Build to Rent: A Key to Housing Affordability

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Build to Rent: A Key to Housing Affordability
Build to Rent: A Key to Housing Affordability

In a climate of crisis when it comes to housing affordability on the east coast of Australia, it is no surprise that we’re seeing an increase in long-term, or even ‘permanent’ renters, as would-be buyers turn to other living arrangements. It is this increase in rental demand which offers younger investors a unique opportunity, and could hold the key to unlocking housing affordability long term.

Approximately 25% of households live in private rental accommodation, according to the Australian Bureau of Statistics. Rental conditions are far from stable for a lot of renters, be they families, young couples, or singles. Indeed, recent findings suggest that there is widespread uncertainty of the short term future, with 83% of renters admitting they have no fixed-term lease or are on leases less than 12 months, and 62% of those surveyed felt that they were unable discuss longer-term rental security. Added to that was the persistent threat of rental increases, making for a largely anxious rental population.

Build to Rent: A Key to Housing Affordability

What is Build to Rent?

Herein lies the problem, and a promising solution has been put forward to address it. A build to rent scheme would incentivise developers to construct housing not with the intention to sell, but instead to rent out at a capped price bracket to cater to low-income families.

Government funding in some form is essential in order to make build to rent a viable solution to the housing affordability crisis. Affordable rent, gathered from low-income families, would simply not be able to cover the cost of building and operating housing in order to make it an enticing prospect for developers. Therefore, some financial incentive must be offered.

Fundamentals of Successful Build to Rent Strategies

By focusing on the four areas of functional design and layout, bespoke management, amenities and secure tenancy terms, build to rent schemes can work for both the tenants they are designed for, and be a profitable investment for the developer.

Design encompasses both the overall appearance of the home, which in turn can shift the reputation and value of a neighbourhood, as well as the interior functionality for the tenant. Effective design, reflective of tenants’ needs, must be based in evidence, rather than speculation, if it is to be truly in demand. Building to the specifications of what tenants look for, as well as what will be considered a good long-term investment, are both key starting points.

Fostering a sense of community will inform both management and amenities. Communal spaces, transport accessibility and proximity to schools, universities and suburban hubs are all examples of features that many of us would value in a home, but often aren’t on the table for renters. And in order to strengthen that community over time, longer-term leases will help to offer security and a sense of stability when raising a family for renters. Leases of 3, 5 or even 10 years could become the new norm in these developments.

Build to Rent: A Key to Housing Affordability

What is Next?

Build to rent sounds like a dream solution, but there are still plenty of wrinkles to iron out.

There must be barriers in place to stop developers from charging what a landlord would, or raising their rent over time, in order for it to be truly affordable to those who need it.

If backed by an institution—essential in order to get funding in the first place—responsibility may fall off the shoulders of the developers when it comes to maintenance and upkeep. By moving away from the local landlord, we risk losing the communication, trust and reliability that comes with it.

Developers must also follow the fundamentals outlined above to ensure a higher standard of housing, rather than receiving guaranteed funding for a poorer job. Rental housing need not be of a lower standard than owned housing, and that stigma needs to be overcome.

Once these concerns are addressed, a build to rent scheme, with government support, could spell the end of the housing crisis that has plagued Australia for the past decade. Further, it could begin to repair the damage to the rental market that has been done, helping to reassure renters that affordable, pleasant, and tenant-centric housing is available. If successful, the build to rent scheme could facilitate increased personal savings, and put an end to talk of a generation of ‘permanent renters’.

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