Realestate.com.au’s Shannon Molloy believes the rapidly growing build-to-rent model will “revolutionise how Australian renters live”:
Build-to-rent (BTR) describes the development of an apartment complex with the express intention of retaining all those dwellings to lease them out. It’s a well-established model in the United States and the United Kingdom but is still in its infancy in Australia – but not for long.
A recent report from EY estimates BTR in Australia will produce 175,000 new homes over the next 10 years…
The report… stunned many in the industry with its forecasts of a $100 billion pipeline of development over the next decade, equating to a big bump to Australia’s GDP and creating tens of thousands of jobs…
The potential for investors – and the promises for tenants of a new and improved way of renting – has sparked a lot of excitement…
BTR has the potential to dramatically boost housing supply, thus aiding affordability, but also to provide a more secure and stable lease that reduces the need to move as often and fosters a closer sense of community.
As MB has argued repeatedly, build-to-rent’s practical application has been questionable in both the United States and the United Kingdom.
There are legitimate questions that need to be answered before Australia proceeds head long down the BTR path, namely:
- will corporatising the rental market actually result in lower rents?
- would a listed corporation charge any less than a regular landlord, especially so when its pricing power will obviously be higher?
- would they be more or less accountable for maintenance and costs?
Are we supposed to believe that adding a cabal of profit-dependent corporations to the housing “market” will reduce its already monstrous lobbying power? The property lobby’s overall lust for build-to-rent suggests not.
Dr Cameron Murray nicely explained the pitfalls with BTR in his recent UQPPES Statecraft Autumn Lecture:
The next story we’ve been sold in the game of political pretend is that tax breaks are needed for corporate build to rent (BTR) housing projects. Somehow, if we replace landlords who own just a few properties and have them managed professionally by real estate agents, with large institutional owners who own many properties, and have them managed professionally by real estate agents, then… I don’t know. Something happens. We never seem to ask what exactly. Like the word affordability, build-to-rent is another “long word and exhausted idiom” hiding real policy aims.
If the experience so far is anything to go by, this solution will turn out to be a multi-billion-dollar giveaway to existing large property owners with no benefits to housing occupants. There are two existing projects that show what outcomes to expect.
On the Gold Coast is Australia’s first and largest BTR at the former 2018 Commonwealth Games Athlete’s Village. Despite record tight rental markets, this development of 1,251 dwellings was on a staged release strategy over 3 years. The manager of the project in 2021 told me they “didn’t want to flood the rental market”. Instead, they left hundreds of brand-new homes vacant for years to keep their rents up.
Strangely, this project is government-owned. Just not an Australian government. The Abu Dhabi sovereign wealth fund owns it. Maybe sometimes governments do like owning and building housing?
In Sydney at Mirvac’s Liv BTR project at Olympic Park, the rents are typically 10% to 30% above the local market rate. The rental prices there last year were $535 a week for a one-bed apartment, $615 for a two-bed, and over $1,000 for a three-bed apartment. To maximise their economic return, they focussed on the premium market with packaged gyms, facilities, appliances and services, to sell a more hotel-like experience.
This is what tax breaks on GST and land tax to encourage BTR landlords are going to deliver.
I also wonder sometimes where all these sites for BTR projects seem to magically appear from. If you believe the previous rezoning story, there aren’t any spare developable sites. The market for buying new homes can’t be satisfied. But now there are many spare sites all over the country to allocate to BTR projects instead.
Perhaps that was a lie and there are plenty of development sites around, but the owners of them are looking for ways to improve the return on them with changes to the rules in their favour.
Rather than fixing Australia’s housing problems at the source, ‘build-to-rent’ is another fake ‘affordability’ policy favoured by the rent-seekers for the rent-seekers and aimed at sucking more lifeblood from the catastrophic market failure of Australian housing.
