What does a building-to-rent plan look like? Will it help renters find cheaper and more stable homes?
Carly Holz gave birth to a newborn baby when she moved out of a rental property due to mold. Three months later, she moved again when her landlord decided to sell her house.
the main points:
Build to rent properties are properties owned by a single person, developer or company
This sector is established in the United States and the United Kingdom but is relatively new in Australia
Build to rent properties can be found in Brisbane, Perth and Sydney, with over 50 per cent of this sector located in Melbourne.
“We had no sense of security,” Holz says.
“Our big concerns were insulation, cleanliness and mold, because obviously we’ve had that happen before,” she says. “And a lot of the properties we looked at, for the comparative price range, were terrible… and very competitive.
“You were still getting 40 to 50 people doing inspections, and you had to show what was listed as the weekly rental price. It wasn’t great.”
Hales and her family decided to move to a rental property in Homebush, in Sydney’s inner west, eight months ago. Tenants can sign leases ranging from three months to three years, pets are allowed and residents can make modifications.
“For anyone who is concerned about renting, I would highly suggest the build-to-rent option,” Holz says.
“Because it provides you with the flexibility, security and independence to live as if you were living on your own property.”
The sector is in its early stages
The ground floor apartment in Mirvac’s Liv Indigo building in Sydney’s Olympic Park has one bedroom, an office and a bathroom, with a 50sqm interior plan and a 24sqm courtyard.
The apartment is being offered at $680 a week, with a yard adding about $30 to the weekly price, says Angela Buckley, general manager of Mirvac Building for Rent. This compares to the average weekly rent of $560 for the area, according to the May 2023 Corelogic Housing Affordability Report.
Buckley says it is difficult to offer affordable rentals in this sector without government support.
“I think what we’re seeing is that we’re at the beginning of this sector,” she says. “Although commercial returns are available to build on the rental market, it is really difficult to offer an affordable product at the same level.”
The build to rent target the luxury market
Real Estate Institute of Australia president Hayden Groves said the housing model as it currently exists in Australia generally targets high-income earners.
“Because of the cost of construction, and the need for these investors… to get a certain level of return and the cost of construction is so high… they’re going to be really looking for short-term, dedicated luxury accommodation,” Hayden Groves said.
“You won’t see build-to-rent providing significant amounts of social or affordable housing available to ordinary Australians.”
Eliza Owen, head of research at CoreLogic Australia, said the sector would only provide occasional relief to the rental crisis.
“The only way to relieve pressure on the rental market is indirectly because it may take some of the pressure off other types of rental properties.”
Affordable housing by ballot
And in Marrickville, in Sydney’s inner west, a 54-room building spread over five floors is months away from completion.
The property is located on land donated by the church to developer Nightingale, which is working with the charity Fresh Hope to provide affordable housing aimed at low and middle income earners.
Prospective tenants hoping to live in the building must join a ballot in order to secure a place in the building, with priority given to individuals with disabilities, Indigenous Australians and single women aged 55 and over.
Rooms range in size from 25 to 30 square metres. Rents at the building have been capped at 70 to 80 per cent of market rates in Marrickville, and Nightingale CEO Dan McKenna said that was the lowest possible figure they could offer, even with the donated land.
“It’s really hard right now to make it less than that to make it add up,” McKenna says.
“To jump back to 40 to 50 per cent of market rent, there will have to be a significant contribution from the government.”
McKenna said there were opportunities to replicate the model across Australia, using donated land. “There are a lot of faith-based organizations that have access to great land in great places that are currently underutilized,” he says.
“This is a positive step, (but) I don’t think it’s the solution to the housing crisis. There are multiple solutions and this is just one of them.”
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