Build to rent: more than bricks and mortar?

People have been building unit blocks that they own outright and rent to tenants for years, so BTR is nothing new. But from an asset class perspective, it’s a relatively new concept for the Queensland market and one that major developers are pursuing strongly in 2021.

As a planner, I’ve been involved in approvals for ‘typical’ medium-high density residential developments in South East Queensland for years. But as the market turns its attention to BTR investments, a new definition of build-to-rent and what such developments should incorporate is emerging.

The ‘new’ build-to-rent: a home, not a house

COVID-19 has seen a global shift in perspectives about what’s important in our homes, and what we need from them as we spend more time in them. Whether you’re an owner or a renter, liveability and amenity are key drivers.

While the trend towards enhanced amenity certainly pre-dates the pandemic, COVID-19 has definitely reinforced its importance. New build-to-rent projects are responding to this need, and creating what I believe is a newer, better standard for apartment living.

Security and experience are everything

Rental apartment buildings are renowned for having high occupant turnover, which isn’t desirable from an owner's perspective. There’s nothing worse for an owner than an empty investment property that’s costing you money and providing no return.

On the flip side, renters face the ever-present fear of an eviction notice should an owner decide to sell, move in themselves, or hike up the rent.

While not all people have a bad renting experience, an underlying awareness of these risks has a flow-on effect. Renters may be less willing to engage with neighbours, socialise and make friends, because who knows if their lease will be renewed in 12 months’ time?  

To improve occupancy rates, reduce turnover, and improve renters’ experiences, build-to-rent developers understand that their buildings must be better, and offer more.

The types of things you will see in these new build-to-rent projects include:

• Onsite management: A property manager who is there all the time to talk with face-to-face about anything you need

• Onsite maintenance: No waiting to get something fixed. 
  

• Better facilities and amenities: A focus on communal spaces. You might find things like co-working spaces, private dining rooms, and bookable poolside cabanas not seen in traditional apartment buildings.
  

• Long-term tenancy options: As the owner won't be selling, renters can enjoy a greater feeling of housing security and integration into the community.

• Ability to de-couple your carpark from your unit: No longer does your unit automatically come with a carpark. Parking spaces are an additional cost to rent so there is an opportunity to reduce your rent if you don't need a space, or secure more spaces if you're as car enthusiast. Given the location of these projects, you'll probably also find public and active transport on your doorstep. 
  

• More activities and events in the building: Provides a sense of community addresses the 'loneliness factor' that is becoming more of a problem in our cities

How can we make build-to-rent a success in Queensland?

I think the ‘new’ version of build-to-rent is a great addition to the Queensland market. It provides housing diversity and the option of long-term rental for those who want it—something that’s almost completely missing right now. 

However, BTR does raise some practical issues when it comes to planning and project feasibility. Based on my experiences working on one of the first new build-to-rent proposals in Brisbane, my observations are:

• We need to create a distinction between ‘old’ build-to-rent developments, and the ‘new’ ones that incorporate all the benefits above. Perhaps onsite management could be a way to create this distinction?

• Planning parameters need to be updated to accommodate this new type of BTR development, what it’s designed to achieve, as well as the benefits it could bring. There is a need for planning schemes to consider specific BTR provisions. Key considerations for these would be:

  • Parking rates
    Given that parking is decoupled from units and a separate expense, lower carparking rates may be appropriate and other sustainable transport options should be included and promoted.

  • Open space and amenity
    Provisions should require a greater amount of communal open space and building amenity. While some private open space is still required, the value of communal spaces in these projects is vital in creating places that people will want to live in long-term.

  • Location
    Build-to-rent developments are best suited to transport-rich or central locations. These types of buildings are more suited to areas where the residents have easy access to work and lifestyle amenities. Ensuring planning controls that promote BTR in the right locations is important.

  • Scale
    Build-to-rent projects are generally large scale to spread the cost of amenities and management across the project. Onsite management of a building by a single owner/operator, and potentially putting restrictions on separate titling of apartments are ways to ensure BTR can remain a separate asset class.

  • Sustainability
    Green buildings are a natural fit for build-to-rent as the lifecycle costs of operating these buildings are key to their overall feasibility. Build-to-rent proposals should have higher sustainability targets than traditional units, as the lifecycle cost is more relevant to the developer.

Opportunities abound in the build-to-rent space

COVID-19 is facilitating another big shift in our local market—the great migration of people from the southern states to Queensland. This is putting upward pressure on housing prices and reducing rental vacancy rates significantly.   

Build-to-rent offers a wide range of benefits. Another big opportunity to explore is the capacity to integrate affordable and accessible housing options into these projects. The early projects delivered as part of the Queensland State Government’s pilot program are offering subsidised rent for tenants who meet certain criteria.

What if a portion of any new build-to-rent building was used to provide affordable housing for low-income earners, accessible housing, or specialist disability accommodation? This could help us not only solve some of the issues we are facing in our rental market but contribute to the creation of more equitable and diverse communities while we’re at it.