Build-to-rent: stimulating recovery, ensuring resilience

BTR presents an opportunity for all levels of government to unlock substantial private sector investment in housing construction quickly. Unlike commercial, industrial or traditional build-to-sell residential developments, BTR developments do not require pre-sales (or pre-rentals) to ensure viability. This effectively shaves 12 to 24 months off the development timeframe and creates jobs and investment opportunities immediately, both in the construction and following operation phases.

Conservative estimates indicate that by stimulating BTR delivery even to an initial scale of 10,000 apartments ($2.7bn in construction investment, not including any amenity additions such as gyms that are commonplace in BTR developments) could support an average of 3500 jobs per year linked to the construction phase alone. Increasing that to 50,000 apartments could support approximately 19,000 jobs per year in the construction phase alone, as well as an average of $2.9bn in Gross Value Added.

While the pandemic may have taken the light off Australia’s housing demand challenges, the undersupply of housing nationally remains a critical issue, even considering the drop in international migration. This issue will be even further exacerbated as the borders reopen and Australia’s positive health and economic response to COVID-19 becomes an attractive drawcard for migrants. BTR presents an opportunity for us to generate enough housing supply to meet current and future demand while ensuring a critical diversity of housing options for all demographics.

Whilst the BTR sector has gained some traction, more must be done to overcome the significant barriers and unlock the broader economic opportunity.

Policy changes will be required to accelerate investment including:

• MITs – BTR assets should be accepted as having the same character as ‘commercial residential’ (by the ATO or by legislative clarification) so that eligible foreign investors’ returns are taxed at a concessional rate of 15%
• Land Tax – State governments should follow New South Wales’ lead by providing land tax concessions for BTR projects if only to help level the playing field with similar BTS assets
• Planning – the treatment of BTR in state planning policies must be overhauled by including specific guidelines for BTR assets (ie specific definitions for BTR assets, tailored design principles and development standards).

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