WRITTEN BY Nicholas Finney and Benjamin Grady
Whatever the cause, whether it be people returning to Australia during the COVID-19 pandemic, steep rates rises, legislative reform tightening regulation of the rental market or simply an increase in demand, there is no question that Canberra is experiencing an affordability and rent stock crisis. With investors looking to other jurisdictions which offer a more affordable, balanced and market-led approach, the question is no longer, how did this happen? But, what is the solution? For the ACT Government, one possible solution is to grow the Build to Rent sector in the ACT. With the highly anticipated Paxon Consulting Group feasibility report due at the end of this month, developers and consumers alike are eager to hear how the ACT Government plans to incentivise and manage the growth of Build to Rent in the ACT.
Generally, Build to Rent is a residential development where all dwellings are retained and managed by the developer and leased out, with a particular focus in providing facilities (such as gyms, workspaces, dining rooms, theatres, and entertainment areas) to its occupants.
Build to Rent is an attractive option for developers as they can be a reliable source of income with a more affordable entry point for the consumer. The management of a Build to Rent complex can be more efficient than the normal unit title structure managed by an owners corporation, due to Build to Rent projects having a single owner. The nature of Build to Rent projects also encourages participation from a broader range of consumers, including students, retirees, and employment housing.
If we are to see Build to Rent projects take-off in Canberra, Government support is essential, not only through tax incentives but through the planning and development framework more generally. There needs to be clear and concise policy changes to treat Build to Rent projects as what they are, a separate class of asset, and to provide the developer with clear guidelines during the approval process. The current design and approval framework is lacking and fails to inspire confidence that Build to Rent projects can be a successful investment in the ACT.
Whilst recent reports suggest the ACT Government is supportive of the growth of the sector in the ACT, it is concerning that the ACT Government’s mindset is already focussed on regulating rental pricing as a condition of any incentives available to developers. Seeing as Build to Rent has, and is continuing, to be successful in other jurisdictions (such as NSW and Victoria) perhaps the ACT should take note and ensure any regulation is balanced with a market-led approach.
For further information regarding Build to Rent, please contact the team at BAL Lawyers.