CEFC invests $100 million in affordable, greener housing

The Clean Energy Finance Corporation (CEFC) has invested $100 million in a new affordable build-to-rent (BTR) strategy managed by AXA IM Alts, which aims to bring the benefits of clean energy technologies to sustainable, affordable homes across Australia’s largest cities.

In its initial stages, the strategy is targeting as many as 3000 apartments in key worker employment hubs, with at least 50% offered at a discounted rate to equivalent market rents for means-tested tenants.

Consistent with the International Energy Agency’s zero carbon buildings approach, homes built through the strategy aim to be energy efficient, fully electric and capable of being powered by renewables while driving reductions in embodied carbon.

The strategy will create a replicable model for the delivery of affordable housing into the market, while leading with sustainability for tenants who have traditionally been locked out of the benefits of clean energy technologies and sustainable living.

The first investment, a 397-unit residential development in Sydney’s Westmead, is adjacent to one of the largest health, education, research and training precincts in Australia.

Expected to be completed in late 2025, the development will provide housing for around 1000 people, with half the dwellings targeting key healthcare, teaching and emergency response workers in the precinct.

AXA IM Alts has partnered with community housing provider, St George Community Housing (SGCH) to manage the Westmead property from completion, along with other future projects in NSW.

“The Westmead project, our strategy’s first investment, is expected to complete in 2025 and will aim to enable essential workers to live in good quality, institutionally managed accommodation closer to their place of employment,” said Antoine Mesnage, head of Australia at AXA IM Alts.

“We seek to replicate this model at scale across Australia, with an initial focus on Sydney, Melbourne and Brisbane, and we have a number of pipeline opportunities identified to grow and diversify the portfolio further. Additionally, in supporting the transition to a decarbonised economy, we are targeting market-leading environmental and social credentials across the assets that aim to deliver strong ESG and impact outcomes, and long-term value to our investors as well as the local community.”

Future projects will target a minimum 5-star Green Star Building certification and a minimum average 7.5 star NatHERS home energy rating.

CEFC CEO Ian Learmonth said, “To effectively reduce emissions in the property sector, sustainability needs to be at the heart of all developments. Tenants can face challenges in implementing energy efficiency and emissions reduction measures in their rental properties. This new strategy is an important step in an equitable energy transition, taking an integrated approach to leverage global best practice and drive clean energy outcomes to provide benefits to tenants, and more broadly to help to address housing supply and affordability.

“This investment brings the benefits of sustainability to an important segment of Australia’s residential sector, at scale. Making homes more resilient, healthy and comfortable by lifting sustainability standards helps meet our current and future housing needs as we move towards net zero emissions and unlocks the advantages of sustainable living for more Australians.”

Mesnage agreed and added, “The CEFC’s investment is an important milestone in the continued success of our Australian affordable housing program and our wider global residential strategy, which we intend to grow alongside new capital partners. It also reflects our shared approach to addressing the shortage of good quality, sustainable housing stock for key workers in Australian cities.

“We have strong ambitions to continue to expand this residential strategy in Australia, allowing our clients to benefit from AXA IM Alts’ global expertise and local knowledge in the sector. The support of established and like-minded institutional investors such as the CEFC, as well as the strong pedigree and operational expertise in affordable housing of our operational partner St George Community Housing, will be invaluable to helping us achieve that growth.”

CEFC head of property, Michael Di Russo said, “Bringing the benefits of sustainability to all sectors of the residential market is an important part of broader decarbonisation of Australia’s building sector and reducing our national emissions.

“AXA IM Alts bring significant expertise from their international experience in residential and affordable housing investment to support the development of high quality, sustainable and affordable housing in the heart of some of our largest and most vital communities. This investment demonstrates that sustainability and affordable housing are not mutually exclusive, and that unlocking the benefits of energy efficiency for affordable housing can accelerate the energy transition more equitably.”

Studies by the Australian Government have shown buildings account for more than 50% of Australia’s electricity use and almost 25% of emissions across the economy. Residential buildings are responsible for around 24% of overall electricity use and more than 10% of total carbon emissions in Australia.

They have also shown that by decreasing energy costs associated with household energy use and transportation, energy efficiency improvements can provide disproportionate benefits for low-income users as energy costs typically make up a bigger proportion of household budgets.

The CEFC has made more than $1.2 billion in lifetime commitments to improve energy efficiency and lift sustainability in Australia’s residential property market. Between 2015 and 2017, the CEFC committed a total of $170 million to SGCH for the construction of up to 500 energy efficient homes with an average NatHERS rating of 7.5 stars, including 300 developed for the NSW Government’s Social and Affordable Housing Fund.

The CEFC also invests alongside co-financiers through its specialist $1 billion Household Energy Upgrades Fund, to help homeowners fast track their transition to cheaper, cleaner energy, while lowering their carbon footprint.

Image caption: AXA's head of Australia Antoine Mesnage (right) with CEFC CEO Ian Learmonth.