Property Council of Australia backs built-to-rent model to tackle housing crisis

Build-to-rent housing could deliver 150,000 new homes over a 10-year period, a new study released by the Property Council of Australia has revealed.

The report, commissioned by the Property Council and conducted by Ernst & Young over a five-month period to April 4 this year, showed that built-to-rent housing in Australia is now worth $16.8 billion but had the potential to become a $290 billion sector with the creation of 350,000 new apartments.

However, the report said a ‘viable’ market in Australia would likely require capital investment from foreign investors.

“The Government is to be commended for taking an interest in the Build to Rent sector, through the National Housing Accord and beyond,” the report said. “However, despite the numerous pilot projects, a viable market that is liquid enough to meet demand is still not realistic in Australia. 

“In order to create a viable market, capital investment is required which is likely originated from overseas foreign investors in the short to medium-term. As such, Australia needs to remove barriers to entry to allow the flow of foreign capital and the creation of a liquid and viable investment proposition.”

Among the report’s recommendations are offering incentives to local and international investors through tax breaks, allowing a 15 percent managed investment trust withholding tax rate for foreign investors and addressing the regulatory barriers for domestic Superfund investors.

Property Council of Australia chief executive Mike Zorbas said the build-to-rent was a key tool to addressing Australia’s housing crisis in the coming years.

“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,” Mr Zorbas said.

“The potential to create 150,000 homes over the next 10 years with just one asset class shows build-to-rent is about as close to a housing policy silver bullet as they come.

He said Australia faces a worsening housing affordability crisis with State Governments missing their housing targets and planning systems failing to keep up. Supporting a build-to-rent model would also ease housing affordability pressures, Mr Zorba said.

“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,” he said. 

A relatively new model of housing in Australia, the NSW Department of Planning describes built to rent as “large-scale, purpose-built rental housing that is held in single ownership and professionally managed”. It’s a popular, long established model of housing in Europe where it made up one fifth of commercial housing in 2020, according to Canstar.

The Ernst & Young report said the Australian model should target Millennials and Generation Z, with a focus on young single and couple households.