Build-to-rent apartments and rooftop gardens: how the City of Sydney is facing the future

Developers could be given between 20 percent and 75 percent more floor space under plans by City of Sydney Council to encourage build-to-rent residences.

The allowance will be available to applications made within the five-year time frame from when changes to planning and development rules are approved.

City of Sydney has announced its endorsement of changes to the rules to make building family friendly and build-to-rent apartments easier. Lord mayor of Sydney Clover Moore said the proposed changes to the planning controls balanced the need for more housing with sustainability concerns and the desire to maintain the character of the city.

“Exciting changes include new incentives for build-to-rent housing in the CBD, embedded Net Zero building controls, the promotion of increased tree canopy and green roofs and a streamlined processes for design excellence and major development applications,” she said.

“We are also supporting housing diversity and addressing the loss of smaller and more affordable dwellings as a result of redevelopment.”

The concept of ‘built to rent’ properties has gained traction in recent months as a way of addressing the housing affordability crisis in major centres. The concept is one where developers and their financiers build multi-residential dwellings but, rather than selling them, retain ownership of all properties and rent them out.

Built-to-rent properties are more commonly seen in Europe and the UK, where they have been used to supply housing to those struggling with housing affordability.

Ms Moore said moving to this model would ensure higher occupational rates in inner city residences.

“That is great for inner-city vibrancy and avoids situations where international investors leave newly built flats empty for capital gain,” she said.

The Federal Government announced incentives to encourage built-to-rent development in its budget earlier this year.

The proposed changes would also encourage developers to install green roofs through height incentives, as well as allowing developers 20 percent more floor space for co-living accommodation for students and low income workers.

“We know that students are one of the groups that have been hit hardest by the rental crisis in Sydney, with lack of appropriate accommodation and affordability both major issues,” Ms Moore said.

“By offering these additional floor space incentives we hope landowners and developers will create more co-living accommodation in areas like Haymarket, which has proved popular with students in Sydney.”

Draft changes will be presented to the NSW Department of Planning and Environment.

The Reserve Bank had little choice but to raise interest rates again this week.

Inflation was already proving stubborn before the latest Middle East instability added further pressure to energy prices and supply chains.

Housing inflation alone has averaged six per cent over the past year, remaining one of the single biggest contributors to CPI.

But while the focus remains on rates, the deeper problem is structural and far more dangerous.

Australia is not building enough homes, and the conditions required to fix that are deteriorating simultaneously.

Construction costs remain elevated. Builders are increasingly unwilling to absorb contract risk. Labour shortages persist.

Capital is becoming more expensive. And as borrowing capacity weakens and sentiment softens, fewer projects are becoming financially viable.

The result is a self-reinforcing cycle.

The RBA raises rates to fight inflation. Higher rates reduce development feasibility. Fewer projects start. Housing supply tightens further. Rents rise. Inflation persists. The RBA raises rates again.

The only long-term solution is supply, yet Australia remains nowhere near the National Housing Accord target of 240,000 new dwellings a year.

Completion continues to lag approvals, meaning many projects approved on paper are simply never making it out of the ground.

That gap matters enormously because housing is not just another sector of the economy.

Around two-thirds of Australian household wealth is tied to property, while the sector underpins millions of jobs and related industries. Weakness here quickly spreads beyond real estate.

We are already seeing signs of stress. Auction clearance rates in Sydney and Melbourne have softened, borrowing capacity has declined, and parts of the market are experiencing price corrections as confidence weakens.

At the same time, policymakers continue to debate tax measures such as changes to negative gearing and capital gains tax discounts, despite fears that such reforms could drive private capital out of the rental market at precisely the moment when supply is most constrained.

This is the paradox at the centre of Australia’s housing crisis.

Demand for property remains extraordinarily high, yet the economic conditions required to actually build new housing are worsening.

The Reserve Bank cannot solve that problem alone.

Monetary policy cannot accelerate planning approvals, reduce construction costs or create more tradies. It can only raise the cost of money until something eventually breaks.

And increasingly, that “something” looks like the development pipeline itself.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Build-to-rent apartments and rooftop gardens: how the City of Sydney is facing the future

The proposed changes are designed to address housing affordability in Sydney and increase the vibrancy of the city

Rising rates, construction inflation and shrinking investor confidence are pushing Australia deeper into a dangerous housing spiral that monetary policy alone cannot fix.