Imagine renting a flat where you have a three-year lease and aren't charged through the roof.
In the midst of a rental crisis, the idea of an apartment block designed entirely for renters, and that offers long(ish) leases, almost sounds utopian. But that's what build-to-rent ideally offers.
And it may be coming to a neighbourhood near you over the next few years. So why?
The government is welcoming build-to-rent developments
As home ownership becomes harder to obtain for many as property prices start to creep up again, renting long-term is becoming less of a choice and more of a requirement for many people. The federal government has so far avoided the Greens' calls to freeze rents, though it has said it will increase rental assistance to more than one million people on Commonwealth support. But what about everyone else who may be looking at renting forever?
During his budget speech last week, Treasurer Jim Chalmers briefly mentioned a tax break for foreign investors in build-to-rent developments to help address our issue with housing stock supply.
To qualify for the tax break, developments would need to have at least 50 apartments and offer three-year leases. The budget papers mention that consultation is yet to be done around how many apartments might need to be set aside as affordable rentals to qualify for the tax break.
A report commissioned by the Property Counsel of Australia found there were 72 build-to-rent projects in the pipelines in Australia. Credit: Bernard Hermant, Unsplash
Why is build-to-rent suddenly in the convo?
While build-to-rent (BTR) may sound like a relatively new addition to Australia, there's been a bit of energy in the space over the last few years because some state governments introduced their own incentives.
A report commissioned by the Property Council of Australia says there's 72 build-to-rent developments in the pipeline across Australia, with 11 already up-and-running, and a prediction of more than 5000 BTR apartments on the market by the end of the year.
CEO of The Tenants' Union of NSW, Leo Patterson Ross, says build-to-rent holds a lot of promise, "but so far, the developments we've seen haven't necessarily delivered on that promise."
"We're not seeing longer leases, the rents are generally premium," he says.
Australia's rental crisis shows no signs of waning, with the nation's rental stock sitting at a 1.42 percent vacancy rate according to the latest data from PopTrack. It says rental prices have gone up 8.7 percent over the past year.
The development industry sees BTR as some potential assistance to the challenges of supply — BTR is easier to get out on the market because it has no pre-sale requirements. When the news of the tax breaks came out, Property Council CE Mike Zorbas said it would unlock desperately needed supply through a new form of housing.
“More supply means downward pressure on the cost of renting and buying homes and will offer more housing choices and affordable options at a time when we desperately need them," Mr Zorbas said.
Sydney and Melbourne have seen extraordinary lines at rental inspections, during a time of very low vacancy. Credit: TikTok/ Ciara O'Loughlin
What is build-to-rent?
Build-to-rent means apartment blocks designed for renters, ideally offering longer leases than the common 12 or six months. You're likely to be paying your rent to the company that manages the block, rather than an estate agent or landlord.
And there's a lot to be said for stability and not having to move every year or so. Academics from the Universities of Melbourne and Adelaide on renter's mental health, but once they've lived in the same property for six years, their mental health is on average, similar to homeowners.
Mr Patterson Ross believes six years should be the minimum for a long-term lease to ensure those positive mental health outcomes.
But just because an apartment block starts with rental as the priority, doesn't mean apartments won't be sold off later. The government's budget document says, "the dwellings must be retained under single ownership for at least 10 years before being able to be sold."
So, just because it's built to rent, doesn't mean it will be rented forever.
Build-to-rent offers the idea that renters don't have to move as often, and instead take long-ish leases. Source: AAP
A different kind of build-to-rent
Mr Patterson-Ross says the federal government's proposed tax break — along with a build-to-rent tax break offered by the NSW government — doesn't require much of developers to include affordable housing or affordability measures.
While many build-to-rent establishments are likely to be offered at market rate, there's a different type in the works by nonprofit organisation, Nightingale Housing. Nightingale is developing a build-to-rent space in Sydney's Inner West by pairing with another not-for-profit organisation that owns land.
"It'll be 54 homes rented out long-term leases of five to 10-year leases at truly affordable rates, capped at 75 percent of the market rate in the area," explains Nightingale Housing CEO Dan McKenna.
To land one of these affordable rentals, you'd need to put your name in a ballot, rather than going through the standard rental application process. The first 20 percent of the homes are set aside for key demographics including Indigenous Australians, people living with disability, single women over 55, and community contributors, such as teachers.
Tenants would share some facilities such as laundries, and parking spaces wouldn't be included, but the location was chosen for its proximity to shops and public transport so residents don't have to rely on private car ownership.
"There's a lot of people talking about built-to-rent," says Mr McKenna.
"As far as we can see, it is all at market or above market [prices], which probably doesn't necessarily help the problems that we're facing right now," he says.
More to come?
Mr McKenna is glad to see the federal government talk more about build-to-rent and opening up investment in the sector.
"Like everything, the devil is in the detail," he says.
"We don't want to see the proliferation of high-end luxury rentals in our cities which aren't servicing ... what the need is."
"Development is full of risk," he says.
But from where he sits, with the numbers of people in rental and mortgage stress; "as soon as you crack open that affordable market, I don't see much risk involved in putting people in homes."
