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No rental bond. Pets are welcome. And the landlord is happy for tenants to paint walls, hang artwork or build shelves.
Mirvac’s LIV Indigo at Sydney Olympic Park sounds too good to be true – especially in Sydney’s torrid property market, where tenants face skyrocketing rental prices, no-fault evictions and often put up with appalling living conditions because landlords refuse to repair problems.
Thomas Pospieszny, with dog Joshie, and Nancy Chen are residents of Mirvac’s build-to-rent apartment complex at Sydney Olympic Park.Credit: James Brickwood
But there’s a catch: tenants such as Nancy Chen and Thomas Pospieszny pay more than the median rent for the area.
Chen pays $650 a week for her one-bedroom apartment, while Pospieszny pays $670 a week for his one-bedder in the build-to-rent apartment complex owned by property giant Mirvac. This compares with the median weekly rent of $550 for a one-bedroom apartment in Sydney Olympic Park, according to real estate website Domain. (Domain is majority owned by Nine, publisher of The Sun-Herald.)
“It’s roughly around the same, but this place provides so much more,” Chen says. “Convenience and just being comfortable in my home is everything because I like to stay in a place for a long time.”
The experiences of Chen and Pospieszny are a far cry from horror stories such as the Sydney woman facing homelessness with her six-week-old baby after she fought a 60 per cent rent increase and asked for repairs.
It’s little wonder that Australians do not want to rent long term: a 2018 HSBC survey found renters were not as happy in their accommodation as owner-occupiers, and a 2019 Housing Industry Association survey found 92 per cent of renters wanted to own their own home.
The plight of renters is so bad that the Senate is holding an inquiry into the worsening rental crisis in Australia, while the NSW government is seeking to reform the state’s tenancy laws.
Build-to-rent housing, where a developer constructs an apartment block and then holds and manages it, is long-established in Europe but a newcomer to Australia. Could it be part of the solution?
Data from the Property Council of Australia shows build to rent properties make up just 0.2 per cent of Australia’s housing market compared with 5.4 per cent in Britain and 12 per cent in the US.
However, the council’s NSW executive director, Katie Stevenson, says the federal government’s halving of the Managed Investment Trust withholding tax for Build-to-Rent to 15 per cent earlier this year could lead to up 150,000 new apartments over the next 10 years. “Build to rent has the potential to drastically improve the supply of quality rental properties and when supply goes up, rents go down because there are more option on the market,” she said.
The latest figures from JLL Research show that nationally construction is set to increase next year.
With 315 one-, two- and three-bedroom apartments, LIV Indigo is one of the first residential developments that Mirvac has built to rent out rather than sell apartments.
Mirvac’s build-to-rent general manager, Angela Buckley, says the company sees a “significant market opportunity” in a new category of housing that is better for renters.
“The customer experience is typically poor, with limited security of tenure,” Buckley says. “Whether people rent by choice or by necessity, they represent a large and growing market that needs reliable and good quality housing supply.”
The NSW government introduced tax concessions and planning reforms in 2020 and 2021 to encourage new build-to-rent housing. The state significant development threshold for developers to bypass local councils and lodge build-to-rent plans with the Planning Department was lowered from $100 million to $50 million in Greater Sydney and $30 million elsewhere.
There are 20 proposed build-to-rent developments in the planning system that, if approved, will provide more than 6600 new homes (Premier Chris Minns has warned that NSW will be “130,000 houses short within the next five years”). The NSW Land and Housing Corporation also has a $32 million project for build-to-rent social and affordable rental housing in North Parramatta.
Property developers lobby group the Urban Development Institute of Australia called for further tax and regulatory reforms to encourage build-to-rent affordable housing in a 2022 policy paper, Driving Build to Rent.
The institute’s NSW chief executive, Steve Mann, says build-to-rent properties are typically priced at rents up to 20 per cent above market rates “and the model will need high rent growth to recover ground on increasing yields”.
“Build-to-rent is one piece of a larger puzzle,” he says. “It will help but won’t solve the housing crisis. Initial projects will invariably be targeted as premium products due to the high level of amenity and associated costs.”
Besides Sydney Olympic Park, Mirvac has a build-to-rent property in Melbourne’s CBD and a 396-apartment development under construction in Brisbane’s Newstead that includes 99 homes for essential workers at an affordable rent subsidised by the Queensland government. Both Sydney and Melbourne build-to-rent properties have a health and wellness facility, cinema rooms, games room, coworking spaces and indoor pool and spa.
“We provide onsite property maintenance and customer service via a simple app, all white goods included in each apartment and pets are welcome, and our residents can paint their walls and hang pictures,” Buckley says.
Chen moved into a one-bedder in LIV Indigo after her landlord asked her to vacate her previous home in Burwood, where she had lived for nine years. “Being in the private rental market is quite stressful,” Chen says. “I had to worry about moving if they decided to sell or renovate.”
Pospieszny has lived in the complex with dog Joshie since 2020 and moved to different-sized apartments in the building several times – with the assistance of the landlord. “We moved in and a lightbulb blew,” he says. “Within an hour of raising a request, I had a person come in to change it.”
One of the one-bedroom living rooms in the LIV Indigo build-to-rent complex.Credit:
Mirvac is not the only developer that says it will treat tenants better under existing laws than the current crop of amateur mum and dad landlords. Urban Property Group has about 250 build-to-rent homes in Penrith and Dulwich Hill, with plans for an additional 1500 units.
Urban’s Navali development in Penrith has 21 apartments for NDIS and lower-income tenants, whose rent is up to 75 per cent of the private market rate. The development is a partnership with community housing provider Link Wentworth.
Urban’s chief executive, Patrick Elias, says the build-to-rent model provides residents with greater security of tenure.
“As we’ve seen over the last year, a hot rental market can create significant challenges,” he says. “Too often this results in tenants having to pay significantly more to keep a rental property or moving to a new location at a time of huge demand.”
The Navali build-to-rent project offers affordable housing but is unlikely to be the norm among the sector.Credit: Urban Property Group
Committee for Sydney planning policy manager Estelle Grech says build-to-rent properties offer tenants greater certainty and security of tenure without the fear of surprise hikes in price: “In terms of design, you’re more likely to get high-quality communal spaces, and a deliberate focus on building a sense of community.”
Grech says the average developer building homes to sell had no reason to care about the long-term costs of living in and operating a building: “But when it’s a long-term institutional investor, sustainability and quality ratings are a priority to reduce ongoing maintenance costs.”
Build-to-rent is not affordable housing, she says, “nor is it trying to be”. “But there’s nothing stopping government from partnering with developers in areas of high need to subsidise housing for key workers.”
The 2022 research led by University of NSW’s City Futures Research Centre senior research fellow Chris Martin found there were about 11,800 build-to-rent units in Australia – mostly operated by Meriton. “It really says something about our current lot of landlords and property managers that the prospect of having a mega-corporate landlord can sound like a good thing,” he says.
But Martin says the overseas experience of large corporate landlords has not always been positive. “In some countries they don’t do a whole lot of building; they instead buy up existing stock,” he says. “There’s overseas evidence that they use eviction proceedings more frequently, and increase rents more aggressively.”
While build-to-rent proponents talk up shared facilities such as terrace gardens and yoga rooms, Martin says, “they are also calling for design standards that would allow apartments that are smaller and less well-ventilated than are permitted now”.
But other models – which trade off facilities for cheaper rent – are emerging. Not-for-profit property developer Nightingale Housing has partnered with Fresh Hope Communities to build studio-like apartments of up to 35 square metres in Marrickville that will be rented at below-market rates.
Nightingale Marrickville comprises apartments it calls Teilhaus-style, which means “part of house” in German. They are more affordable because they do not have individual laundries, parking spaces or second bathrooms, says its chief executive, Dan McKenna.
The Nightingale Marrickville development is being built under boarding house laws.Credit: Rhett Wyman
The 54 apartments will be offered at 80 per cent of market rent in a ballot with an income cap – at least 20 per cent will be offered to key service workers, First Nations Australians, people with a disability, carers and single women aged over 55.
The project, approved under planning rules for boarding houses, is on a site owned by the Church of Christ in Marrickville.
McKenna says there are structural barriers to delivering build-to-rent properties in a high-cost market such as Sydney that could be addressed: “This could be through more streamlined approval processes at a local government level, or assistance with financing and improved subsidies at a state and federal level.”
Macquarie University research fellow Alistair Sisson says the greater security of tenure potentially offered by build-to-rent comes at a price. “This is partly because it’s new stock – and for apartments, new stock typically rents for a premium – and partly because it can offer more security than the conventional private rental,” he says. “It’s likely that it’ll continue to be a premium product while tenancies in the private rental sector remain as insecure as they are.”
Mirvac’s LIV Munro build-to-rent project in the Melbourne CBD. The sector may always be priced at a premium.Credit: Justin McManus
Moreover, Sisson says that even if renting becomes more secure overall, the rental yield that investors need to get a return from build-to-rent properties means they will most likely continue to be premium housing options.
“Sydney’s, and Australia’s, housing market is probably not the most favourable to build-to-rent because of high prices and modest rental yields, with the real profits coming through capital gains when properties are sold,” he says.
Sisson says build-to-rent could provide more social and affordable housing if governments pay for it. “It’s complicated to include social and affordable housing in conventional strata schemes due to the owners’ corporation structure,” he says. “Build-to-rent apartment complexes might be able to accommodate tenure mixes more easily if there are subsidies available.”
Advocates of build-to-rent say it frees up stock further down the market – a process known as filtering – which indirectly generates more affordable housing, but Martin says this claim is not backed by evidence.
“Properties do filter downmarket over time, but they are not accumulating as a stock of affordable dwellings,” he says. “They get spirited away into some other use before that happens e.g. owner-occupation, redevelopment.”
The build-to-rent sector is also hamstrung by tax breaks that drive up housing prices, Martin says. “Australia’s small-holding landlords, their losses cushioned by negative gearing, have kept rental yields lower than build-to-rent businesses could stand.”
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