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Modular homes feature in Mirvac’s $1 billion ‘land lease’ deal to supply affordable housing targeting the retirement market.
Soon to be realised in Australia, the business model is imported from the U.S., where the arrangement exists in which people own their homes but rent the underlying land. Often seen in trailer parks and some condominium developments, homeowners pay a monthly “lot rent” to the landowner.
By only purchasing the home and not the land, initial acquisition costs are reduced. However, homeowners are bound by community rules and may also face rent hikes for the land. While this offers an affordable entry point to homeownership, it also leaves them vulnerable to potential shifts in land use or redevelopment decisions by the landowner.
Recognising the opportunity, Australian real estate titan Mirvac has ventured into this hybrid owner-renter affordable housing model aimed at Baby Boomers and retirees keen on downsizing. Announced last week, this move coincides with their recent $600 million acquisition of 27 land lease communities from the operator, Serenitas.
The 27 land lease communities comprise more than 6,200 sites, including over 4,200 occupied and around 2,000 sites to be developed, almost all of which have received development approval.
This transaction is a collaboration with Pacific Equity Partners Secure Assets and Tasman Capital Partners, amounting to a total of $1.01 billion. It is one of the most significant real estate mergers in 2023. Serenitas will continue in its role as the operator.
Both Mirvac and Pacific Equity Partners will jointly own 47.5% of the stake, while Tasman, already a co-owner, will hold the minority interest.
It’s suggested that the average cost of these homes is roughly 20% lower than conventional house-and-land packages, with some homes set to be constructed onsite, while others are modular homes to be manufactured offsite.
The company’s CEO, Campbell Hanan, anticipates a rise in the current 2% market share of the land lease model. He believes that the rapid evolution of this sector stems from the changing “landscape of the housing market”, which is grappling with escalating costs, supply shortages, and a surge in demand due to factors such as immigration, renters, and Baby Boomers eager to downsize.
