Cracking the affordable ‘Build to Rent’​ Nut

In Australia, around 500,000 families live in housing stress each week. They do without necessities and make choices every day about what they or their kids will need to forego just in order to pay the rent and make ends meet. Even worse, 100,000 people sleep rough each night without shelter, a bed, or a simple door to close to give them sanctuary. These statistics are dire, particularly when you think about the country we live in – Australia, we are rich and we are resourceful. Surely these issues – this housing crisis – is something we can solve, not just simply manage.

Companies like BHC (and there are many great community and affordable housing companies throughout Australia) have built and constantly strive to build housing that is truly affordable for people on lower incomes. We pull together every dollar and every lever available to us – land, grants, equity, planning provisions, partnerships. But the truth is that it is nigh impossible to achieve the quantum and scale of affordable housing needed in this country without significant, co-ordinated government backing and subsidy.

I recently spoke on a panel at the CHIA Everybody’s Home Conference on the topic of Built to Rent (BTR). The panel heard and discussed successful UK examples and details of the recent Mirvac BTR development in Sydney’s Olympic Park. Mirvac’s proposed BTR development sounds majestic, and desirable – I think I would like to live there myself – I’d consider foregoing home ownership for long term secure rental accommodation that provides me with a real lifestyle alternative – great location, great design, concierge to pick up my parcels, great community and social life within the development – It sounds like a dream!

This model will, no doubt, be successful, provide more stock to the market and offer a genuinely different and unique lifestyle offering – which will, I’m sure, suit millennials, downsizers, and people who don’t want the tie of a mortgage in their lives.

Affordable, however, it is not.

In addition to this more “up-market” BTR offering we need to devise an affordable BTR that provides long term safe secure affordable rental for people who are not flush with cash. We need this housing on scale, normalised in every suburb, as a real option long term to contribute to closing that 500,000 gap. We need this to give long term security and affordability to those 500,000 families living hand to mouth in the current Australian housing landscape.

So why not just get to it and build this affordable BTR? The issue is that BTR is funded by investors and investors require a return. The rents charged in a more up-spec BTR will be high enough and set so as to reach the investor requirements, but affordable rents are low and just don’t cut it in terms of reaching the yields required.

The challenge as I see it is for community organisations, governments and investors to work together to find a way to close this yield gap, crack this nut. We need to unlock the potential of large scale institutional capital for the benefit of those 500,000 mums, dads, kids, people whoever they are – we all know someone and we all know who we are talking about. They deserve the stability and the bedrock of affordable long term accommodation and a place to call home.

BTR has been successful overseas but wouldn’t it be fitting and ground breaking for Australia to lead the way in terms of cracking the affordable BTR nut. It’s doable – let’s do it – and start to solve the housing affordability crisis in Australia rather than simply managing it.

 

Rebecca Oelkers
BHC – Deputy CEO and COO