Over the past decade, the Build to Rent housing model has emerged as the new kid on the residential market block. Appearing on Australia’s eastern seaboard and, more recently, in Melbourne, the Build to Rent model is well established in the US and UK housing markets and is now a welcome addition to the traditional home ownership and rental options available in our local market.
Greystar, US based company, that has recently obtained planning approval for a Build to Rent project in South Yarra. Locally, Mirvac and HOME are delivering projects across Sydney and Melbourne.
At its most fundamental, Build to Rent offers security of tenure for longer than the one-year term that private sector landlords usually offer to a prospective tenant. In comparison, Build to Rent leases can typically be negotiated for up to 5 years, offering long-term reassurance to tenants and assured and secure income over a longer time frame for Build to Rent property owners.
The Build to Rent model is attractive to institutional investors such as superannuation funds or private sector capital looking for a stable income stream as the property is held in the one ownership vehicle and not subdivided, whereas individual apartments are often sold to individual owners or investors in conventionally formulated apartments developments.
Build to Rent apartments are built at volume and offer a wide range of communal facilities sometimes but not always as a tradeoff for balcony space or a dedicated car space attached to individual apartments. As a consequence, it is even more critical that Build to Rent projects are well located with excellent access to public transport, local parks and other urban amenities. In some instances, such as the HOME development in Richmond, the Build to Rent apartments are part of a larger mixed-use project that includes a supermarket, specialty shops and offices.
Build to Rent apartments are a distinct form of housing in that they are not social housing or key worker/affordable housing – although there is nothing stopping a Build to Rent developer from offering joint arrangements with a registered housing provider or similar as part of a bigger project.
There are few concessions given in the planning approval path for a Build to Rent project. It is a financial and ownership model not one that Planning Schemes differentiate from conventionally owned dwellings – an apartment is an apartment no matter who owns it. However, planning authorities are increasingly recognising the need for more diverse forms of housing and ownership models.
The Build to Rent model is attractive to a wide range of household circumstances. As Australia’s housing market tops out as one of the world’s most expensive, Build to Rent offers a place to call home for many who are increasingly locked out of owning their own home because of affordability issues. It also appeals to “between housing” downsizers or family upsizes, workers relocating between cities or those who for a range of individual reasons want the flexibility of not owning where they live but want the security of tenure that owning a home provides.
As leases are longer, these models give residents an opportunity to engage more fully and for longer in their local community. Build to Rent residents also have access to a wide range of services and communal facilities beyond those that are provided in a conventionally owned apartment building. Just as in any market segment, those services and communal facilities vary across the Build to Rent development spectrum and is reflected in the rent that is charged.
The other key benefit (one not always acknowledged by planning authorities) is that because the Build to Rent investor has a stake in the long-term income stream derived from the project, the construction materials selected are often more durable and maintenance is promptly attended to in both the building, individual apartments and hard and soft landscape surrounding the building. In summary, there is a business model reason for the curation of a residential community within the development.
Build to Rent is here to stay. Time will tell if this ownership model extends beyond its current market niche.
