Governments need to level the playing field for build-to-rent (BtR) developments to be feasible, says a new report by UNSW.

Purpose-built for rental use at market rates, BtR apartment blocks are typically owned by insurance companies, super funds, private equity firms or developers.

According to the City Futures Research Centre report, governments need to equalise land taxes and GST treatment for the BtR segment to compete with mum-and-dad investors and traditional build-to-sell developers.

“In Australia where our private rental market is almost entirely owned by small-scale mum-and-dad investors, this kind of housing would be a largely new departure,” observes professor Hal Pawson from the City Futures Research Centre in UNSW Built Environment.

“As a form of housing largely unaffected by uneven demand, it could help to create more stability in the construction industry, countering damaging booms and slumps,” he added.

The build-to-rent sector delivers several benefits to the housing market. For instance, having a building commissioning company as the long-term owner creates an incentive for higher build quality and more enduring performance. Additionally, BtR developments could enhance housing diversity in Australia’s rather polarised market, and bring about higher management standards and a more secure form of private rental.

BtR developments would ideally also include a proportion of affordable homes for low to moderate income groups. This could be delivered by not-for-profit community housing organisations, which can develop affordable rental housing at lower cost than for-profit companies. However, this would require additional government support in terms of designating ex-government land at a discounted price.

By factoring this into large-scale urban renewal projects such as Sydney’s Central-to-Eveleigh and Rozelle Bay, Pawson believes that the demand for developments of this kind to routinely include 30 per cent affordable housing will be addressed.