- Cutting taxes for build-to-rent developments could see 150,000 new homes built over 10 years
- The sector could grow to $290B and create 350,000 new apartments
- Report recommendations include tax incentives
Cutting taxes for build-to-rent (BTR) developments could see up to 150,000 new homes built in the next 10 years according to new research.
Research conducted by EY and commissioned by the Property Council of Australia (PCA) found that if the government halved managed investment trust withholding tax to 15 per cent, in line with other asset classes, it could see more investment dollars flow into the sector.
Property Council of Australia Chief Executive Mike Zorbas said build-to-rent could help ease the housing crisis.
“With a 79,300-home deficit to 2033, Australia needs better planning, more land supply, proper housing targets and a national strategy on build-to-rent and purpose-built student accommodation,” Mr Zorbas said.
“The potential to create 150,000 homes over the next 10 years with just one asset class shows build-to-rent is about as close to a housing policy silver bullet as they come. Australia is grappling with a worsening housing affordability crisis where state governments miss their housing targets and planning systems fail to keep up.”
Up to 350,000 new homes possible
The report found that if there was a focus on encouraging build-to-rent, the sector could grow to $290 billion and create as many as 350,000 new apartments in an optimistic scenario.
The report offers five key solutions to help encourage more build-to-rent development including applying a 15% managed investment trust withholding tax rate for foreign investors, a 10% rate for affordable housing, allowing institutions to claim GST, promoting the sector, and addressing the regulatory barriers for domestic super fund investors.
Mr Zorbas said that institutional investment could be the missing ingredient from the Australian housing market.
“It’s critical that investments in build-to-rent housing need to be eligible for the 15% withholding tax rate, and an incentivised tax rate of 10% for investors that choose to incorporate the supply of affordable housing dwellings within their build-to-rent projects. More supply means downward pressure on the cost of renting and buying, and people who live in build-to-rent housing will enjoy the benefits of professionally managed properties, good locations, superior amenities and long-term security of tenure.”
“To accomplish the ambitious goals established in the national Housing Accord, the government needs to level the build-to-rent investment playing field in the May 2023 Budget.”
Growth sector
The study estimates that the current size of the build-to-rent sector in Australia is $16.87 billion (just 0.2% of the total value of the residential housing sector) with only 11 operating build-to-rent projects, and another 72 projects in the pipeline.
In the US there are more than 20 million build-to-rent housing units, representing 12% of the country’s total housing stock. In the UK, the build-to-rent sector has grown exponentially in recent years from 47,000 units in 2016 to over 240,000 in 2022.
“The growth of build-to-rent in the UK and US has been strongly supported by governments at all levels welcoming institutional investment,” Mr Zorbas said.
