27pc more: Albo’s new housing move ‘too pricey

Put forward as a ‘sensible’ solution to deal with Australia’s devastating housing crisis, a Labor initiative to combat skyrocketing prices looks like it could do the reverse.

Put forward as a ‘sensible’ solution to deal with our housing crisis, a Labor initiative to combat skyrocketing prices, looks like it could do the reverse. Picture: NewsWire / Martin Ollman

There will be a nice flurry in construction of build-to-rent (BTR) apartments across capital cities after the Federal Labor Government finally secured passage of legislation that encourages construction through tax concessions for developers.

But there are concerns the apartments will be too pricey for the needy.

The legislation requires only 10 per cent of the apartments be tenanted on an affordable basis, at a 25 per cent discount to market rents.

Constructed for rental occupancy and retained in single investor professionally managed ownership, BTR is a slowly emerging occurrence that will change the world of rental property offerings.

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The lagoon pool at "the Gladstone" – Melbourne's biggest built-to-rent development.

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It kicked off in Australia in 2017 and by mid-2024, just 5000 apartments had been completed, with 11,000 under construction.

While well established overseas, the BTR industry makes up just 0.2 per cent of Australia’s housing market. There is a pipeline of 45,000 announced apartments, and expectations of reaching 100,000 by the end of 2030.

Given the 10 per cent affordable component, it could generate 10,000 good quality affordable apartments.

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Development remains focused in Melbourne where building sites are cheaper, with the city possessing 41 per cent of the tracked pipeline, clustered heavily on the CBD fringe.

Sydney and Brisbane follow, with respective market shares of 24 per cent and 19 per cent.

The buildings, which must contain at least 50 apartments, are to offer leases of five years which introduces the longevity that is so important for tenants, along with allowances for pets and personalisation, such as painting and decorating.

Both the affordable and the market-rate offerings in the same building must have equal quality finishings and fittings.

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Mirvac's LIV Indigo build to rent project at Sydney Olympic Park,

Hal Pawson, professor of Housing Research and Policy at the City Futures Research Centre, UNSW Sydney recently noted the legislation was no silver bullet, but a sensible effort to address widely perceived housing pressure points in a style similar to purpose-built student accommodation.

Pawson expects BTR to typically be a “premium product”, targeted at moderate to high income earners; in early 2024 he surveyed two bedroom apartments being advertised in Sydney and Melbourne at weekly rents in the $800 to $950 range.

A more formal 2022 study of the 315-apartment LIV Indigo complex, Australia’s first large-scale BTR property that opened in September 2020 at Sydney Olympic Park, found its rents were much higher than nearby established rental offerings of traditional providers, the mum and dad investors.

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The Charter Keck Cramer study, which excluded the affordable apartments as well as furnished apartments from their sample, found the median one bedroom, one bathroom apartment rent in LIV was 19 per cent higher and the median two bedroom, two bathroom LIV BTR rent was 27 per cent higher than traditional built to sell offerings.

This pricey scenario prompted the Greens to demand 100 per cent of BTR be affordable while the Coalition was concerned the Albanese government was motivated to provide industry super funds with a “dream” run for new revenues via this emerging form of institutionalised housing investment.

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Originally published as 27pc more: Albo’s new housing move ‘too pricey