Defence aHousing Australia Annual Report 2014-15

Objective 1: Property provisioning

Our business strategies:

  • Be the supplier of choice for housing ADF families and single ADF members.
  • Cooperate with third parties in the establishment of mutually beneficial arrangements including, for DHA, suitable land for Defence housing.
  • Pursue innovation, diversity and sustainability.

Our performance against key indicators

KPI Target Achievement Outcome
Provisioning for ADF families
Properties supplied against the approved Provisioning Schedule 99% 99% tick
Properties acquired or constructed against the Corporate Plan 951 951 tick
Properties leased against the Corporate Plan1 1,540 1,684 tick
Provisioning for single ADF members
Properties supplied against the Corporate Plan 99% 105% tick
Properties acquired against the Corporate Plan 216 203 cross
Properties leased against the Corporate Plan 35 63 tick

1 Achievement includes leases extended by agreement with lessors. We do not capture these in the original target.

Our major outcomes

Supplied 17,454 properties for ADF families against a target of 17,458.

Supplied 17,454 properties for ADF families1 against a target of 17,458.

Supplied 715 properties for single ADF members against a target of 673.

Supplied 715 properties for single ADF members2 against a target of 673.

Completed construction of major development projects at AE2 and Heartwood in Sydney (NSW), Gordon Olive Estate in Brisbane (QLD) and Bayriver in Adelaide (SA).

Completed construction of major development projects at AE2 and Heartwood in Sydney (NSW), Gordon Olive Estate in Brisbane (QLD) and Bayriver in Adelaide (SA).

Acquired and settled 11 major land sites to deliver approximately 3,500 allotments for future Defence housing.

Acquired and settled 11 major land sites to deliver approximately 3,500 allotments for future Defence housing.

Upgraded 145 DoD-owned houses in locations including Seymour (VIC) and at RAAF Base Tindal (NT) and Larrakeyah Barracks Darwin (NT).

Upgraded 145 DoD-owned houses in locations including Seymour (VIC) and at RAAF Base Tindal (NT) and Larrakeyah Barracks Darwin (NT).

Completed a major program of works to restore and upgrade 13 houses at HMAS Creswell in Nowra (NSW).

Completed a major program of works to restore and upgrade 13 houses at HMAS Creswell in Nowra (NSW).

Acquired land in major city locations for Defence housing through agreement with state and territory governments.

Acquired land in major city locations for Defence housing through agreement with state and territory governments.

Completed a study on compact housing and presented our report and findings to the Government Land Organisation's sustainability network.

Completed a study on compact housing and presented our report and findings to the Government Land Organisation's sustainability network.

Piloted a range of sustainability technologies, including keyless entry and home energy management systems.

Piloted a range of sustainability technologies, including keyless entry and home energy management systems.

Recognised by the development and construction industry, winning three awards and received commendations for architecture and natural resource management.

Recognised by the development and construction industry, winning three awards and received commendations for architecture and natural resource management.

Our property portfolio

As at 30 June 2015, we managed 18,872 properties3 across Australia worth approximately $10 billion. The majority of housing we supply accommodates ADF families. However, we are steadily growing our portfolio of properties to accommodate single ADF members.

Properties are located in capital cities, major regional centres and some remote locations in Australia where the ADF has a presence. Wherever possible, we integrate off-base properties throughout the community. We also manage on-base, regional and remote housing for the DoD under annuity (finance lease) arrangements.

All new properties must comply with DoD specifications in terms of location, size, amenity and market rent. The quality supplied is in line with, if not above, community standard. We are working to ensure all existing properties meet the DoD's minimum standard, as set out in the New Housing Classification Policy by 2017. We will achieve this through a combination of property upgrade and disposals.

Our portfolio mostly comprises detached three and four-bedroom houses. We are increasingly supplying townhouses, courtyard style houses, flats and apartments in selected locations. A portion of these properties are categorised as rent band choice (RBC)4. This style of housing is appropriate given 46% of ADF families we accommodate have no children and 18% have one child under four years of age.

We also manage or lease a small number of properties in remote locations on behalf of the Australian Maritime Safety Authority.

Refer to Appendix A for a breakdown of our total portfolio by location and ownership.

How we determine Defence housing requirements

Housing for ADF families

Each year, the DoD provides us a forecast of how many ADF families will require Defence-funded housing over the next five years, as distinct from those who will live in their own homes.

Referred to as the Defence Housing Forecast (DHF), it details accommodation requirements by location and rent band classification. We are required to supply 85% of Defence-funded housing for ADF families through our service agreement with the DoD. ADF families directly source the balance through private rental markets and we manage the payment of their rent allowance (RA).

Using the DHF, we draft a capital program. It sets out the proportion of housing we can supply, taking into account factors such as vacancy rates, expiring leases, land supply, the availability of capital, and the state of private rental markets. The result is a large-scale residential development, construction, acquisition, leasing, and disposals program that gives us flexibility to achieve our overall provisioning targets.

The capital program requires approval from our Board of Directors. Once approved, it is summarised in our Corporate Plan and provided to our Shareholder Ministers. We also negotiate with the DoD and agree on an approved Provisioning Schedule (APS). There is typically a small variation in numbers between the APS and Corporate Plan.

Housing for single ADF members

The DoD does not provide us with a detailed forecast for this program, as they do in terms of housing for ADF families. They identify priority locations and minimum requirements for future provisioning. We then set provisioning targets and manage business risk.

To mitigate risk, we ensure properties brought into the portfolio are attractive to single ADF members and within reasonable rent ranges to minimise vacancy risk. We also ensure the properties are suitable for property investors, so that we can sell them through our SLB program and recoup the capital as soon as possible.

How we met our Defence housing obligations

Capital program – ADF families

We achieved very strong provisioning outcomes for ADF families, with 17,454 properties supplied as at 30 June 2015 against the APS target of 17,458 properties.

In 16 locations (referred to as DHF areas), we provided more than 99% of the APS and in 17 locations we provided more than 100% of the APS. Of note, we supplied an additional 94 properties in Sydney, meaning fewer ADF families needed to source private rental accommodation in this difficult market.

We observed significant variations in Cairns (QLD) and Darwin (NT), where housing demand was substantially lower than the DHF. To manage this, we rationalised provisioning to 89% and 95% in these regions respectively.

Table 1 sets out our provisioning achievement for ADF families. More information about each provisioning method follows.

Table 1: Provisioning achievement – ADF families

2014–15
Actual
Corporate
Plan
Target
Variance to
Corporate
Plan
APS
Target
Variance
to APS
Opening balance 17,590 17,521 69 17,584 6
Acquisitions 245 297 (52) 234 11
Constructions 706 654 52 738 (32)
Direct leases 133 150 (17) 154 (21)
Leasing renewals/options 1,398 1,390 8 1,399 (1)
Additions subtotal 2,482 2,491 (9) 2,525 (43)
Lease ends 2,250 2,134 116 2,305 55
Disposals (DHA) 71 102 (31) 100 (29)
Disposals (off-base annuities) 62 52 (10) 53 9
Handback – Defence owned 93 84 9 84 9
Transfer between portfolios 142 9 133 93 142
Subtractions subtotal 2,618 2,381 217 2,635 (17)
Closing balance 17,454 17,631 (177) 17,458 (4)

( ) Denotes a negative number.

Retail acquisitions and constructions

We acquired and constructed 951 properties at a total cost of $472.7 million. We increased acquisitions and constructions in the Sydney (NSW), Amberley (QLD) and Wodonga (VIC) DHF areas to offset reductions in Richmond, Newcastle and Liverpool (NSW). This result reflects improved flexibility in our business processes to respond to changes in demand, and the timing of property delivery.

Leasing

We directly leased 133 properties from their owners and successfully negotiated with 1,398 existing lessors to sign new lease agreements or extend their current lease. This resulted in us exceeding the target for lease additions.

We handed back more properties to lessors than budgeted to rationalise provisioning. The major contributing areas were Townsville (87) and Darwin (46) where demand was lower than forecast in the DHF.

We also strategically undertook more than $723,000 worth of upgrades to 37-leased properties as part of our lease renewal program. As these properties are located in highly desirable areas, it is preferable that they remain in our portfolio for the longer term.

Disposals

We disposed of 71 properties we owned and 62 properties we managed on behalf of the DoD. We deemed them surplus to our requirement, as they no longer met minimum standards and were not suitable for upgrade.

Land acquisitions

We acquired and settled 110 retail land lots at a cost of $29.2 million and nine major land sites for future development at a cost of $84.0 million. We will use this land to construct future properties for ADF families. Table 2 provides more detail of this activity.

Table 2: Major land acquisitions – ADF families

Location Expected
allotments
Nearby ADF establishment Distance
(km)
New South Wales
Fort Wallace and Stockton Rifle Range, Hunter Valley 302 RAAF Base Williamtown 12
Thornton, Hunter Valley 506 30
Bringelly, Sydney 1,377 Holsworthy Army Barracks 22
Edmondson Park, Sydney 31 11
Middleton Grange, Sydney 40 16
Schofields, Sydney 985 RAAF Base Richmond 21
Queensland
Stafford, Brisbane 6 Enoggera Army Barracks 6
Victoria
Sale, Gippsland 47 RAAF Base East Sale 7
South Australia
Bowden, Adelaide 12 RAAF Base Edinburgh 23

Capital program – single ADF members

We achieved very strong outcomes for single ADF members with 715 properties supplied at 30 June 2015 against the Corporate Plan target of 675.

During the reporting period, we used available capital and other resources to add as many properties as possible to our portfolio to achieve national coverage. Single ADF members now have off-base accommodation options in Brisbane and Townsville (QLD); Sydney (NSW); Canberra (ACT); Melbourne (VIC); Adelaide (SA); Darwin (NT); and Perth and Rockingham (WA).

This supports our strategic objective of supplying 1,000 off-base apartments by 30 June 2016. By agreement with the DoD, when this target is achieved we will be able to offer all RBC properties to ADF families and single ADF members.

Table 3 sets out our provisioning performance for single ADF members against the Corporate Plan. More detail about each provisioning method follows.

Retail acquisitions

We acquired 203 properties at a total cost of $92.7 million. We revised the target down from 216 properties throughout the reporting period to balance the purchase of more expensive properties in Botany, Sydney (NSW) and greater-than-forecast leasing activity.

Leasing

We directly leased 63 properties from their owners and successfully negotiated with 23 existing lessors to sign new lease agreements or extend their current lease. This resulted in us exceeding the target for lease additions by 31 leases.

Table 3: Provisioning achievement – single ADF members

2014–15 Actual Corporate Plan
Target
Variance to
Corporate Plan
Opening balance 425 425 0
Retail acquisitions 203 216 (13)
Direct leases 63 35 28
Lease renewals and options 23 20 3
Additions subtotal 289 271 18
Lease ends 26 23 (3)
Subtractions subtotal 26 23 (3)
Transfers 27 0 27
Transfers subtotal 27 0 27
Closing balance 715 673 42

Land acquisitions

We acquired and settled 30 retail land lots at a total cost of $2.8 million and two major sites for redevelopment at a total cost of $31.6 million. We will use this land to construct future properties for single ADF members. Table 4 provides more detail of this activity.

Table 4: Major land acquisitions – single ADF members

Location Expected no.
of allotments
Nearby ADF
establishment
Distance
(km)
New South Wales
Alexandria, Sydney 152 Defence Plaza Sydney 5
Waterloo, Sydney 49 3.5

How we manage Defence-owned properties

As at 30 June 2015, our portfolio included 1,731 Defence-owned properties located on ADF bases and establishments, and remote locations around the country.

In 2014–15, we continued work on a $300.0 million program to upgrade and replace on-base housing so that it meets minimum standards by 2017. In the reporting period, we completed upgrades on 145 houses and at 30 June 2015 had a further 38 in progress or in the early pre-works stages. As in previous years, programming vacancy to enable upgrade works was the greatest roadblock.

In the Northern Territory, we completed upgrades at RAAF Base Tindal and at Larrakeyah Barracks. We are on track to complete the third and last phase of the Tindal program (63 of 193 houses) in December 2015. This will have a flow on effect and greatly assist in advancing another upgrade program in Katherine. Progress on the Alice Springs program was slow due to a lack of vacant dwellings.

In Victoria, we completed upgrades on 12 properties in Seymour and the final upgrade of houses in Puckapunyal is in progress. Upgrades at HMAS Cerberus are on track for completion by 30 June 2016. We are also working with the DoD to review the upgrade program at East Sale.

How we manage heritage properties

We own Commonwealth Heritage Listed (CHL) properties in New South Wales and Western Australia, and manage and maintain 61 CHL properties at ADF bases and establishments across Australia on behalf of the DoD. We maintain these heritage-listed properties to an appropriate high standard, ensuring they are not only useable, but also liveable assets to accommodate ADF members and families.

In 2014–15, we prepared and received approval from the Australian Heritage Council for a heritage strategy in relation to CHL properties we own. The strategy:

  • fulfils our obligations under section 341ZA of the Environment Protection & Biodiversity Conservation Act 1999 (EPBC Act)
  • ensures we comply with schedule 7C of the EPBC Regulations 2003 and guidelines issued by the Department of Environment in 2008.

As part of this strategy, we worked to identify Commonwealth Heritage values for our properties. Once completed in 2015–16, we will provide a formal report to the Department of the Environment, via the Minister for Defence.

We started work to restore 10 CHL properties we own at the Gunners' Cottages in Fremantle (WA). We will also construct six new properties at this site to complement the existing ones. Once completed in 2016, the project will provide three one-bedroom cottages, 12 two-bedroom cottages and one three-bedroom cottage for ADF members.

During the reporting period, we also managed a program of works on 13 DoD-owned CHL properties at HMAS Creswell in Jervis Bay (ACT). We restored the original design intention of the properties to create airflow and improve cooling and heating. We also completed some general maintenance and upgrades to driveways and footpaths.

We also planned and started conservation and/or restoration works on the following DoD-owned CHL properties:

  • Anglesea Barracks, Hobart (TAS)
  • HMAS Cerberus, Mornington Peninsula (VIC)
  • Victoria Barracks, Paddington (NSW)
  • Spectacle Island, Drummoyne (NSW)
  • HMAS Watson, Watsons Bay (NSW)
  • Selected houses for high-ranking officers at Duntroon, Canberra (ACT).

More information about our heritage-listed portfolio and specific projects is available on our website (dha.gov.au/development).

How we work with third parties to meet our Defence housing obligations

We consistently liaise with third parties, such as state and territory governments, government land bodies, developers, real estate agents and other businesses to identify and possibly acquire suitable land for Defence housing.

In 2014–15, as in the previous financial year, we found working with state and territory governments to deliver mutually beneficial outcomes proved very effective.

Through an agreement with the Queensland Government, we acquired land close to Gallipoli Barracks and started construction of 49 modern, state-of-the-art units for ADF members. In return, we are constructing 17 units on various sites they own in Brisbane for their future use.

We have similar agreements in place with the Northern Territory and Western Australian Governments, whereby we will acquire land to construct housing for ADF members in exchange for delivering a mix of affordable and/or social housing options for their use.

We also agreed to a co-branded project with the Prince's Foundation to deliver ADF members eight terraces and four units in Bowden, Adelaide (SA). The Prince's Foundation is one of His Royal Highness, the Prince of Wales' many charities and promotes sustainable development in support of healthier communities. We are managing the project, which incorporates the Prince's Foundation's design and construction principles. The project is due for completion in 2016.

We have a number of pre-qualified builders we invite to tender to upgrade and construct our properties. Builders can seek to become pre-qualified at any time. We also advertise expressions of interest on a periodic basis via AusTender. More information is available on our website (dha.gov.au/partnering).

How we create a sustainable property portfolio

Our approach to sustainability looks beyond individual buildings by taking a holistic view. We evaluate and implement innovations in the following categories:

  • Better business: optimising business operations to meet ongoing sustainability objectives.
  • Smart housing: key design changes that deliver positive environmental effects while providing desirable features.
  • Enhanced communities: urban design that creates healthy, resilient communities and positions us to be an innovative leader in the residential development industry.

In 2014–15, we incorporated direct design changes to buildings and urban precincts for environmental performance and encouraged behavioural change in ADF families and ADF members for healthier, more sustainable lifestyles.

We updated specifications to provide guidance on design, construction and performance requirements for our low and medium density housing projects. The specifications are available to view on our website (dha.gov.au/partnering).

In terms of sustainability, all of our new dwellings must achieve a minimum six-star Energy Efficiency Rating (EER).5 We also seek to meet the requirements of the Urban Development Institute of Australia's EnviroDevelopment certification (to six-leaf level).

We continued to work collaboratively with the Government Land Organisations' sustainability network on a compact housing6 study and presented our report and findings. The purpose of the study was to share information on this growing market, as well as drive change around planning laws to encourage greater levels of construction. We hope that this work will enable us to provision housing that meets DoD rent band requirements.

During the reporting period, we also worked on a number of initiatives. This included:

  • piloting new technology, such as keyless entry, and home energy management systems
  • working with electricity and gas companies to deliver more efficient use of utilities
  • working with telecommunication providers to facilitate landline and broadband capability.

How we are recognised by the construction and development industry

As a progressive developer, we aim to balance innovation and sustainability with the needs of ADF families and the broader community. This philosophy earned us considerable recognition from key industry stakeholders, as a leader in the residential development industry.

Winner:

DHA
Urban Development Institute of Australia
NSW Awards for Excellence 2014
Residential development: Crimson Hill, Lindfield
Category: Marketing (residential estates)

PTM Group for DHA
Master Builders Association
National Excellence in Building and Construction Awards 2014
Residential development: Breezes, Muirhead
Category: Medium-density over five (5) dwellings

DJ Jones Constructions for DHA
Master Builders Association (Far North Queensland)
Housing and Construction Awards 2014
Residential development: Bluewattle, Rasmussen
Submission: Sales and Information Centre
Category: Commercial building worth up to $5 million

Highly commended:

Bates Smart for DHA
Australian Institute of Architects
NSW Architecture Awards 2015
Residential development: Crimson Hill, Lindfield
Submission: Tubbs View and Hamilton Corner precincts
Category: Residential Architecture (Multiple Housing)

DHA with Greening Australia NT
Territory Natural Resource Management (NRM)
NRM Awards 2014
Residential development: Breezes, Muirhead
Submission: Breezes Muirhead Aboriginal Landcare Program
Category: Best Collaboration in NRM

Finalist:

DHA
Urban Development Institute of Australia
NSW Awards for Excellence 2014
Residential development: Crimson Hill, Lindfield
Category: Design and Innovation

DHA
Urban Development Institute of Australia
NSW Awards for Excellence 2014
Residential development: AE2, Ermington
Categories: Urban Renewal and Sustainable Development

DHA
Urban Development Institute of Australia
NT Awards for Excellence 2014
Residential development: Breezes, Muirhead
Categories: Environmentally Sustainable Development

DHA with dKO
Building Products News
Sustainability Awards 2014
Residential development: AE2, Ermington
Categories: Multi-density Development

DHA with Greening Australia NT
Territory Natural Resource Management (NRM)
NRM Awards 2014
Residential development: Breezes, Muirhead
Submission: Breezes Muirhead Aboriginal Landcare Program
Category: Best Urban NRM Group

We also submitted nominations in a number of 2015 awards; however, the results were not available at the time of printing. We will publish the results on the industry recognition page of our website (dha.gov.au/development/recognition).

Footnotes

1 Members with dependants (MWD) as defined by the DoD.

2 Members without dependants (MWOD) and/or members with dependants – Unaccompanied (MWD(U)) as defined by the DoD.

3 Includes properties located on and off-base for ADF members; newly acquired and/or constructed properties; properties being refurbished or off-line for maintenance; and those at the end of lease about to be disposed of.

4 RBC includes inner urban apartments, townhouses and flats. It allows a member to choose a residence in a better location to suit their lifestyle. The member chooses to occupy a RBC home that does not meet the minimum standard for their rank, but is in an attractive location.

5 EER must be certified by an independent accredited assessor, using AccuRate (NatHERS replacement), other equivalent methods (e.g. state systems such as BERS Pro and BASIX) or, where permitted, BCA Deemed-to-Satisfy Provisions.

6 Compact housing is medium density housing on blocks less than 300m2.