Mirvac boss backs build-to-rent model to provide cheaper housing

Mirvac chief Susan Lloyd-Hurwitz says developers must be ready to build apartments to be rented rather than sold.

Mirvac chief executive Susan Lloyd-Hurwitz in Sydney. Picture: James Croucher

The head of one of Australia’s largest property groups says developers must be ready to build apartments to be rented rather than sold, to provide affordable housing for the nation’s rapidly expanding cities.

Mirvac chief executive Susan Lloyd-Hurwitz told The Australian’s Better Cities forum in Melbourne that developers should lead the way in providing affordable housing options, including building units intended to be rented out, rather than sold immediately for a high profit.

She described renting in Australia as “a very patchy experience” where people were often forced into relatively short-term leases, and indicated long-term rental was an attractive option for some in the market. “An institutionally managed community with better amenities, security of tenure, corporate capital ..... from a customer point of view, it’s a no-brainer. The demand is absolutely there,” she said.

In its report A Fixed Abode, PwC Australia described “build to rent” as a system where a building was constructed for the purpose of rental accommodation and was owned by a single institution, rather than the traditional rental model where an individual investor owned the apartment.

The report said the BTR sector was the largest real-estate class in the US, bigger than commercial and retail property. It said tax incentives and subsidies could be offered to developers in Australia to boost such investment.

Ms Lloyd-Hurwitz said a collaborative effort was needed to provide cheaper housing in cities.

“If we want to create different housing typologies to give people secure homes, whether they are rental or purchased, there’s a real interaction that has to happen there, with people who are landowners and governments of all levels actually specifying — ‘this site should have 25 per cent rental, 25 per cent affordable and 50 per cent do whatever you like’,’’ she said. “And that ... can really kick-start a different conversation around how land is used.’’

This year Mirvac flagged a plan to set up a fund to develop build-to-rent units, targeting investments from superannuation funds that would benefit from the rental returns.

But Adrian Pozzo, chief executive of the super-fund backed developer Cbus Property, said the economics of investing “build to rent” did not yet to stack up.

“You’re paying big dollars for land. There’s an issue about land price; there’s an issue about government charges; there are issues with council rates and other things which make the model quite difficult,” he said

“If you’ve got a long-term view, build-to-rent will work. If you’re accepting of, maybe a 4 per cent income return, that will work.

“But being a property developer, it doesn’t work. A 4 per cent return for a developer is not acceptable,’’ he said.