prefer well-located inner city living over a larger property and garden. Approximately 46% of Defence families for whom DHA provides housing have no children and a further 18% have only one child under the age of four.

In 2013–14, Defence allowed DHA to offer 100 inner-city apartments in Sydney to Defence families with selected compositions. This policy change enables properties of this nature, that would not previously be deemed suitable by Defence, to be offered to eligible Defence members.

Total stock under management

As at 30 June 2014, a total portfolio of 18,577 properties worth approximately $10 billion was managed across Australia. These properties accommodate Defence families. They also include off-base accommodation for Defence members, newly acquired properties, properties being refurbished or off-line for maintenance and those at the end of lease about to be disposed of. In addition to housing stock supplied to meet Defence requirements, properties are managed for the Australian Maritime Safety Authority and Australian Customs and Border Protection Services. DHA's total portfolio is summarised in Table 2.

Table 2: Housing portfolio 2013–14

On-base housing

DHA's portfolio includes 1,336 houses located on Defence bases and establishments around the country (40% are in the NT). They are owned by Defence or financed by DHA under annuity arrangements.

Defence pays DHA fees to cover the cost of management and maintenance for 61 heritage listed houses. Approximately 380 houses are vacant and are assigned to separate management arrangements.

Work continued on the $300.0 million program to upgrade and replace Defence-owned houses to ensure they meet minimum Defence standards by 2017.

After the successful construction of 97 new houses on Larrakeyah Barracks, Darwin (NT), a project to upgrade another 48 houses is now under way.

Work continued on upgrading 193 houses on RAAF Base Tindal (NT), with 103 completed as at 30 June 2014. This will ensure that the houses meet the Defence minimum standard for the next 15 years. Work continues on upgrades of on-base housing at HMAS Cerberus and Puckapunyal Army Base (VIC), Kapooka Village and RAAF Base Richmond (NSW) and 65 remote houses in Western Australia and North Queensland.

Defence received Parliamentary Standing Committee on Public Works approval in May 2014 for the construction of 50 tropically-designed houses on-base at RAAF Base Tindal (NT). This development project also involves the provision of infrastructure services and the delivery of parks, green spaces and community facilities. Completion of the project is expected in 2015–16.

In June 2014, the project to redevelop houses on RAAF Base Darwin was referred to Parliament. This project will replace 78 non-compliant houses with 80 three and four-bedroom compliant tropically-designed houses. The project will be carried out under annuity funding arrangements provided by DHA to Defence. Provided this is approved by Parliament, the project is expected to be completed in 2016–17.

Heritage housing

DHA manages 61 heritage listed properties across the Defence estate. These properties are located at the Royal Military College, Duntroon and HMAS Creswell, Jervis Bay (ACT); Garden Island, HMAS Watson and Victoria Barracks, Sydney (NSW); HMAS Cerberus, Mornington Peninsula (VIC); and Anglesea Barracks, Hobart (TAS). Since completion of a major upgrade program in 2010, minor upgrades continue to be undertaken as required. In 2013–14, a series of minor upgrades (new kitchens, bathrooms and laundries) were managed at HMAS Watson (NSW) and new fences provided for properties on Garden Island (WA).

In June 2013, a heritage site known as the Fremantle Gunners Cottages was acquired from Defence. These 10 properties will be renovated in keeping with the heritage requirements and turned into 16 homes for Defence families.

Sustainable housing

DHA's approach to sustainability looks beyond individual buildings. It incorporates direct design changes to buildings and urban precincts for environmental performance and encourages behavioural change in tenants for a healthier, more sustainable lifestyle. This holistic approach evaluates and then implements innovations in the following categories:

• better business—optimising business operations to meet ongoing sustainability objectives
• smart housing—key design changes that provide positive environmental effects while providing desirable features and
• enhanced communities—urban design that creates healthy, resilient communities.

With a view to being an innovative leader in the residential development industry, DHA seeks to meet the requirements of six leaf EnviroDevelopment certification from the UDIA. DHA focuses on investing in sustainability within individual buildings and by taking a holistic approach to urban planning.

In June 2014, DHA hosted the Government Land Organisation's sustainability network meeting in Sydney where each State gave a presentation on innovative trials they had run within their developments. At the meeting DHA launched a collaborative scoping project on compact housing. The study provides an opportunity for States to share information in this growing market. It also enables participants and the general community to work at a Government level, driving change around planning laws to encourage compact housing. The aim is to help meet the growing demand for affordable housing while meeting Defence rent band requirements.

Innovative housing

The Creating Homes of Choice (CHOC) working group is a new platform to collaborate on innovation across DHA. Within this group, proposals are assessed and tested for practicality, engaging all stakeholders to ensure initiatives are evaluated across all areas of the business. They are then rolled out as pilots within projects and, if successful, are incorporated into building specifications and business-as-usual processes.

CHOC currently oversees projects within the following areas:

• Compact housing—exploring innovative design for housing on blocks under 200m² and working with Government land organisations to develop best practice from existing projects.
• Housing specifications—reassessing housing specifications and inclusions, focusing on innovative design to build desirable properties.
• Defence policy—developing a submission to assist Defence in streamlining its policy.
• Strata and body corporate management—ensuring that policies and procedures benefit both investors and Defence members as DHA's housing portfolio grows in medium and high-density areas.
• Technology—expanding through innovative and mobile support applications to expand service offerings and contractor management.
• Innovation initiatives:
  • delivering pilots such as geothermal energy, keyless entry and home energy management systems
  • delivering more efficient utilisation of utilities (electricity and gas) in the house and
  • working with telecommunications providers to facilitate the provision of land-line and broadband capability.

Tenant satisfaction

Defence members are surveyed annually to measure satisfaction with their current DHA-managed property. In 2013–14, 89% of 3,248 participants were satisfied with their current Service Residence. This result is similar to that in 2012–13.

Figure 1: Defence member satisfaction with current housing, 2009–10 to 2013–14

Newly constructed, acquired and leased housing must satisfy Defence criteria in terms of quality and level of amenity, inclusions and fittings. Examples include security, heating, cooling and covered outdoor areas. Satisfaction of Defence members living in new properties has been consistently high. In 2013–14, among 37 Defence families satisfaction with newly constructed properties was 89%. In the same survey, among 64 Defence families satisfaction with newly-acquired homes was 89%.