Why the next frontier for NFP village operators should be land lease

As we look across Australia's booming land lease sector, one question keeps coming to mind: where are the mission-led organisations?

For providers whose purpose is built around affordable housing and supporting older Australians, it is remarkable that no NFP operator is embracing the model.

Because the more you look at it, land lease is the same as retirement villages were 50 years ago, but better.

Downsized money to live on

The RV value proposition was downsize and release money to live on. This doesn't work so well now. Speaking to SATURDAY, retirement village operator Levande confirmed it now costs around $1 million to deliver a single independent living unit.

Construction costs continue to rise, development timeframes continue to stretch, and capital requirements continue to grow. NFP’s now cater to the financially well off in middle ring suburbs, because that is where the home sale price will cover new construction costs. But does this match missions or just profit targets?

Land lease offers a true downsize and release cash to live on. The homes sell from $600K to say  $1.2M in resort locations. Compare this to the above $1M construction costs alone of RVs.

Ownership

Land lease residents own their homes while the operator retains ownership of the land, removing the land component from the sale price of the home.

For NFPs, this must be at the top of their consideration. They still own the land and control their long-term future – and mission.

The resident is responsible for maintenance of the home. A not insignificant advantage over retirement villages.

Cash and simplicity

With land lease, cash starts to flow from Day Minus 300. The deposit is a firm deposit. Full price- and development profit – is achieved at settlement. From Day One of occupancy rent is paid fortnightly and that is profitable rent, not breakeven rent as required under the RV Act.

This is ten years of cash flow versus ten years of no cash, then one lump sum.

For mission-led organisations, this creates a powerful combination.

Consumer demand is also evolving.

In a separate interview with SATURDAY, GemLife CEO Adrian Puljich said he sees land lease emerging as a viable option for older Australians seeking apartment-style living without leaving the communities and catchments they know.

He is now building ‘pocket parks’, low rise land lease of 50 homes in a suburban footprint without grand facilities. He tells us the residents value the affordability and community, not the facilities. This is the traditional RV space.

He is also building the first medium rise land lease projects and is keen to share his IP to help expand the market.

Integrated care models work.

Many mission-led organisations already operate home care, Support at Home and residential aged care services. They understand how to support older Australians as their needs change.

Care will be required sooner rather than later in land lease.

Consider Palm Lake Resort, a group who has spent close to a decade co-locating residential aged care alongside its land lease communities.

The concept mirrors what mission-led organisations have been doing for more than 60 years through the co-location of retirement living and aged care.

So, we raise the obvious question again:

If land lease can deliver affordable housing, create development profits, generate recurring income and support a pathway to care, why aren't more mission-led organisations pursuing it?

For a sector searching for new housing solutions, stronger balance sheets and greater impact, land lease may not just be an opportunity.

It may be the most obvious opportunity hiding in plain sight.