The fight to improve housing affordability in cities like Melbourne could well be helped by the development of a ‘build to rent’ sector.
Build to rent means developers build housing and then retain the building to rent it out to lower-income families.
Instead of a developer building a project then selling it for a profit, a developer gets backing from an institution such as a superannuation fund to build for the long term and rent out at a cheaper rate.
NSW Treasurer Dominic Perrottet has just begun a working group to assess the viability of the idea as it gains momentum and media attention.
The build-to-rent sector has been growing quickly in London and the United States.
According to Matthew Cranston in the Australian Financial Review if you took the percentage of institutional investment in residential property globally and applied that to Australia you would have a potential $7 billion to be invested.
MSCI’s Bryan Reid says if the build-to-rent model did attract that sort of institutional capital it would mean around 30,000 new apartments being built to rent in Australia that would significantly improve housing affordability.
For the build-to-rent sector to get a foothold it would need some changes to taxes which currently hold it back in Australia, unlike overseas where they don’t put constraints on build-to-rent developers.