[+] Affordable BtR a Rental Squeeze Solution

Australia’s build-to-rent industry is maturing and should do some of the heavy lifting to help address affordability in the nation’s challenged rental market, according to a housing peak body. Rental stock hit historic lows in December, driving strong demand and tough conditions for renters. A PropTrack rental report found that listings in December were 30.2 per cent below the 10-year average for the month, while median rent prices had surged 11.5 per cent in 2023 to a median price of $580 a week. Some build-to-rent operators have already opted to include affordable housing options within their buildings. But most of Australia’s existing build-to-rent offering is servicing the higher end of the market with prices starting from about $600 a week. Amenity-packed BtR servicing high-end market QShelter manager of policy and strategic engagement Jackson Hills says build-to-rent could help to diversify the “fragile” rental market but incentives were needed. “We know that 95 per cent of all the development in our state comes out of the private market so it cannot just be about shifting more obligations on to developers,” he says. “It should be providing appropriate incentives, for example uplift bonuses, carparking concessions, reductions in DA fees and financial support to allow the sub-market housing products to come to fruition within these wider developments. “Institutional investment in one line of ownership, which relies largely on a modest return over time, means that short-term fluctuations in price and other environmental factors can be sustained in an asset that has a longer-term focus on returns. “This means greater security for renters and a more dependable, less lumpy, investment product for investors.” ▲ Premier Steven Miles acknowledges building capacity is challenging. Hills says the restructuring of the rental market would enable an affordable build-to-rent product to emerge , supported by government subsidies. Hills says he believes this affordable build-to-rent model could be delivered through a partnership between institutional capital and community housing providers in a development and management agreement, or solely at a tenancy management level. The Queensland Government has approved three affordable build-to-rent pilot projects with Frasers Property at Fortitude Valley, Mirvac at Newstead and Cedar Pacific in Brisbane’s CBD. Affordable build-to-rent one of many levers in housing-supply challenge The projects will deliver about 1200 build-to-rent apartments and more than 450 will be offered at discounted rent prices under a government-subsidised program. The State Government has recently announced a range of measures in its Homes for Queenslanders package aimed at increasing housing supply and diversity in the Sunshine State, which also strengthens renters rights, creates a portable bond scheme and puts a red line through rent bidding. Speaking at the Queensland Media Club event today [February 6], Premier Steven Miles announced a commitment to deliver 1 million new homes by 2046, as part of the $3.1-billion Homes for Queenslanders plan. “Ninety-five per cent of these new homes will need to be in the private housing market, that’s why we will fund the trunk infrastructure to encourage more development,” Miles said. “One of the biggest funds in the plan is really there so when we identify a developer with a project in the right location that delivers the right stock, we can pay some of those infrastructure charges.” The Urban Developer asked the Premier whether the state’s affordable build-to-rent pilot would be expanded as part of the “every lever” housing policy. Minister for Housing Meaghan Scanlon said they were looking at every option and talking to “anyone and everyone” in order to address the state’s chronic housing shortage. While the Premier acknowledged the bulk of the new homes would be delivered by private investment he said you couldn’t turn off one of the infrastructure projects in the pipeline in order to build out another. “You need the infrastructure to get the housing, you need the roads, the public transport, the hospitals, it’s not binary. You can’t choose one over the other, we need to find ways of doing both,” he said. Tax changes could deliver 10,000 more affordable homes The Property Council of Australia recently commissioned research with EY that shows lowering the managed investment trust (MIT) withholding tax to 10 per cent for build-to-rent develops, which included affordable housing, would accelerate the delivery of 10,000 affordable homes in 10 years. “This new modelling shows one cost neutral government policy improvement will throw the weight of new institutional investment behind the creation of 10,000 affordable homes,” PCA chief executive Mike Zorbas says. “Build-to-rent is a vital component of the country’s housing puzzle, offering tenants security of tenure, enhanced amenities and properties managed by professionals. “Without every extra dollar of institutional investment Australia can harness, hitting our national target of 1.2 million new homes will be a Herculean task.” Domain chief of research and economics Dr Nicola Powell says the rental market may have turned a corner in the December quarter. She says the strain still remains evident but rental price growth is slowing. Powell agrees build-to-rent can help to ease the choked rental market . “To help alleviate Australia’s housing crisis long term, further solutions need to be activated, such as build-to-rent,” she says. “It provides a significant amount of rental housing supply at scale and speed. With the cost of home ownership becoming more and more expensive in major cosmopolitan cities, it can act as a key circuit breaker for housing affordability.” Inclusionary zoning could move the needle QShelter’s Jackson Hills knows it’s not a black-and-white issue. The cost of construction and the alternative build-and-hold model present some stumbling blocks for the build-to-rent industry in the current construction landscape. “[But] these types of developments are going to be critical in the next 5-10 years to service the growing population in those areas (targeted for higher density),” he says. “I suspect as the asset class grows in Australia there will be a variety of models targeting different segments of the community. At present though, we know current build-to-rent developments are responding to a more luxury end of the market ... that will diversify in time. “I think to truly target affordable housing, a subsidy from government is critical. I do not think that should be confused with ‘discount to market’ rent style programs. There is room for both in my mind but a missing feature in these developments right now is affordable housing (for the bottom 40 per cent of the income distribution).” Hills says inclusionary zoning should be incorporated to help facilitate good mixed-tenure development and good social and economic outcomes. “That is absolutely something governments should invest in and not something the private sector can deliver by itself. It must be achieved through innovation and partnerships.” Although inclusionary zoning is commonplace in other states, it is yet to be adopted in Queensland. The Premier Steven Miles announced a pilot of inclusionary zoning to help developers understand different models of delivery as part of the Sunshine State’s Home for Queenslanders policy. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Affordable BtR a Rental Squeeze Solution

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