In the face of Australia's housing challenges, there's a lot of talk about building "diverse" housing.
When Australians think about the need to construct new homes to tackle the current housing shortage, the assumption is that those are either homes being designed and built by the owner for personal living space or investment, or by a developer who intends to sell them off one by one.
In other words, each home is being built for an individual person to own.
The Property Council of New South Wales brought together major operators to discuss their role in tackling housing challenges. Picture: Getty
It’s less often assumed that homes are being built in large quantities for institutions and corporations to manage themselves.
And perhaps – with the exception of affordable housing constructed by governments, which is fairly well understood – this type of construction would be viewed with some level of skepticism from the Australian public. Or at the very least, it might raise questions on whether homes built to be owned by large corporate managers are as productive for the nation’s housing goals.
A recent panel hosted by the Property Council of New South Wales sought to bring together a number of those large operators who are doing exactly that – building large quantities of homes with the intention of owning and managing them – to look at what role they feel they can play in the current housing challenges.
Speaking at the event was Adam Hirst, CEO of build-to-rent operator Novus, Anouk Darling CEO of student-accommodation provider Scape by The Living Company, Fiona Russell, NSW operations manager of retirement living provider Levande, and Michael Rabey, executive general manager of acquisitions and development for land-lease operator Ingenia Communities.
They were joined by the NSW rental commissioner Trina Jones, who noted that currently one third of the state's population live in rental homes, and the majority rent from small holding landlords that own between one and three properties. It leads to what she described as “a very fragmented market”.
Overall, Ms Jones noted that in NSW, as in other states, there’s only a “very small portion of institutional investors” that own rental homes.
But sectors like BTR, student accommodation, and land-lease or retirement communities are growing across the state and the nation.
It’s clear to see why, with attractive lifestyle amenities and continued demand for the type of purpose-built housing that these offer: student focused facilities located close to campus, age-bracketed living designed for comfort in later years, and general rental stock with secure leases and amenities adapted to the community.
By offering tailored housing on a mass scale, these operators play a key role in solving some of the pain points involved in Australia’s housing shortage.
For example, land-lease communities provide attractive lifestyles for retirees who might be ready to move on from large family homes, thus freeing up stock.
Student accommodation, meanwhile, provides a purpose-built offering for domestic and international students that might otherwise occupy homes on the open rental market.
Operators say they could deliver clear benefits to Australia’s housing market, but scaling is constrained. Picture: Getty
Built-to-rent offers longer-tenure leases well suited to Australians that are looking to rent with less risk and uncertainty.
There’s a strong case for the benefit to Australia’s housing landscape that these operators can provide, but the challenge that many face in scaling their businesses is that the systems are still largely set up to cater to build-to-sell.
Across the panel, that was something that participants overwhelmingly said they would like to see change.
Mr Hurst noted that it can be extremely hard to get BTR projects to stack up for institutional investors, with rising construction costs and a very different pay-out than in the build-to-sell environment.
The investors that are prepared to invest, he said, are roughly “split between capital that wants to take development risk and then capital that wants to hold these assets for the long term”.
Mr Hurst and Ms Darling also pointed to regulatory issues that penalise their sectors and constrain delivery despite strong demand.
“[Student accommodation] is an asset class that is a key contributor to the economic viability of New South Wales… but it’s also an asset class that’s been very poorly treated by policy and unfit policy… we’re being punished by regulatory that actually is not fit for purpose,” said Ms Darling.
Moreover, Ms Russell commented that long and uncertain planning approval timelines had in effect blocked the retirement-living provider's ability to keep their product up-to-date and increase the number of homes they can offer at popular locations.
“We’ve got a couple of sites that sit within the Sydney metro area, and we’ve been spending the last 10 years trying to get approval to renew those,” she said.
Mr Brady also noted that the development of land-lease estates is effectively prohibited in the Greater Sydney area, constraining the role that land lease providers can play in Australia’s most populous state.
As Ms Darling put it, all these operators are hoping for future changes that might enhance their ability to play a bigger role in solving Australia’s housing challenges, and deliver a “regulatory environment that’s fit for purpose, that enables capital flow”.
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