Addressing Australia’s Rental Crisis: The Urgent Need for Build-to-Rent Solutions

Hi Andrew Bell here,

In my last fortnight’s edition, I highlighted the severe housing crisis in the rental sector. Demand is surging due to falling construction levels across Australia and rising population growth. Despite recent calls to reduce immigration, population growth will continue to outpace construction for the foreseeable future.

For over a century, Australians have relied on private investors to provide rental accommodation. Over 90 percent of rental properties in Australia are owned by everyday Australians who typically own one or two properties to build a nest egg for retirement. Negative gearing has been key to making this work, but the current economic climate has made it increasingly difficult for people to save enough to buy investment properties. Consequently, the number of new investors entering the market is dwindling.

What we urgently need is a rapid increase in rental properties and a new approach to how we supply them. Most properties bought by private investors were originally built for sale, meeting high design and construction standards that drive up purchase prices and, subsequently, rents.

We need rental accommodation built specifically to meet tenants’ needs in locations close to employment, transport, shopping centers, and schools. These properties must be constructed to ensure affordable rents, which brings the concept of build-to-rent (BTR) into play—a concept not previously seen or encouraged in Australia.

The number of Australians renting for life is rising rapidly, and we must cater to their needs. The beauty of BTR is that a single construction project can provide 300 to 500 apartments in one go. The BTR market, as it is known, involves rental stock held by a single ownership, usually in medium to large-scale multi-dwelling buildings. This ownership could be local institutions like superannuation funds or major offshore investors.

BTR is well-established in large overseas markets such as the USA, the UK, and many European countries. In Sydney, almost 36 percent of dwellings were rented in the last census, up from 31.6 percent ten years earlier, demonstrating the rapid growth in demand for rental accommodation.

Our challenge is that BTR is new in Australia. Local governments are trying to understand it, as they play a crucial role in adjusting building codes, parking requirements, apartment sizes, and offering incentives like reduced infrastructure charges and temporary rate reductions. State governments need to expedite their processes, including reducing stamp duty charges and land tax concessions to incentivise BTR constructions. The federal government also has a role in addressing GST, capital gains tax, and similar issues. Making BTR construction attractive will draw in even those unfamiliar with the concept, incentivising large-scale development over individual investments.

With capital city house rents in Australia recording their largest quarterly increase in 17 years, the urgency is clear. Governments, however, often move slowly, and bureaucracy can clog progress.

Melbourne, with its rapid population growth, leads the country in BTR constructions. However, other regions, especially the Gold Coast, need to expedite their processes. I am currently working with local, state, and federal government levels to launch our first sizeable BTR project on the Gold Coast and to establish more in strategically needed locations.

As more people face increasing hardship, those of us in a position to help must make the loudest noise. In my role with the Real Estate Institute of Australia and as part of the agency with the largest rent roll on the Gold Coast, I am committed to fast-tracking housing solutions for our fellow Gold Coasters and Australians.

I’ll be back in a fortnight.