Affordable housing

Eve Picker: [00:00:08] Hi there. Thanks for joining me on Rethink Real Estate for Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone. And speaking of building better, I’m very excited to share that my company, Small Change, is now raising capital through a community round that is open to the public. Small Change is a leading equity crowdfunding platform for impact investment in real estate. For as little as $250, anyone 18 and over can invest in Small Change, helping to fuel our growth as we disrupt the old boys club of capital that routinely ignores so many qualified people and projects. Please visit Wefunder.com/smallchange to review the full details of our raise and to make an investment if you can. And remember, investing is risky. Don’t invest more than you can afford to lose.

Eve: [00:01:44] Three years ago, I interviewed the delightful Jeremy McCleod of Breathe Architecture, and today I’m lucky enough to interview him again. Jeremy founded Breathe, an architecture studio in Melbourne, Australia. There he delivers gorgeous and sustainable buildings to his clients. But Jeremy was unhappy with the ever-widening gap between those who have wealth and those who do not. So, he embarked on a second journey to deliver sustainable and affordable housing to everyone. Many told him that this was an impossible goal. But he completed his first project, The Commons, with accolades, three years ago. With a waiting list of over 8000 buyers, Jeremy and his team set about building lots more. This is what a great architect does. Listen in to learn more.

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Eve: [00:03:14] Hi, Jeremy. Thanks for joining me. And I just want to say, whoa, what a difference three years in a pandemic made for your business.

Jeremy McLeod: [00:03:23] Yeah, it’s been pretty wild times. Thanks for having me back on, Eve. It’s good to see you on the other side.

Eve: [00:03:31] It is. It’s the other side. So, since we last talked, your architecture studio Breathe and your brainchild Nightingale seem to have both exploded. And I wanted to give a little background to listeners who hadn’t heard the first podcast, or maybe tell them to go listen to it. But let’s talk about Nightingale first. So, for those listeners who missed our first chat, tell us about Nightingale. What is it and where did it all begin?

Jeremy: [00:04:03] Okay, so. Yeah, Melbourne, where our practice is, is a lot like any capitalist society. Unlike the beautiful Scandinavian countries where they decide to house their people through high taxes and good kind of support networks in a good neo liberal society, our government has been underspending in housing for decades. And so, as an architect, you know, we work, historically, our choice is to do private homes for wealthy Australians or do apartments for property developers where, you know, they’re really following a profit in a complex kind of environment. So, both of those things aren’t very rewarding. And Breathe architecture, our architecture firm, you know, we believe strongly in this idea that our first client is the planet, you know, our second client is the broader community that live on that planet. And then lastly, we have the client that pays us, and we felt like doing property development apartments wasn’t achieving the first two of those three criteria. So, we built a prototype project. We finished that in 2013 and it was called The Commons, and it was an idea to kind of prove to developers that you can make a profit by building sustainable homes and building community. And so, we built this building called the Commons. And the idea was that it would be car free, carbon free, that it would be affordable and that it would be incredible. And a lot of those things came true. I mean, we shot for the stars. We kind of landed on the moon.

Eve: [00:05:50] It is incredible. It’s a beautiful building.

Jeremy: [00:05:52] Yes, Eve you’ve been here. Right. So, you’ve been to it. You’ve been to Australia, you’ve been to Melbourne, you’ve seen it. We couldn’t get the carbon free piece right. So, there was still, we couldn’t afford the non-gas infrastructure back then. But apart from that it’s a very good building. And what was interesting about that was that we then opened it up for tours, brought every developer in the city through and said, look, this is what you can do. And they all saw it as a kind of an aberration rather than a trend and said, oh, well, that’s a nice idea, but thanks very much, we won’t worry about it. But, interestingly for us at Breathe is that people just, you know, every regular day Melburnians that are writing to us saying, if you’re going to do that again, can you please let us know? Because we would like to live in a building like that.

Eve: [00:06:36] But the really important thing is that these units were also affordable, right? They were affordable to civil servants who were really being pushed out into the far nether land.

Jeremy: [00:06:51] Yeah. I mean, the whole premise of building something that was sustainable and affordable simultaneously and still profitable for a developer was really about this idea of, you know, analyzing everything. And it was about a sustainability of reductionism. So, developers view historically has been that sustainability is expensive and it’s hard to get a return on your investment. And so, we just questioned everything. So, the big thing about taking out the cars was that we saved 10% of the build cost by taking out the basement. We reduced every apartment by $40,000. We took out every second bathroom. So, every two-bedroom apartment only has one bathroom. So, we saved $9,000 per apartment. We even took out all of the individual laundries, reduce the price of every apartment by about $6,000. And when you take a second bathroom and a laundry out of an apartment, the living room suddenly gets, you know, nine square meters bigger. You know, in your space, 90 square feet, about 90 square feet bigger, right. So, the living rooms start to be these really great, you know, spaces to be in. The cost comes down in all these apartments and then we start to build really great shared spaces, like a really incredible bike park, a really great rooftop laundry, you know. And rooftop laundry sounds weird, but it’s beautiful, right?

Eve: [00:08:12] It’s absolutely beautiful, yeah.

Jeremy: [00:08:13] Opens up onto the big garden and views to the city. And these become these, kind of, social hubs where people in the building meet each other doing something really ordinary, but it actually works in a kind of safe, nice space where people actually get to break down those barriers to talk to each other. So, anyway, when we finished the Commons, we won the national award for housing with this thing, and it was quite a small building. You know, it was 24 apartments, and we won the National Award for Sustainability, which was incredible because it wasn’t a $100 million university building that was funded by some philanthropic fund. It was, you know, it was actually. Yeah, it was just a market rate apartment. So, then we wanted to get other developers to employ us as architects to do that after two years of bringing them through the building. We couldn’t find anyone that would want us to do that. They wanted to do the same as business as usual. So, we decided that I took four days off work, and I wrote a manifesto and called it the Nightingale model, and we established Nightingale housing. So, the idea was that we would share all of our IP. That we would bring architects together, that architects would lead a housing revolution, that we would democratize capital.

Jeremy: [00:09:31] It’s interesting, Eve, that you and I met and, you know, when I saw Small Change, I was like, oh, this is what I really needed back in 2015. But basically, it was peer to peer funding. Small mom and dad investors putting in like about $100,000 each to kind of crowdfund these projects, equity fund these projects. And we built the first project, Nightingale One, which finished in 2017. And then, you know, by that stage our waiting list, people who had been writing to us had grown from 11 to 57. And so, we balloted those apartments. So, we didn’t sell them through a real estate agent. We took all of the agents out, all of the marketing, all of the display suites, which all reduced the cost of the building. We took out all the gas to make sure it was 100% electric. We shared a lot of the infrastructure inside the building, like the hot water for the hydroponic heating, like the hot water for the showers. So, we got one set of plant that does all of that. It makes it really cheap for everyone living in there. These are all built to sell like market owned apartments. And 57 people entered a ballot and we balloted. We sold all the apartments in one day. And people hadn’t seen that in Melbourne, you know.

Jeremy: [00:10:46] So anyway, you know. So, that was kind of the start of Nightingale. And what’s happened since then is that a couple of projects kind of took that Nightingale model and delivered it. So, we shared that IP with other architects. You know, I actively worked with those other architects to help them deliver those projects. So, Nightingale 2 is a great example of that. And then it kind of faltered, Eve. And the challenge, I think, was that to go and source equity, to go and buy a piece of land, you know, someone needs to sign the directors guarantee on the purchase of the land. To go and secure a debt, someone has to put a director’s guarantee down, you know, to secure whatever it is, $10 Million from the bank. And the bank wants to know that the person delivering the building has done it before and that they’re good at it and that they have a big balance sheet behind them. So, this revolutionary idea for Nightingale housing, like it kind of went bananas, right? So, after Nightingale 1, we balloted Nightingale 2. And you know, we started doing all of these projects, but, you know, our demand grew so that there’s 15,000 people, over 15,000 people on a database now to buy housing.

Eve: [00:12:02] Wow, my heavens.

Jeremy: [00:12:03] But we couldn’t keep up with supply because, you know, there’s fundamental issues around, in a good neoliberal society, around risk, who’s prepared to take the risk and put their home on the line. And, you know, again, I guess risk from a debt point of view and an equity point of view, who’s going to put money into these projects because you know, who’s going to take risk on that? And so, look, the good news is that, you know, we’ve just completed like our 500th apartment and we’ve got another 500 in the pipeline. Last year we balloted $80 million worth of housing where we’ve rolled in a social housing portion so that, you know, trying to really kind of nail the affordable housing piece now means we have 20%, that the first 20% gets balloted to an affordable housing provider. So, that’ll be a charitable organization like Women’s Property Initiatives. The next 20% goes in a priority ballot. So, to you know, key service workers, nurses, teachers or to First Nations Australians or to people with a disability or carers for people with a disability. And the last 60% is balloted to, you know, to the broader waiting list. Everything sold. Now we’ve got a, you know, the new model is kind of evolved into, you know, it’s a Nightingale not for profit, so, there’s no profit in there anymore.

Jeremy: [00:13:33] And we’re now getting institutional funding from what are our superannuation funds, which might be called pension funds in the US. And we’re getting senior debt now from our major banks really through their kind of social impact arm rather than just their commercial finance arm. So, we’re getting good rates and really good engagement like we’ve had the CEO of one of Australia’s biggest banks, you know, come and meet with us, walk through the buildings, ask us what he can do to help personally and like task you know team of six of his heavy hitters to help, you know, build a specific loan product for people who want to buy into Nightingale. So, I think the interesting thing about Nightingale is this idea that it’s got a very clear narrative around it, which is that it’s a triple bottom line housing model. So, it’s about being carbon neutral. It’s about building community, not only in the community within the building, but kind of engaging with the broader community through that whole process. And then lastly, it’s about affordability and how do we get a broader cross-section of the community living there. So, it sounds it sounds pretty easy, but, you know,

Eve: [00:14:43] Well, it’s not easy.

Jeremy: [00:14:46] As you know, Eve. So, you know, and when I started there, it was, you know. Yeah, it was just an idea, right? You know, in a manifesto. And I recently handed over the reins, so I was the founder for a while. I put together a not-for-profit board. Or actually, I got some help to put together a not-for-profit board, which was really great. We put someone on to kind of run the show for a couple of years and then it just didn’t take off. And then I step back in as managing director to try and say, If we’re going to go, let’s do it. I stayed in that acting managing director for over five years, you know, and we saw massive growth and I’ve just stepped down in that role as managing director. So, you know, I’m back on the board now. So, you know, I attend six weekly board meetings. But, you know, as I stepped away, there’s now 17 staff, you know, and 500 apartments in the pipeline. And yeah, so.

Eve: [00:15:44] Is it satisfying to have built that?

Jeremy: [00:15:46] Yeah it is and you know, I was sad to step away. But, you know, I’m also the design director at Breathe Architecture and you know, it’s time that I actually give some love back to Breathe. You know, the organization that founded Nightingale. Now, you know, I feel like I need to spend some time there to go and, you know, see what’s next on the horizon, right?

Eve: [00:16:07] Yes, yeah.

Jeremy: [00:16:08] Building up to do the next thing.

Eve: [00:16:10] So, are other architects involved now? You said you have built 500 units.

Jeremy: [00:16:16] Yes. So, I mean initially it was meant to be this architect led kind of revolution and we got lots of engagement from architects to do that. Lots of challenges around funding and equity raising. And just not.

Eve: [00:16:32] It’s all about money, isn’t it?

Jeremy: [00:16:34] It’s all about money. It’s all about money. Unfortunately. This idealist has become, I’ve become much less, I’m much more pragmatic over time, which is really interesting. I was also quite scathing at the development industry when I started Nightingale, thinking that they were all evil. And now I’m. Yeah, and now, you know, I’m really embarrassed about the things that I said early on, the disparaging things I said about developers, because I just realized how hard it is and how much risk is involved. And you know that the profit margins that developers put in, while they might seem horrifically high from the outside, you know, it only takes one project to go.

Eve: [00:17:17] It’s a huge amount of work.

Jeremy: [00:17:17] Well also, they need a balance sheet to be able to fund the projects and in the event that one project fails, they need to, they need a balance sheet behind them to be able to.

Eve: [00:17:26] Especially in Australia where I really don’t understand how the financing works at all, we’ll have to talk about that. But it seems even harder than here.

Jeremy: [00:17:35] It is.

Eve: [00:17:36] It’s very difficult.

Jeremy: [00:17:37] Yeah, it is very complex. And the banks here, you know, I guess like anywhere are not interested in taking, you know, risk so.

Eve: [00:17:44] Very conservative, yeah.

Jeremy: [00:17:46] Yeah, yeah, yeah. So, you need lots and lots and lots of debt coverage, but it’s really great to be able to get to the point now where I can step away from that. I do worry for the sanity of my replacement, given, you know, it’s probably the same thing that’s happened in the States. You know, we’ve got high inflation here. We’ve got, we have had supply chain issues through COVID. So, we’ve seen massive increases in construction costs in the last two years. In one of the states here, we’ve seen like a 23% increase in construction. So, in the last year, that’s put a lot of projects under pressure. And then we’ve seen, to try and control inflation. The banks have put the interest rates up, so lending is tightening. So, first tome buyers who are our cohort are struggling to get loans. So, you know, it’ll be interesting to see, you know, out of those 15,000 people, how many can actually secure a loan to buy a property. We will see how much demand there still is out of that 15,000 for the next project, when we take the ballot.

Eve: [00:18:48] So then, yeah, I think you’ve answered this question. My question was going to be what did you have to give up on? Like your idealism was thinking, this is going to be like this, but what did you have to give up on to really make this work? Was there anything or have you.

Jeremy: [00:19:02] Yeah, well, I mean, that’s a that’s a really good question. Look, I did think that, you know, that when we first established Nightingale that it was going to be this really light touch thing, right? That there would be a couple of people with a repository of all of the information and they would share it with a Nightingale license to another architect. And that other architect would read through everything diligently. They would understand the risks involved. They would establish a company, go and raise equity, go and secure a debt, and go and buy the site and build the projects. And that it would grow, and it would just go viral. I think that was the that was the dream, right? That the whole thing would kind of happen because it was such light and demand for it. So, the thing that I’ve had to give up on is actually, you know, from being a revolutionary organization, you know, to actually have the impact that we need, we’ve become, yeah, much more mainstream. So, you know, now Nightingale, you know, has a fund it raises, you know, seed fund and equity and debt. Nightingale goes and buys the sites; it engages the architects. So, you know, we still employ.

Eve: [00:20:05] So, you’re really, that nightingale is really making it all happen.

Jeremy: [00:20:11] Yeah. So, Nightingale does everything now takes all the risks. So, as a director on the board, I still take the risk. So, we’re basically taking the risk out of the hands of the architects and centralized it at Nightingale. But we’ve also centralized the expertise. So, you know, we’ve got a finance director at Nightingale, we’ve got, you know, delivery team of development managers and project managers and that obviously gives the banks and the superannuation funds lots of confidence that this team has done it before, and they can do it again and all that expertise is in-house.

Eve: [00:20:45] That’s a lot, that’s huge.

Jeremy: [00:20:49] Yeah. But you know, yeah. So, it’s much less grassroots and it’s much more boring. Yeah. Hey, I mean, still doing incredible things, right? It’s still setting the agenda like, you know, we build.

Eve: [00:21:05] You’re a starter. You don’t like the maintenance, the maintenance stages.

Jeremy: [00:21:08] 100%. I’m a starter, not a finisher. There are other people that are better at finishing than me. That’s absolutely right. Well, it’s got an incredible inertia.

Eve: [00:21:20] I think we have that in common. I like things, but maintenance can be really boring.

Jeremy: [00:21:25] Yeah, And look, it’s got its own inertia behind it now, so it doesn’t need me, you know, anymore.

Eve: [00:21:31] Pretty fabulous. So, what else about the model has shifted over time? This just.

Jeremy: [00:21:35] Well, look, under the interesting thing for us was that we were delivering housing that was carbon neutral and that was meant to be affordable. But I was actually frustrated by delivering not for profit housing that, you know, the first project was 19% under market. In one of the projects we balloted last year was only 13% under market and it’s not for profit. Right? And so, I think the challenge for us was that when we pushed the environmental credentials and the build quality and the design quality and all of those things, it still wasn’t as cost effective as what we were hoping. You know, we were hoping to kind of shave 25% out of the price of housing and we thought that we would get better at that over time and that as we built bigger projects, and we had an economy of scale that we could keep on reducing prices. Yeah, I guess for us it just, it didn’t get cheaper. Even with big projects like Nightingale Village where there’s six buildings all together and we’re sharing infrastructure, you know, the project got more complex and they got better, but they didn’t get cheaper.

Jeremy: [00:22:43] And so, for us, we had to kind of start to think about how do we have impact on affordability, which is when we kind of wrote our own affordable housing policy, you know, a little bit like, you know, the UK where we just allocate 20% of housing kind of salt and pepper through each of the developments now and then those 20% are held by the community housing provider and cross subsidized by everything else in the project, which actually makes everything else in the project slightly more expensive, right. So, we’ve actually made the other 80% slightly more expensive, but we now have 20% that is truly affordable, you know. And so, and it’s complex and it shouldn’t be up to a small not for profit to be delivering affordable housing. But in a city where there has been so much underspending on housing, then I think that everyone’s got to take some responsibility to try and solve for that.

Eve: [00:23:39] So, has any of this rubbed off on the Australian Government?

Jeremy: [00:23:43] Yeah, I mean it’s been incredible. The impact that Nightingale has had is unbelievable. So, you know, so Nightingale now has, there are a number of other companies doing things that look and smell like Nightingale, but they kind of got their own, you know, their own approach to it. You know, there’s a company here called Assemble, and if you talk to Assemble, you know, they say that they developed all of their all of their things, all of their ideas, all their policies at the same time as us, which may well be the case. And maybe everyone was kind of we just all arrived here at the same time. They kind of came a couple of years after us. But the great thing about assemble is their scale. So, they are funded, you know, they’re 25% owned by a superannuation company, all of their sustainability credentials, they match all of our sustainability credentials. So, we’ve got seven and a half stars, not five stars.

Jeremy: [00:24:44] That’s one of our, you know, energy rating requirements. They’re also 100% electric. They also buy 100% certified green power, so no black power. They also have a car share system in that they also have an embedded network that shares the benefit for the residents. And they also have a 20% affordable housing criteria. You know, the difference is that while we’ve got 500 apartments under development, they’ve got 3000. So, I mean, and also, yeah, it’s incredible. And also, they’ve got some really smart people working with them around tax structuring and finance. And they’ve been able to work really well with government on getting government backed finance, you know. So, yeah, I think that they’ve approached it in a kind of more intelligent and strategic way. But it’s really great, right? So, it’s not just Nightingale now. It’s also a company that has to generate returns for a pension fund which is doing this and showing that this model can be replicated at scale and profitably and still everyone wins on it and most of their model is build-to-rent, but they’re building buildings that are largely…

Eve: [00:25:55] Which is unusual in Australia.

Jeremy: [00:25:58] Yeah, I mean Australia is weird, right? So, most of the apartments here are kind of built to sell. Most of the rental apartments are owned by mum and dad investors, you know. And so, the build to rent market here, you know, the rental market is only just recently turning to kind of, you know, whole buildings being owned by a property companies. So, we’re seeing like Heinz coming out here, Greystar coming out here, so, internationals coming here to build, you know, buildings that will be rented out. So, it’s good to have Assemble here as an Australian, you know, version of that.

Jeremy: [00:26:35] But we’re also seeing boutique developers, Milieu here, who sell beautifully designed. Their whole schtick is beautifully designed buildings, relatively small buildings. There may be only 50 apartments in each building. But what we’ve seen from them is that they engage Breathe architecture to work on a project with them. And basically, they said we want to build all of the sustainability outcomes of Nightingale. We want to add some optionality. So, if our purchasers want to buy a car park or buy an individual laundry, they can. And so, we’ll just offer those as optional extras and then we’ll sell it at a different price point. And we’ll make sure that it’s designed really well and that it’s, you know, that the specification is slightly better. And so, we’ve seen Milieu now become a B Corp certified company delivering buildings that are carbon neutral in operations, meeting all of the Nightingale kind of design standards and then selling to the kind of the next tier up of second or third home buyers, you know, and it’s been really good to see them delivering great quality with those same sustainability and community outcomes.

Jeremy: [00:27:51] And in fact, around here, Eve, you’ve been to this suburb that we’re in, Brunswick, in the north of Melbourne here, it’s kind of a, you know, I guess, let’s call it a Williamsburg of, you know, of Melbourne, right? It can be gritty, and it can be great. And it’s pretty diverse. But what we’ve seen around here now is that no developer builds here now, who is serious. No one here plumbs gas into their building, no one here builds something that’s kind of under seven stars. You know, everyone who’s building here now knows that the purchasers in and around this area expect that their building is going to be energy efficient and there’s going to be 100% electrified. So, it’s been really interesting to watch the market shift. And I think that, you know, the epicenter is here around where we’ve built 14 nightingale buildings in this suburb. And I think that it’s kind of rippling out through the rest of Melbourne and then it’ll kind of ripple up the East coast here and get to Sydney and Brisbane.

Eve: [00:28:54] What about other countries?

Jeremy: [00:28:58] No, no, no, that’s a really good question. I mean, yeah, it’s interesting that lots of people around the world know about Nightingale, and we’ve spoken to people in London, you know, Sweden, Canada.

Eve: [00:29:12] And plenty of students who know about Nightingale and Breathe.

Jeremy: [00:29:16] Yeah, yeah. It’s really interesting. But New Zealand has paid a lot of attention. So, New Zealand is, you know, Australia only has 25 million people. New Zealand only has 5 million. It is the most beautiful place. It’s incredible.

Eve: [00:29:33] It is gorgeous, yeah.

Jeremy: [00:29:34] The New Zealand central government has a housing crisis on its hand that the cost of housing in New Zealand is like, you know, I think it’s like know third after, you know, Paris and Hong Kong or something like it’s crazy how expensive housing is in Auckland. The central government from New Zealand sent a delegation of about ten senior planners, planners, urban designers out to come through, and economists, to come and walk through the commons and look at Nightingale One. They’ve recently announced a new housing policy under their incredible Prime Minister, Jacinda Ardern.

Eve: [00:30:12] I know. She’s amazing.

Jeremy: [00:30:13] She’s amazing. Yeah, she’s like, Oh, there’s a problem with housing. Let’s write a housing policy and let’s actually change planning policy to solve that. And basically, when that delegation met with me, they said, what is the biggest barrier to building affordable housing? And I said, it is, in Melbourne, it’s actually third-party objection. Right? So, it’s.

Eve: [00:30:36] Yeah, I was going to say the same thing. Zoning. Well, it’s, yeah, objection rights are really strong there, but definitely zoning impacts what you can do.

Jeremy: [00:30:44] Yeah. So, one person living, you know, 500 meters away, you know, or half a mile away can put in an objection and delay the entire project and cost the project hundreds of thousands of dollars. Absolutely, and it’s alive and well here. And the thing that they complain about is lack of car parking, despite the fact that our road network is absolutely at capacity and that the City of Melbourne has 30,000 available car spaces in existing buildings. And all we need is an app called Parkhound or Spacer to link people up to those things. So, we don’t have a car parking problem, we’ve just got a management issue about where those people being able to find those car spaces, so car parking and height and so basically anything over two stories, everyone in Melbourne is up in arms. And so, basically what they did in New Zealand is that they heard that, and they’ve got a new policy which says that anything up to five story, there’s no third-party objection rights, even if it’s got zero car parking. So, they’re happy to waive the car parking to zero because construction of basement is, like labour costs are very high, really high in Australia and New Zealand. We’re literally saving like 15, sometimes 20% of the housing cost out by taking out basement car parking.

Jeremy: [00:32:08] So, so New Zealand has changed their planning rules and Breathe have been working with the with the kind of community-based developer, believe it or not, with an incredible constitution out of Hamilton and New Zealand and a local architect called Edwards White in New Zealand. And we’ve been working with them to build their version of Nightingale. You know, that’s specific to New Zealand. And so, we’re working on a project with them. But the first project isn’t like Nightingale One, like 20 apartments. It’s like Nightingale Village. So, it’s, you know, it’s eight buildings by eight different architects, all carbon neutral in a village. And we’re working really closely to make sure that we knocked that out of the park and we’re building the infrastructure around that. It’s called Project Korimako. Korimako is a New Zealand bird, you know, as opposed to, you know, the Nightingale. Anyway, I’m really looking forward to. So, the Breathe team kind are working with them and we’ve taken all the learnings from our time at Nightingale over there to kind of try and, you know, just leapfrog kind of five years of R&D. So yeah, it’s, it’s definitely it’s definitely spreading.

Eve: [00:33:16] Interesting. So, in the meantime, what’s happening with Breathe? I know a little bit because, full disclosure, Jeremy is my architect on a project in Australia which has suffered through the pandemic and objection rights. Right?

Jeremy: [00:33:33] Well, I mean you saw that there was one objector on your project, which was a really aspirational project, not an overdevelopment. And we had to spend a lot of time with that one objector, you know, to kind of work through that was painful. And now our big challenge is funding, right? Funding and finance.

Eve: [00:33:53] Well, also the contractor, it’s a very, very dense urban site. The contractor is really concerned about how he’s going to build there. And so, you’re not going to like this but he says, you know, they need the whole road. That objector went away because we gave them an accessible parking spot, which the contractor says he now needs. It is really, I mean, I’ve never seen, I mean, I’m in a small town. I know that entitlements and zoning moves very slowly in places like San Francisco, but I’ve really never been through anything quite like it. Especially with the pandemic. And everyone disappeared and there were no phones, and no one responded to email.

Jeremy: [00:34:40] Yeah, it was challenging, wasn’t it? Anyway, we’ll get there, Eve. So, what was the question again?

Eve: [00:34:47] So, like, what’s happening in your architecture studio?

Jeremy: [00:34:53] Yeah, okay. Okay. Right. So, you know, we’ve kind of specialized in sustainability for a long time. And when I say specialized, it’s just been something that we’ve always done. I think the big change for us in the last couple of years is that one of our great architects, Bonnie Herring, was the director of architecture here, we’ve now made her a director of sustainability. We’re now doing lifecycle assessment on all of our buildings. So, we’re one of three firms in the country that are kind of measuring carbon and trying to deal with whole of life carbon or embodied carbon, which has been interesting. And, you know, everyone says to us, you know, it’s funny that you guys tend to focus on narrow your focus down and doesn’t that cost you work? But interestingly, by narrowing our focus, we’ve got clients like ANZ Bank. So, you know, we’re a relatively small practice. You know, I think there’s 27 staff here and ANZ Bank are again one of the big four banks here, and they’ve been working with us in the last couple of years about changing their branch rollouts to being, you know, instead of constructing branches, basically working on a system where we build, you know, a carbon neutral, like kit of parts or furniture installation basically that can be installed and then removed at the end of each lease and taken to other branches and, and all the parts can be used. There’s a barcode on all of the parts so you know.

Eve: [00:36:23] It’s like knock down furniture for ANZ Bank.

Jeremy: [00:36:25] Exactly, exactly. So basically, kind of, and the incredible thing about that is, you know, just in the 21st century, being able to design everything in 3D, you know, prototype everything, build a prototype branch, test everything, and then start to roll out, you know, branches. And so, we basically built this kit of parts, a 3D model, a handbook, basically like an IKEA catalogue showing how it all goes together. A little YouTube tutorial to future architects working on these branches.

Eve: [00:37:02] A phone number.

Jeremy: [00:37:04] No phone number, but, you know, so we designed that. We rolled out the first three branches together with ANZ and then we worked with their three other architects to then take them through it and then we worked with another three. And so, we’ve kind of been spreading how to do that, you know? Yeah, like a tutorial, but you know, they’ve just finished their 60th branch and they’re rolling out across the country, so they’ll roll out hundreds of these things. So, these carbon neutral branches in operation with a massive reduction in embodied carbon, that’ll be totally circular. So, there’s no glue in these things, Everything’s screwed together or bolted together. So, at the end of a component’s life, it can all be, you know, broken down to its kit of parts and reused. I mean, that’s been pretty interesting.

Eve: [00:37:48] For people listening, they’re wondering, is this really what an architect does? So, you know, is this the role of an architect?

Jeremy: [00:37:58] Well, that’s a really good question, right? Because what is an architect in the 21st century? You know, I’m on the National Council of the Institute of Architects in Australia. And, you know, a lot of architects think their job is to draw buildings. You know, and I would say to any architects listening that that is absolutely not our job, that, you know, 39% of all carbon emissions on this planet come from the built environment. And that, you know, we’re in a time of massive climate crisis and that we as a profession need to be asking ourselves big questions like, eh, should we be drawing a building at all? Or should or should we be finding a different solution? So as architects, we’re trained as systems thinkers, you know, Eve, you’re trained as an architect, and you know.

Eve: [00:38:46] It’s a great training, it’s creative, and it’s systematic and it’s, you train to be a problem solver and make something from nothing. Yeah.

Jeremy: [00:38:55] Yeah. Correct. And so what I would say to architects is to use that thinking to say, what is the answer to this solution? Is it building more basement car parks or is it actually just introducing the council to apps that already exist, or is it building an app? You know, like what is the answer to the problem? And it’s not always drawing a building, you know? So, yeah, I think that where, you know, yeah, we probably approach architecture a little bit differently to traditional firms. I’m not a big fan of single, you know, residential family houses, you know, or the inequity in that that so many architects focus on this fetish-ization of you know I want to do this big luxurious house, you know, and I want to get it photographed and put in a magazine.

Jeremy: [00:39:48] But if you think about the impact that you can have, you know, spending all that time with a pedantic, wealthy client to build their one dream house as opposed to you could be working with Aboriginal Housing Victoria, you know, and building housing for First Nations Australians who have been, you know, pushed off their own land in this country, you know, or you could be working with ANZ to say, well you’re about to roll out 400 branches, how do we pull out thousands and thousands of tonnes of carbon out of that and how do you improve the working experience for all of your staff through that, by, you know, introducing Biophilic design and flooding the place with plants and pink UV grow lights so that at night time when the branch closes, it glows pink, you know. So, yeah, I think that we have to ask ourselves. You know, this is post, we are we exist post peak oil. We exist post, you know, the debate on climate change. There is no debate now. And we have to choose who we want to be in the profession and what we want to be doing, but it shouldn’t be adding to that 39% of carbon emissions. It shouldn’t be adding to social injustice. You know, we get to be change makers and we should, you know, focus our time and our energy on that.

Eve: [00:41:14] Yes, I totally agree. For me, it’s also that buildings make better cities for everyone. And I get.

Jeremy: [00:41:25] Absolutely.

Eve: [00:41:26] Really upset when all the focus is on that special Italian marble finish inside, when really, it’s the external walls of the building that are going to make a street or a place or a square, really a wonderful, really place to be, you know.

Jeremy: [00:41:43] I had an architect at Breathe the other day, quote, a famous quote to me, and he said, Jeremy, God is in the detail. And I banged my fist on the table and I said, absolutely not. Not in this place. You know, it’s in the big idea and it’s in the ethic of what you’re doing, you know?

Eve: [00:42:02] But on the other hand, your details are gorgeous. So…

Jeremy: [00:42:05] Yeah, absolutely. I mean, but those two things have to coexist, right? You know, you can’t just obsess about a detail without actually if you think about Bonnie in the way that she worked and designed the commons, you know, every detail is about a reduction. How do I take things out? And so, it’s so reductive that it’s really, really beautiful. But there was a reason for that, right? A sustainability reason, a cost reason. So yeah, but also Eve, interesting that you studied architecture, but you saw that what actually needed to happen in the built environment was funding for the right type of projects. So, Small Change is an example of I teach at Melbourne University, I teach Nightingale night school to thesis students, you know, every second semester at Melbourne University. And I become incredibly proud when I hear about one of my graduates going out and they might work for Lend Lease in and become the head of their sustainability, you know, or they might go and work for a property developer and become a development manager there, or they might go and work for the public housing team in Singapore, you know. But I get really inspired when I hear that architects understand that sometimes the most impact they can have is not drawing buildings but using their systems thinking to actually make massive change. So, I think the key is getting up upstream, right? Architects are always downstream. You’ve got to get up to the source to be able to kind of change be outcomes.

Eve: [00:43:45] I think that’s right. And I don’t know if it’s changing, but I taught in architecture school for a while and I found it incredibly myopic that students were taught to design just buildings and very little time was spent on everything else they could do with their education.

Jeremy: [00:44:05] I think it depends a lot on what university, you know, like I was at the Royal College of the Arts a couple of years ago, you know, with a woman, Tash, there seeing what she was doing. And she was there really trying to get, you know, these architects in London thinking really about systems, big things, you know, how do we, you know, how do we as a profession have, massive impact which leads to massive change.

Eve: [00:44:32] Yes. So, I’m going to ask you one more question. When are we going to build a Nightingale project together in the US? That’s what I really want to do.

Jeremy: [00:44:43] Well I mean, if you think of if you think about what the barriers are. So, can we get a great architect in the US? Absolutely. You know. Can we find a site with lots of opportunity in the US? Like, absolutely. You know, I mean, often, you know, we’ll try and align strategic planning support with community support. You know, and you can imagine that there would be states or cities within the US. I mean, it’s obviously quite divided at the moment, but we but we would need to go to the right place to do it. And then the biggest piece of the puzzle is funding, you know. So, and I think that…

Eve: [00:45:22] It always is. Yeah.

Jeremy: [00:45:23] And I think that, you know, that you could solve that. So, and well, actually the last piece of the puzzle is that the Nightingale Housing Board has said absolutely no to any, the reason that Breathe are working with the New Zealand crew is that the Nightingale Housing Board have said Jeremy No we’re, we’ve got a sole, let’s just solve Melbourne, you know, and I’ve kind of pushed them to, you know, Adelaide to the next state to the west of us and I’ll push them north into, into New South Wales. So, we’re kind of in a few states here. But yeah, I think that, you know, we could call it the Eagle.

Eve: [00:46:07] I love this idea of sustainability through reductionism. Like I worked in this Pittsburgh market, which is a really soft market when I was doing real estate development. And I had to reduce everything down to the bare minimum for different reasons, just because the market couldn’t support anything else. But there are now places here where it can support, it can support more. But I mean, you know, my own apartment has polished concrete floors because we really couldn’t afford to cover it. And I’ve got, you know, concrete, raw concrete block walls because painting it just wasn’t part of the budget. I think that’s beautiful. You know, I think that it’s exposing that, you know.

Jeremy: [00:46:50] But if you detail it well, I mean, the fascinating thing is if you think about the Commons, you know, Bonnie being so reductive that even the surfaces. So, all of the tap ware that we used to specify in Melbourne was cast in brass and it made it made in Melbourne, cast in brass sent off to the chrome platers so to be electro plated with chrome. And then it would come back to the manufacturers that would brush the chrome, that would repackage it, they would send it out. And chrome plating is a very toxic process, anyway. It’s very, very energy intensive and it requires all of this transport between the brass caster and the chrome platter and back again. So, Bonnie pulls all of the chrome plating off, you know, talks to the manufacturer, gets them to agree to give us basically the rough cast brass, you know, just buff off.

Eve: [00:47:40] Which are beautiful, right.

Jeremy: [00:47:42] Absolutely beautiful. And now in Melbourne, you know, find me a building you know, whatever, ten years on that doesn’t have bar store furniture and brass tap you know. So, it’s actually, it’s become an aesthetic and I’m not saying that again, maybe it was just the time, but you know, it’s become an aesthetic in its own right in this city. But it’s really come out of, you know, Bonnie Herring pushing this, just really pushing the reductionist agenda. So, yeah, I mean, it’s interesting. And then if you think that all of the apartments around here, we pull all the ceilings out to give us, you know, taller ceiling heights and to not put all of the, you know, embodied carbon in those ceilings and to expose all the thermal mass to give us really stable temperatures. You know, we’ve been pulling the ceilings out since 2014 and now no apartments around here, you know, like they’ve all got exposed concrete ceilings, you know.

Eve: [00:48:52] So, there was this language in construction and building homes that wasn’t really there for good purpose, right. And you’ve stripped it away and it’s really quite a beautiful aesthetic and people are adopting it, it’s a great thing.

Jeremy: [00:49:07] It’s interesting. Eve, I better run because I’ve got to go and talk to someone. So good to speak with you.

Eve: [00:49:15] And I want to, I’ll want to know in two or three years where you are then, because this was enormous progress, especially given that there was a pandemic during all of this.

Jeremy: [00:49:25] Yeah, but I think that I’m sure it was the same in the States. We were expecting the sky to fall, and everything was upside down. So, you know, housing prices went up, construction prices went up, yet demand went up like nothing made any sense. So, yeah, you know, I am still expecting the sky to fall, Eve.

Eve: [00:49:49] I’m hoping to come to Melbourne sooner and we’re going to catch up again then. Thank you very much.

Jeremy: [00:49:56] Thanks, Eve. Thank you.

Eve: [00:49:58] You too. Bye.

Eve: [00:50:16] I hope you enjoyed today’s guest and our deep dive. You can find out more about this episode or others you might have missed on the show notes page at RethinkRealEstateforGood.co. There’s lots to listen to there. You can support this podcast by sharing it with others, posting about it on social media or leaving a rating and review. To catch all the latest from me you can follow me on LinkedIn. Even better, if you’re ready to dabble in some impact investing yourself head on over to wefunder.com/smallchange, where you can invest directly in Small Change and our mission to democratize capital formation to create impact in commercial real estate development. A special thanks to David Allardice for his excellent editing of this podcast and original music, and a big thanks to you for spending your time with me today. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.