Hitting the shores of Australia and New Zealand’s housing market is a new housing model; ‘Build to Rent’ accommodation
A Sydney based Build to Rent (BtR) conference was held from the 19-20th of February[1] and Rainer Strunz, Director of Plus Architecture’s Melbourne office, attended the conference to learn more about driving growth and investment in the sector, one that Plus Architecture has been involved in during the past few years. Here Strunz shares what catching this latest wave is all about…
Build to Rent (BtR) housing is purpose-built accommodation composed of 50+ units owned by a single entity and under professional management. Never up for sale, these units are perpetually rented, with tenancy agreements set for long periods of time. This model has its roots in the US (where it is called ‘Multifamily’ housing) and has been adapted in the UK over the past ten years, fast becoming a trend. On the international scene, 30 million units have been or are being created worldwide[2]. The local market in Australasia is just surfacing, and while New Zealand (NZ) has 543 units in 12 BtR developments (mainly based in Auckland), Australia has at least 9,000 units completed, with more in the pipeline[3].
“Owning your own home has been thought of as a rite of passage by Kiwis and Australian’s for generations. However, Plus has noticed that our housing sectors have increasingly shown a pattern of declining house ownership with an increased number of renters”
Owning your own home has been thought of as a rite of passage by Kiwis and Australians for generations. However, Plus has noticed that our housing sectors have increasingly shown a pattern of declining house ownership with an increased number of renters. “Over the past decade, the number of renter households in Australia and NZ has increased by 500,000 and 120,000 respectively, increasing the proportion of renters from 27% to 31% in Australia and from 30% to 34% in NZ”.[4] The cost of housing has moved this tide, along with our shifting demographics. There has also been an increase of single-person households across all age groups[5] meaning redistributed (and less) income per household, resulting in people renting for longer periods of time and more rental units needed. Though not a solution for those at the lower socio-economic end of the spectrum, BtR housing has the potential to step into the breach for those in the middle-class, providing long-term, stable, quality housing stock with professional management – something our current housing markets are lacking.
With no maintenance required, little liability, and freedom of flexibility, the BtR developments appeal to a diverse range of people, and not just those priced out of the market. BtR housing aims to have longer tenancies, meaning an increased stake in the community. The operators of BtR facilities seek to generate this, with about 70m2 of shared amenities designed for every 100 units. These spaces are designed to be flexible, adapted to suit the desires of the building’s occupants, and may take the form of a gym, communal lounge or cinema room. Community is a priority for BtR housing; when occupants were asked, they cared less about the quality of finishes (as long as they were at an acceptable standard), and more about how friendly the cleaner and management staff were. Plus Architecture has also learnt from experience the importance of higher spec’d acoustic ratings between dwellings, and that a larger focus on sustainability is crucial, particularly if looking to attract and retain residents from a younger generation. Unlike a typical rental, BtR occupants often have the option of owning a pet, and pet washes are more likely to be provided. Minor interior house alterations – such as redecorating – is likely to be approved by the operator. Small additional rights like this go a long way towards treating renters less like second class citizens, and more like home owners, working in the BtR owner’s favour, with longer-term residents, steady income, and less vacancies resulting.
“Community is a priority for BtR housing: when occupants were asked, they cared less about the quality of finishes and more about how friendly the cleaner and management staff were”
With eyes to the horizon, Plus recognises the way forward for BtR is choppy, with tenancy and tax laws in Australia and NZ needing to adapt to boost the concept. One of the major financial bumps is GST; where a Build to Sell (BtS) project can write off GST as a cost, BtR developments cannot - meaning an additional 10-15% is paid by the developer. Additionally, in Australia, the overseas BtR investor pays 30% of their earnings in tax, while a BtS developer pays 15%. Amendments to Australia and NZ’s Residential Tenancy Acts also need to offer tenants more rights to enable more longer-term renting. A major takeaway point of the Conference for Strunz was that countries like the US and UK have a well advanced, flourishing BtR market. With demand for rental housing increasing, this trend is sure to gather momentum in Australasia with time, giving us a unique opportunity to address accommodation on a scale unprecedented in our young nations’ histories.
The broken housing market in Australia and NZ needs more than BtR, but while it may not be a single winning move, it will meet a need currently not catered for, and improve the quality of rental housing - lifting our construction and management standards. Progression in this field will need the support of a diverse range of industry professionals, and Plus Architecture is already on board, looking forward to ongoing participation and designing rental accommodation to grow new solutions for our housing markets. One thing is for sure, when this wave lands, it will be one to watch.
[1] ‘The 3rd Driving Growth & Investment in Build to Rent’ by Criterion Conferences, Dockside, Sydney, Australia, 19th-20th February 2020.
[2] Prospects For Build-to-Rent In New Zealand, The International Context, CBRE Ltd, February 2019.
[3] Build-to-Rent in Australia, Landcom. July 2019.
[4] ‘Build-to-Rent to give up to two million Kiwi renters better options’ (18th June 2019).
[4] Build-to-Rent in Australia, Landcom. July 2019.
[5] Rethinking the Kiwi dream: How New Zealanders live now’ (21st April 2019).