Australian cities are consistently named among the world's most liveable, but a growing housing problem puts the country at risk of losing this position. Due to population growth there is a need to deliver almost 1.6 million homes, including an additional 500,000 rental properties, in the next 10 years.
New research from Allens and Urbis, the Build-to-Rent: Key to unlocking the future liveability of Australia's cities report, has found that Build-to-Rent (BTR) may be the quickest solution to increase choice and capacity of accommodation, at scale. However, existing policy settings are not conducive to BTR emerging as a viable asset class in any Australian jurisdiction.
Allens Managing Associate Tim Chislett said with further support from governments, the sector has potential to become large enough to improve liveability and affordability, and address Australia's accommodation supply shortage.
'BTR supporters aren't necessarily asking governments for more favourable concessions than other asset classes; they're simply seeking a level playing field. With some key policy changes, BTR's potential will be unlocked,' said Tim.
The new report identifies three areas where changes to government policies are needed, to support the growth of the sector in Australia: Managed Investment Trusts (MITs), land tax and planning.
- Currently BTR is denied the concessional tax rate of 15% that applies to income from most other property asset classes for foreign investors in MITs. For BTR to qualify for the MIT concessional rate and be given a level playing field, it should be classified as 'commercial residential'.
- State governments should consider providing land tax concessions for BTR projects and remove foreign land tax surcharges, to make BTR more attractive to foreign investors. By virtue of BTR residential towers being owned by a single landlord, states stand to gain more land tax revenue for BTR projects than Build-to-Sell, under the current law, and on an asset by asset basis.
- Defining what a BTR asset is could provide an opportunity for states to adopt tailored planning policies to ensure BTR reaches its full potential. BTR currently falls under the general concept of 'residential accommodation' in all Australian jurisdictions.
According to the report, for Australian cities to remain some of the world's most liveable an increase supply in housing is required.
'Our major cities risk facing an acute housing shortage. Inner-city areas along our Eastern Seaboard only have 1.5 years' worth of apartment supply under construction, with a more limited pool for sale beyond that,’ said Urbis Director Mark Dawson.
‘There is a further 2.2 years of supply that is approved but not yet selling. If we can fast-track some of this for new rental housing, it would boost both housing and the economy.
'BTR holds a key to addressing Australia's growing housing problems; governments just need to unlock its potential,' he said.
Allens Partner Michael Graves said a thriving BTR sector offers a range of economic and social benefits and caters to the demands of modern consumers.
'It's no longer about owning a house. There's a need for accommodation that's close to work, offers high quality amenities and guarantees security of tenure, and BTR deliver on all these demands,' said Michael.
Urbis is a market-leading firm with the goal of shaping cities and communities for a better future. Drawing together a network of the brightest minds, Urbis and its international business Cistri, consists of practice experts, working collaboratively to deliver fresh thinking and independent advice and guidance – all backed up by real, evidence-based solutions. Working across the areas of planning, design, engagement, policy, heritage, valuations, investment management, transactions, economics and research, the expert team at Urbis connect their clients in the public and private sectors to a better outcome, every time.
Allens legal team
Michael Graves (Partner) and Tim Chislett (Managing Associate).
Notes for editors.
Allens is a commercial law firm working throughout Australia and Asia. Through its integrated alliance with Linklaters it provides clients access to 40 offices in 28 countries around the world.