Australia’s housing market is a complex beast, and the idea that build-to-rent (BTR) properties could tame it has gained traction in recent months. Proponents argue that BTR can provide affordable, long-term rental options and ease the housing crisis.

However, a deeper dive into this topic reveals that BTR might not be the silver bullet it’s touted to be. In fact, it may exacerbate the class divide in property ownership and fall short of addressing the root causes of housing affordability issues.

I, personally, am not a fan of BTR. I believe it will exacerbate an already overly commodified housing system, leading to an unprecedented class divide in home ownership.

Let’s explore the pros and cons below to understand this current topic in greater detail.

The Build-to-Rent Model: An Overview

Before diving into the criticisms, let’s understand what BTR actually entails. Unlike traditional build-to-sell (BTS) developments, where properties are sold to individual buyers, BTR developments are constructed with the intent of being rented out indefinitely. These properties are usually owned by large institutional investors or developers who manage the rental units and maintain long-term leases.

The Promise of Build-to-Rent

Proponents of BTR argue that it offers several benefits, in summary:

1. Increased Rental Supply: BTR developments can increase the supply of rental properties, potentially easing demand pressures currently being experienced by renters.
2. Stability for Renters: Long-term leases provide tenants with greater security and stability compared to the typical six- or twelve-month leases.
3. Professional Management: BTR properties are often managed by professional companies, which can mean better maintenance and service for tenants.

While these benefits sound appealing, they don’t tell the whole story.

Why Build-to-Rent Won’t Fix the Housing Problem

In my professional opinion, the BTR model is more a short-term solution to a much bigger, and deeply rooted long-term problem. The model will inevitably produce:

1. Limited Impact on Housing (Un)Affordability

BTR developments primarily target mid-to-high-income earners rather than low-income families who are most affected by the housing crisis. According to CoreLogic, the average rental prices for BTR properties are often set to ensure profitability for developers and investors, making them unaffordable for those who need them the most.

2. Profit-Driven Motives

Institutional investors and developers behind BTR projects are driven by profit. This means that rental rates are set to maximize returns, often aligning more with market rates than with affordability targets. The primary goal is to generate consistent income streams, not to solve the housing affordability crisis.

3. Class Divide in Property Ownership

BTR inherently favors large investors over individual homeowners. As BTR properties proliferate, individual homebuyers are pushed to the margins, exacerbating the class divide. Wealth accumulates among institutional investors while average Australians struggle to own homes, creating a widening gap between renters and property owners.

4. Reduced Homeownership Opportunities

BTR developments occupy land that could otherwise be used for build-to-sell homes, reducing the overall availability of properties for purchase. This scarcity drives up prices and makes homeownership increasingly elusive for many Australians. Whilst touting to help solve the housing affordability crisis, BTR properties actually make it a whole lot worse.

5. Community Impact

Long-term rental communities can lack the sense of ownership and community engagement found in neighborhoods with higher rates of homeownership. Renters may feel less invested in their communities, leading to lower levels of social cohesion and community participation.

More Beneficial Solutions to the Housing Affordability Problem

If BTR isn’t the answer, what is? Here are several alternative solutions that, I believe, could more effectively address Australia’s housing affordability crisis:

1. Increase Public and Affordable Housing Supply

This is an absolute no brainer. Governments at all levels should invest in building more public and affordable housing. This approach directly targets the needs of low-income families and can significantly reduce the strain on the housing market.

2. Incentivize Affordable Housing Development

Provide tax incentives and subsidies for developers who include a certain percentage of affordable housing units in their projects. This can encourage the private sector to contribute to the solution.

3. Implement Rent Control Measures

While controversial, rent control occurs in many large international cities and has done for decades. Rent control can help keep housing affordable for existing tenants. Implementing measures that cap annual rent increases can provide much-needed stability for renters.

4. Support First Homebuyers

Offer realistic grants, tax breaks, and low-interest loans to first-time homebuyers. By making it easier for individuals to enter the property market, these measures can help balance the scales and promote homeownership. Having feasible support that sweepingly captures a large cohort of First Home Buyers is key, not tokenistic incentives. The Australian Government Housing website at https://www.australia.gov.au/information-and-services/housing provides up to date information on current housing policies and incentives for first home buyers.

5. Encourage Co-Housing and Shared Equity Models

It’s time to innovate and look at home ownership with a future focused lens. Explore alternative homeownership models such as co-housing and shared equity schemes. These models allow individuals to buy into the property market at a lower entry cost and share the burden of ownership.

6. Urban Planning and Zoning Reforms

Reform urban planning and zoning regulations to increase the density of housing in urban areas. Encouraging the development of multi-family units and high-density housing can increase supply and reduce pressure on housing prices.

Build To Rent Won’t Cause a Dent

While build-to-rent properties offer some benefits, they are not a panacea for Australia’s housing affordability crisis. In fact, they may deepen the class divide in property ownership and fall short of addressing the core issues.

A multifaceted approach that includes increasing affordable housing supply, supporting first-time homebuyers, and implementing thoughtful urban planning reforms is essential to creating a more equitable and accessible housing market.

For Aussie homebuyers, staying informed and working with a knowledgeable Property Buyers Agent can provide valuable insights and help navigate the complexities of the housing market.

By understanding the limitations of solutions like build-to-rent and advocating for more comprehensive measures, we can move closer to resolving the housing affordability problem.

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