BTR "Build-To-Rent" New Amendments To Help Curb Sydney Housing Crisis
The term "Built to Rent" (BTR) pertains to residential properties that are professionally managed and owned by a single entity, as defined by the NSW Government Planning. The primary objective of expanding the rental housing market is to increase rental options in desirable neighbourhoods. There are indications that more of these apartment buildings may emerge in Sydney's central business area, as suggested by a planned modification to the zoning code.
Australia's rental market is under considerable strain, particularly in Sydney, where the rental vacancy rate has dropped to less than 1.11 percent, according to the latest data. In response, the Sydney City Council is actively advocating for changes to the Sydney Local Environmental Plan 2012, aiming to alleviate the cost of renting for Sydney residents. The proposed modifications aim to encourage the development of additional Build-to-Rent (BTR) and co-living spaces throughout the city.
Minister of Housing Julie Collins has announced the government's goal to increase housing stock by 1.2 million homes by 2029. As part of this initiative, application fees for build-to-rent projects will be reduced, creating a more predictable foreign investment framework. This reduction is anticipated to stimulate the development of such projects nationwide, providing long-term rental options for Australians, according to Minister Collins.
Real estate developers are expected to receive approval to add between 20 and 75 percent more floor area for specific Build-to-Rent (BTR) projects under new legislation. This law will apply to both BTR conversions and new constructions, including applications filed within five years after the official adoption of these regulatory changes
Sydney Lord Mayor Clover Moore acknowledges the success of build-to-rent models in addressing housing crises overseas. She notes that these developments provide stable and secure accommodation for renters.
“We’ve seen build-to-rent work well overseas to help address the housing crisis, with these types of developments providing stable and secure accommodation for renters,” she stated.
While the Build-to-Rent (BTR) initiative has the potential to significantly impact Sydney's rental landscape, it seems to be less attractive to foreign investors compared to alternative assets, primarily due to lower rates of return. An analysis by EY for the Property Council in 2022 revealed that Sydney had only 315 operational BTR units and 430 units under construction, while Victoria had 1,711 operational units and 4,938 units under construction during the same period.
These developments are occurring alongside a declining demand for non-premium office spaces in Sydney's central business district (CBD), with office vacancy rates hovering around 14 per cent, as reported by the council.