Supporting build-to-rent housing by levelling the investment playing field can help deliver 150,000 homes and address Australia’s housing affordability challenges, a study commissioned by the Property Council of Australia found.
The study, conducted by EY, said the build-to-rent sector can help the federal government achieved the “ambitious” one million homes target by 2029 and ease the tensions in the rental market.
To boost the sector, the report outlined five key recommendations:
- Apply a 15% managed investment trust withholding tax rate for foreign investors.
- Provide an incentivised tax rate of 10% for investors, domestic and international, that choose to incorporate the supply of Affordable Housing dwellings within their build-to-rent projects.
- Remove the irrecoverable GST expense on land and development costs.
- Signal the governments’ strong support for the sector through public messaging to further boost domestic and foreign investor participation.
- Address the regulatory barriers for domestic superfund investors by removing stamp duty from the ASIC Regulatory Guide 97 Fees and Cost Disclosure requirements.
Property Council of Australia Chief Executive Mike Zorbas said build-to-rent housing is the missing ingredient in Australia’s housing mix.
“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,” he 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.”
Build-to-rent in Australia
The build-to-rent market in Australia is relatively new and smaller compared to other countries.
Overall, the current size of the sector is estimated to be around $16.87bn, or just 0.2% of the total value of the residential housing sector.
To give more context, the United States have more than 20 million build-to-rent housing units, which represent 12% of the total housing stock. In the United Kingdom, the sector experienced a substantial growth in recent years — from 47,000 units in 2016 to 240,000 in 2022.
In Australia, there are only 11 operating build-to-rent projects, and another 72 projects are set to rise.
Early this year, the South Australia State Government has announced a $70m Build-to-Rent project in Adelaide that is expected to unlock 130 social and affordable dwellings.
Based on a conservative estimate, if the sector were to grow to just 3% of the Australia’s residential stock, it could reach a value of around $290bn.
Last year, a study from JLL also suggested build-to-rent as a long-term solution for rental shortages in Australia.
According to the study, the build-to-rent model gives long-term renters security of tenure, preventing “no-cause” eviction, improves the responsiveness of maintenance requests, and helps boost the level of amenity and services offered to renters.
Photo by jackmac34 from Pixabay.