You might have heard a bit about ‘build-to-rent’ (BTR) in the press, but what does it actually mean for renters in Australia? It’s a tough market out there, so it’s fair to ask whether this concept could make life easier or harder.
This article forms part of our Build-to-Rent guide, which looks at the build-to-rent concept in Australia, the benefits for renters and where this development style is headed in future. Check out the full series today.
If you’re looking to rent one of these homes instead of buying a house or renting a standard apartment, our guide is here to help.
Let’s start with the basics. What exactly is build-to-rent?
What is Build-to-rent (BTR)?
The core of build-to-rent is properties that are purpose-built for renting. They’re typically larger-scale apartment-style developments and are generally owned and maintained by the developer and leased out.
They come in different shapes, sizes and prices, ranging from luxury (think Hilton-style) to government-supported affordable housing programs. It’s a pretty new model, and while there are plenty already available, tens of thousands are under construction and in planning.
It’s a pretty exciting segment, one we think has good potential to grow in the coming years.
Of course, the standard housing model we’re all used to in Australia is known as “build-to-buy,” or sometimes “build-to-sell”.
In this set-up, a developer builds residential houses, apartments and townhouses and sells them to owner-occupiers (who live in the property) or to mum-and-dad investors who’ll rent them out instead of selling them.
With build-to-rent, the focus is on providing high-quality, purpose-designed rental stock, creating an additional housing choice for Australian renters that offers greater security – and service.
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How big is build-to-rent in Australia – and why are we hearing about it now?
The sector might still be new to our shores, especially when you compare how it’s working abroad, where it has a far stronger foothold.
Build-to-rent expanded exponentially in the UK from 2013 after government support and now accounts for one in four homes built in London. The US’ build-to-rent sector makes up almost two-thirds of the rental stock in some of the largest cities, with heavyweight landlords like Greystar RE Partners operating as many as 600,000 units each.
But experts say it’s growing and is slowly gaining recognition as a viable rental option (and investment). Several completed projects are already underway in Melbourne and Sydney, and more are in the pipeline.
Mirvac opened LIV Indigo in Sydney’s Olympic Park in 2020. The company’s first significant build-to-rent development has some 315 apartments, ranging from one to four bedrooms.
Are they good for renters?
In Australia, this model promises high-quality, high-amenity, well-located, purpose-built rental apartments designed to cater for a vast range of needs. And when you look at it, build-to-rent represents a pretty enticing vision for the future of renting.
Build-to-rents have a few subtle differences from your typical apartment, and what’s on offer will vary depending on the operator. That said, typical advantages for renters can include:
> Lease security. A real challenge we face in Australia is the lack of what we call ‘supply diversity’ in our rental stock. Basically, most of the private rentals in the market are owned by ‘mum and dad’-type investors. In itself, that’s not an issue. But like most of us, this type of investor is subject to changes in their financial circumstances.
With standard leases usually capped at 6 or 12 months, investors may choose to sell up or move back into a property, and for renters, this means the dreaded ‘notice to vacate.’ It’s a big reason why having lease security becomes so important.
Build-to-rent properties solve this problem – they’re designed specifically for the rental market and have large specialist corporate owners who want you to stay with them as long as it suits you. Operators tend to offer a range of lease durations with longer leases (3 years+) available from the start.
It depends on the development, but you could take a longer lease with different renewal conditions, low or no rental bonds, paint the walls as you wish and bring your pet in – without pre-approval.
> Professional owners. This is somewhat related to lease security, but a by-product of having a corporate ownership structure is a far more commercial and consistent approach to rental management.
A major plus of build-to-rent is that many operators allow tenants to make minor changes (paint their walls/hang pictures) and have established maintenance and concierge programs to cover the day-to-day.
> Flexibility with your living space. Tenants in built-to-rent properties tend to have more flexibility with their living space because the developer’s onsite management oversees tenancy arrangements.
Some allow you to upsize to bigger apartments when you start a new family, or to downsize when your life changes and you need less space.
While some of these features can be accessed through a traditional lease agreement, having one owner for the whole complex can make it easier to find out what apartments are available in future. Plus, given the landlord is already familiar with your tenancy record, the approval process can be easier too.
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> Would you like fries with that? Build-to-rent properties are purpose-built to attract and retain good tenants. The critical difference is that they’re built for renters, not a landlord who may never live there or an owner-occupier who’s less than keen on high body corporate fees.
Because of that focus shift, these buildings typically include amenities that other complexes wouldn’t feature. Along with pools and shared outdoor spaces, you might be able to find a complex with communal working spaces, yoga studios, community gardens, shared dining areas and even movie rooms for hire.
Build-to-rent operators are keen to attract tenants, so they stay across contemporary lifestyle trends. HOME Apartments over in Southbank were very conscious that WFH was still fresh on people’s minds, so they included a shared workspace for building residents. Their coworking space today looks like a fancy airport business lounge, has all the expected facilities and is a great way to co-work outside your apartment without needing to leave the building.
Depending on the project, your rent might include cleaning and maintenance services. Score. For example, LIV Indigo offers a cinema, gaming room, and a dog washing area and includes white goods and appliances. No rental bond either.
> Some affordable housing options. Traditionally, build-to-rent wasn’t developed to solve the affordability issue, but some projects are required to include lower-cost housing for those who might not otherwise afford it.
The Queensland Government, for example, is partnering with the construction industry to deliver affordable rental housing through new build-to-rent developments. They approved two Brisbane-based affordable housing projects by developers, including Frasers Property in Fortitude Valley, and Mirvac in Newstead.
Combined, these projects will offer almost 750 apartments – up to 240 dwellings to be provided at a discounted rent.
> A sense of community. The benefits go beyond financial when you improve certainty and security for renters – emotions also play a part.
Build-to-rent developers often promote the community element of the model as a big drawcard for tenants. By allowing residents to stay as long as they want to, they can put down roots and build a sense of community living.
The sharing of space means tenants automatically connect and form relationships. Rather than the people in your building only being neighbours, they’re also your community.
But the model doesn’t come without drawbacks
The ability to put a stamp on your home together with longer leases might appeal to a wide range of tenants, but there are a couple of points worth considering.
Build-to-rent is still a relatively new idea in Australia; as with any real estate project, there’s good and bad to be found. If you’re considering renting one of these properties, do your homework when choosing a building and understand the fine print.
Build-to-rents often charge a premium for security and amenities. Generally, apartments in build-to-rent developments rent for more than a suburb’s median price because of the associated services and amenities. So, even at a discounted price, you can expect that build-to-rent pricing may be out of reach for some demographics and those requiring social housing.
Depending on how the developer has structured their amenity inclusions (along wth facility access), tenants may end up paying for things they don’t use or necessary value.
What government incentives are available for build-to-rent?
Currently, state governments are implementing various schemes and incentives to support this model becoming part of the potential solution to housing affordability.
- New South Wales has a 50% land tax discount until 2040 for build-to-rent developments. See more at Revenue NSW.
- There’s also a 50% land tax discount for eligible projects in Victoria. Developers can access an exemption from the absentee owner surcharge for the same period. See more at VIC Gov’s Treasury & Finance page.
- From 2023, the South Australian government will offer a 50% land tax discount for eligible projects, but details are yet to be confirmed. See more at Revenue SA.
- The Queensland government is partnering with several private build-to-rent developments to deliver affordable rental housing through rent subsidies. Read more at the Queensland Treasury website.
That’s a wrap!
The addition of build-to-rent in the mix is undoubtedly welcome. More variety and choice for renters is always a good thing!
Build-to-rent properties aren’t for everyone, of course (especially being priced around 10% higher than similar ‘bare bones’ properties), but they come with numerous inclusions and benefits – especially around lease security – and we’re here for that.
Rent.com.au is Australia's largest company dedicated to renters and is owned and operated by ASX-listed Rent.com.au Limited (RNT:ASX). For over 15 years, Rent.com.au has exclusively focused on making renters' lives easier by making it easier to find a property, secure it, move in and pay rent.