A new study finds that Build to Rent could help deliver 150,000 new apartments and help address Australia’s stark housing affordability challenges.
The study by EY, commissioned by the Property Council of Australia, was released a month ahead of the Federal Budget and shows that a level investment playing field for Build to Rent developments could create 150,000 rental homes over ten years.
This would significantly help the Australian Government hit its one million homes housing target by 2029, and ease pressures in the rental market.
EY and the Property Council of Australia also estimates in the report that Build to Rent housing, which is relatively new to the Australian residential market, is currently worth $16.8bn with only 11 operating schemes, and another 72 projects in the pipeline.
“With a 79,300-home deficit to 2033, Australia needs better planning, more land supply, proper housing targets and a national strategy on Build to Rent and purpose-built student accommodation. The potential to create 150,000 homes over the next ten years with just one asset class shows Build to Rent is about as close to a housing policy silver bullet as they come.
“Australia is grappling with a worsening housing affordability crisis where state governments miss their housing targets and planning systems fail to keep up. To offer more housing choices and affordable options to Australians, we need to tap into institutional investment in Build to Rent housing from Australia and abroad. More supply means downward pressure on the cost of renting and buying, and people who live in Build to Rent housing will enjoy the benefits of professionally managed properties, good locations, superior amenities and long-term security of tenure. The growth of Build to Rent in the UK and US has been strongly supported by governments at all levels welcoming institutional investment.”
Mike Zorbas, Chief Executive, Property Council of Australia
However, the sector has the potential to expand to $290bn if it grew to just 3% of Australia’s residential stock.
Not only would this see the creation of up to 350,000 new apartments, but if the managed investment trust withholding tax was halved to 15% in line with other property asset classes, three times as many Build to Rent projects would go ahead compared to a business-as-usual approach; according to high-level financial modelling undertaken as part of the study.
The Australian Government would also receive a 30% increase in tax receipts over a ten-year period.
“It’s critical that investments in Build to Rent housing need to be eligible for the 15% withholding tax rate, and an incentivised tax rate of 10% for investors that choose to incorporate the supply of affordable housing dwellings within their Build to Rent projects. To accomplish the ambitious goals established in the national Housing Accord, the government needs to level the Build to Rent investment playing field in the May 2023 Budget.”
Mike Zorbas, Chief Executive, Property Council of Australia
In the UK, the Build to Rent sector has grown exponentially in recent years from 47,000 units in 2016 to over 240,000 in 2022.
Alongside this, in the US there are over 20 million Build to Rent housing units, representing 12% of the country’s total housing stock.
The report indicates that Australia will need to grow its own Build to Rent market to catch up with its western counterparts.
