Build-to-rent not all it’s built up to be
Despite action by the NSW Government, build-to-rent properties are generally not affordable for older renters on low incomes. The most recent build-to-rent project in Sydney’s Olympic Park costs $85 a week more in rent than a similar property in the normal private rental market and would leave a single pensioner with less than a dollar a day to live on.
Build-to-rent properties often provide better quality housing and more secure tenure for renters. However, this comes at a cost. To lower the cost of build-to-rent properties, the NSW Government will halve land tax for the next 20 years for developments started on or after 1 July 2020.
Currently, a one-bedroom build-to-rent unit in Sydney’s Olympic Park starts at $535 per week. Estimating the land tax at premium rates for this apartment, assuming it is one of fifty in a block on a land surface of 4,000 square metres valued at $4 million, the total land tax would be $80,000 annually overall, or $1,600 annually per apartment. The NSW Government’s discount reduces this to $800. If this discount is used solely to reduce the weekly rent of an apartment, the rent decreases from $535 per week by $15 to just under $520 a week.
Currently, single pensioners pay 25 per cent of their pension to live in social housing in NSW. That comes to around $111 a week. Apply CRA and the weekly rent is $76.
Clearly, land tax cuts alone will not only fail to reduce the rent of build-to-rent properties, they will not materially make rents more affordable to anybody.
In the US and Europe, Governments have provided funding to make build-to-rent housing secure and affordable. Governments in Australia need to step up. One way of doing that is by building more social housing. That, surely, is a more effective way of meeting the demand for affordable and secure housing than by giving tax breaks to developers for build-to-rent housing.