The terraced home vernacular is nothing new in the streets of Sydney.  Once the housing typology of choice in the 1850s and the goldrush era, the small footprint home may indeed strike gold once more.  After all, everything old is new again as the NSW Government pulls all the levers to unlock housing supply in the seriously constrained and unaffordable Harbour City. In a matter of months the new infill housing reforms will come into effect and Willowtree Planning’s Andrew Pigott says it will unlock more opportunity for low-rise residential flat buildings.  Pigott says the reforms would allow residential flat buildings, terraces, townhouses and duplexes in zones have historically been exclusively detached housing.  Announcing the suite of reforms, planning and public spaces minister Paul Scully said building out was no longer feasible.  NSW Productivity Commission research backs up that claim. A report from the commission has found that Sydney’s sprawl into greenfield areas was costing the economy $75,000 per home to deliver trunk infrastructure, schools and transport in the western Sydney fringe.  ▲ Surry Hills in inner Sydney: Terraces and townhouses had been part and parcel of Sydney’s housing past, planning minister Paul Scully said. Focusing on infill development in established areas such as Redfern, Ultimo and Surry Hills has merit. These suburbs chalked up additional costs to the economy of about $39,500 per home, according to the report.  The changes will generate more than 110,000 new homes and revive Sydney’s “missing middle”, Scully said. “Terraces and townhouses have been part and parcel of Sydney’s housing past. They’ve been restricted and now we want to make them part and parcel of Sydney’s housing future,” he said. Affordability has been a key conversation as part of these housing reforms, as the city’s median house price tops $1.6 million, with few signs of that upward trend easing.  The fundamentals for build-to-rent developments are coalescing. But it’s not just vertical communities that are capturing the opportunistic developers.  Garden-style build-to-rent developers Build-to-rent is increasingly moving to urban fringe areas. Low to medium-density typologies, or garden-style build-to-rent could be the next frontier.  Franklin Street principal Jeremy Quinn says it’s a build-to-rent model that is popular in the US Sun Belt, which comprises the southern tier of the US, including Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi, New Mexico, South Carolina, Texas, about two-thirds of California, and the southern parts of Arkansas, North Carolina, Nevada, Oklahoma, Tennessee and Utah. “It’s a one or probably a two-level building with ground-floor apartments and then level one apartments and parking at grade. So you’re taking the cheap land and turning it into surface carparking and kind of walk-up typology,” Quinn says. ▲ Franklin Street principal Jeremy Quinn: so-called garden-style build-to-rent is popular in the US Sun Belt.  “I think if you are doing it (in Australia), you’re going much further out. You’re on the urban fringe and I can see it becoming maybe part of a new greenfield subdivision, do some apartments and pitch to the price point the affordability of it.” In the United Kingdom the supply of build-to-rent houses has previously focused on urban markets, whereas rental demand is much larger in suburban locations (54 per cent compared to 35 per cent in urban markets), according to a Savills report.  Ascend is the largest manager of operational build-to-rent houses in the UK and manage on behalf of PRS REIT and Gatehouse Investment Management. Each investor has consistently reported high occupancy rates and high renewal rates. The PRS REIT reported 98 per cent occupancy across its 5129 homes in September 2023.  According to Savills data, proximity to schools, green spaces and health services are key to the success of garden-style build-to-rent developments.  NSW developers lead the charge Sheargold Group recently put forward plans for a 50-townhouse two-storey build-to-rent project in Wollongong at its Vista Park estate on the Illawarra Escarpment.  The project proposed for Tharawal Drive, Wongawilli, would comprise 25 one-bedroom apartments, 18 two-bedroom, and 7 three-bedroom apartments to become the region’s first build-to-rent offering.  The DKO Architecture-designed project build-to-rent plans include two internal roads with a communal area in the middle of the site.  ▲ Sheargold’s proposal for its Wongawilli development would comprise 25 one, 18 two and 7 three-bedroom apartments. No stranger to the area—nor the build, hold and manage model—Sheargold Property developed Bankbook Terraces, a nine townhouse development, and The Grove townhouse complex, also in the Vista Park estate at Wongawilli.  They’re not the only developer looking at garden-style build-to-rent.  Resimax chief executive Ozzie Kheir told The Urban Developer late last year that he wanted to deliver 500 build-to-rent detached houses in the next two years to cater to families looking for suburban lifestyle. Kheir is committed to finding land and building houses on it that Resimax can then rent out to families predominantly—but land supply is a limiting factor in Victoria.  While institutional capital is flooding the vertical build-to-rent communities market, with Greystar recently revealing its biggest Australian project to date, a $500-million project in Melbourne, the low and medium-density build-to-rent market presents an opportunity for smaller and privately funded developers.  Green fields of opportunity But Quinn believes it will be the greenfield developers initially who take up the garden-style walk-ups as part of their communities offering.  “People need housing. There’s no question and that model could provide it,” Quinn says.  ▲ The cost per unit is significantly less in a garden-style build-to-rent development. “You know, if it’s well located in a new masterplan on a train station, with access or proximity to jobs, why not? “The key will be getting the land and the construction [prices] down to make sense of it.” The cost per unit is significantly less in a garden-style build-to-rent development with no need for basement carparking and a much more efficient building.  Quinn says he knows a number of the bigger greenfield community developers are investigating the single-family rental approach but says he hasn’t seen anyone roll out a platform for the asset class, which is in its infancy in Australia.  “They’ve been running the numbers on it for two or three years. So that suggests that maybe something’s not stacking in there.  “I think they would be an obvious target but it could also be the sub-institutional-level groups who carve off a part of their parcel. “Maybe they sell it to one of the build-to-rent operators. It does open the door to that small developer because instead of a $250-million highrise of 300 units, we’re now looking at a 50 to 75-unit project at a much lower price point and you know you ’re  sort of talking at $25-million total project cost. “It’s a much smaller equity cheque to write. The question will be who takes the leap?” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.
