Boosting rental supply is an important aspect of ensuring there are more affordable housing options available to people that need it.
According to reiwa.com figures for the December 2021 quarter, the median cost of a house rental in Perth is up to $ 450 per week and the vacancy rate is just 2.5 per cent. For units, the median rent is up to $ 410 per week and the vacancy rate is sub two per cent.
One solution to boost rental supply and get more affordable options to the market is by facilitating build-to-rent projects.
Build-to-rent offers an effective longer-term solution to many of our current and long-term rental challenges, however current taxation settings deter investment in this sector.
Put simply, build-to-rent apartment projects are designed and constructed by a developer who retains ownership of the building when it’s complete.
The apartments are then rented out directly to tenants by the developer, who also manage and maintain the complex. These developments sometimes have the backing of an institutional investor like a superannuation fund.
Build-to-rent projects differ from traditional build-to-own models, where a property developer might build an apartment complex and then sell the units off to individuals who will either choose to live in them or rent them out as investment properties.
Build-to-rent projects can offer greater affordability to the market through options such as security of tenure through longer lease periods, centralized management of the complex and a variety of onsite amenities. They can also incorporate social or affordable housing options.
To level the playing field and encourage the delivery of affordable build-to-rent projects, we require changes to federal and state-based tax obligations, specifically managed investment trusts (MIT), land tax and goods and services tax (GST).
Adopting these changes and allowing time for the market to respond sufficiently will take time, however there is solid evidence that build-to-rent projects in North America and the UK have emerged as an attractive investment opportunity for large-scale institutional investors and provided a much-needed supply of affordable rental homes.
Recognizing the important role that this emerging sector can play, the New South Wales Government has recently introduced a land tax concession for build-to-rent developments until 2040.
UDIA WA has recommended that the State Government replicate this concession and encourages the Federal Government to amend MIT and GST settings to support the delivery of build-to-rent projects in Western Australia in the upcoming State Budget.