Build to rent: new concept that could end renters’ worst nightmares – but with a catch

It’s a radical way to rent imported from the US and now in Australia, a new concept could remove some of the age old frustrations for tenants.

It’s one of the biggest frustrations from roiled renters: the hefty bond that sits in limbo and then has all or part of it withheld by the agent to pay for a cleaner, despite you spending days scrubbing every dusty crevice. One in three renters don’t get their full bond back.

However, the days of the bond could be over if a radical new way to rent, rolling out first to Sydney, becomes the norm.

It’s called “build-to-rent” and the first fully private rented block, built by property giant Mirvac, has just opened.

“It’s not like we’re kicking massive goals, it’s just that renting is usually so bad,” Mirvac build to rent manger Andrew Hansen told news.com.au.

The new way of renting will also mean you’ll no longer have to jump through hoops to keep pets, bang holes into walls or paint every room a different shade. As long as the rent is paid, tenants can stay put as long as they want.

But there’s a catch – these privileges will cost you more in rent. As much as 20 per cent extra.

And a housing policy expert was warned that build to rent “won’t be a silver bullet for Australia’s housing affordability stress.”

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Bonds are a top frustration for renters. Picture: Steve Mosman

‘NIGHTMARE’ OF RENTING

Residents are now moving into LIV Indigo at Sydney Olympic Park. Australia’s first build-to-rent block outside of specialised markets like student housing, LIV Indigo has 315 units. Other LIV blocks are going up in Melbourne and Brisbane.

A couple that moved into the block in September told news.com.au that LIV’s promises of free whitegoods, always available maintenance, the ability to decorate and no bond seemed had seduced them. But the clincher was the pet friendly policy so they could keep their dog.

Mirvac’s Mr Hansen said they had been expecting more families but right now – at a third full – it was all about the dogs.

“We’re actually thinking of having a floor of no dogs, just for those people who don’t want them,” he laughed.

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LIV Indigo is one of Australia’s first ever ‘build-to-rent’ properties available for private renters of all stripes. Picture: Benedict Brook.

BUILD-TO-RENT EXPLAINED

The concept of build-to-rent is that tenants rent homes in special rental-only complexes directly from big corporations, like Mirvac, rather than private landlords.

“With private landlords there is always the worry that they will sell or move their child in. But we haven’t strata-ed this building and we won’t sell them off individually,” said Mr Hansen.

So, for example, the choice to renew the lease is up to the tenant alone.

Mirvac is also keen to push the added extras. There’s a kids play area, office and cinema space and an open plan kitchen and dining area. Karaoke is next on the list.

“A couple of residents recently got engaged in the space and held their party here.”

In the US, where the concept is huge, some properties even have bowling alleys.

One of the common areas at LIV Indigo.

WHAT’S IN IT FOR DEVELOPERS

It’s estimated around 20 per cent of US tenants live under the build-to-rent umbrella. Tenants generally rent for two years but can stick around for a decade or more.

Mirvac reckons up to 200,000 such dwellings could be built in Australia if the concept gets legs. Around 12,000 units are currently being built.

A land tax discount of 50 per cent in New South Wales has helped the first properties to go up.

“In a traditional development, we would have to sell 50 to 60 per cent of homes off the plan before we could even start building. But with buy to rent we can start building right now,” Mr Hansen said.

“It’s a lower yield for us but it’s also very defensive. Property sale cycles can go up and down but people will always need to rent so it diversifies Mirvac’s portfolio.”

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LIV Newstead in Brisbane, will be one of the next of Mirvac’s build to rent properties.

THE CATCH? THE PRICE

The lack of bond is an eye opener. But Mr Hansen said they didn’t need it.

“Bonds are a big gripe but we treat people like adults. We’re never going to chase people for $150 or $300 in cleaning bills as we’ve allocated money for wear and tear,” he said.

But the catch is the rent is higher than similar properties. A two-bedroom apartment in LIV Indigo begins at $615 a week; that’s between 10 and 20 per cent higher that similar sized private rentals.

“Yes our prices are high; but we’re not ashamed of the value that you get which includes the customer service, onsite maintenance, the refrigerator, gym, etc,” he said.

“But it’s not for everyone. If you want the cheapest apartment in Sydney, that’s not going to be us.”

Professor Hal Pawson from UNSW’s City Futures Centre said hopes build-to-rent might be a solution for those who struggle in the private rental market were likely overblown.

“Build-to-rent won’t be a silver bullet solution for Australia’s housing affordability stress, but it does have potential to widen housing diversity, enhance building standards, and lead to a better-managed, more secure form of private rental housing.

“Government help in some form will be essential to enable an affordable housing element,” he wrote on website The Conversation.

Mirvac’s LIV Newstead development, which is under construction in Brisbane and due to be completed in 2023, will have 99 of its 390 apartments given over to affordable housing at a 25 per cent discount to the market rent. Another two LIV complexes are in the planning stages in Melbourne’s CBD.

Mr Hansen said all Mirvac’s build-to-rent developments will have amenities for tenants to share. But what those are will depend on the mores of the people moving in.

“We could do a basketball court, but if no one wants that we could put in something else.

“In all likelihood, a dog park.”