Are build-to-rent apartments the future?

The New Zealand Property Council says build-to-rent is a new type of ‘commercial living’ usually located in city centres within walking distance of key transport links. Tenants have the option to stay as long as they want in multi-unit, professionally managed, quality homes that offer a range of amenities and bespoke lifestyle options.

The model has recently had unprecedented growth in the UK, with reports of 35,000 units either built or in construction since September last year.

NZPC says build-to-rent provides more security for tenants because they are offered longer-term rentals.

Maintenance requests are typically dealt with promptly, rather than relying on a private landlord to respond. Build-to-rent properties are also often pet-friendly, and the tenants are free to make minor modifications to the dwelling.

In Europe, many build-to-rent properties enjoy shared facilities such as gyms, swimming pools and shared community living spaces. Often developments offer shared spaces, which include kitchens and games rooms, with the community of neighbours connecting and thriving through coffee groups, cooking classes and other community-focused activities.

Not only does high-density living reduce emissions, build-to-rent developments such as these are located in the middle of cities close to schools, shops, cafes and key public transport routes, minimising car usage.

According to NZPC, build-to-rent projects typically have “a clear focus on achieving positive environmental outcomes. This is often reflected in sustainable approaches to construction and a focus on achieving high Homestar and Greenstar ratings”. 

Build-to-rent properties are usually owned by institutional investors and managed by specialist operators. They are purchased by investors who own shares in the development; the investors don’t own an individual unit. Shareholders are paid dividends based on the number of shares owned, with the units rented out to the public.

According to NZPC, the build-to-rent concept is working well overseas, with investors who take a long-term approach to wealth finding it a worthwhile investment. The model has also been credited with contributing to a national construction boom in the UK.

NZPC is calling on the government to work with the sector to "define what constitutes build-to-rent for New Zealand and make the necessary legislative amendments to reduce impediments for potential BTR investors. Aligning the tax treatment of the BTR sector with similar large-scale commercial property investment assets will help to encourage investment".

In March this year, the coalition government announced it would introduce legislation to make it easier for overseas investors to invest in build-to-rent developments. Cabinet will make changes to the Overseas Investment Act 2005 to better support build-to-rent housing developments.

A March article on RNZ said, "The Overseas Investment Act will be amended to create a streamlined consent process, allowing investors to purchase land with the intention of building a new build-to-rent development or purchasing an existing one".

In the same article, Chris Bishop, Housing and Associate Finance Minister said, "New Zealand's complex overseas investment laws are holding the build-to-rent sector back. Under the amended act, a ministerial directive letter will be issued to signal that New Zealand was open to foreign investment in such developments”.

Developer Simplicity Living recently launched a build-to-rent housing programme in Auckland, with plans to build 10,000 new rental homes in the next decade. Simplicity managing director Shane Brealey told TVNZ on 7 May that the company "can’t build them fast enough … It doesn't matter how many we build, the queue for people wanting these residences will never shorten."