WHY BUILD-TO-RENT-TO-OWN WOULD WORK IN REGIONAL ECONOMIES Build-to-rent-to-own has the potential to support the development of housing at scale in a way that aligns with the needs of regional communities.
Employers in regional centres could use build-to-rent-to-own to incentivise workers who come to work on projects such as constructing solar farms to stay in the community. Our research noted that businesses are purchasing housing to secure a workforce, as well as hiring entire pubs. During stakeholder interviews, it was also relayed to us that regulatory loopholes in caravan parks in NSW are putting pressure on regional local councils. Communities are being established, with councils unable to levy adequate rates to service them. Build-to-rent-to-own would offer workers the opportunity to build housing equity and provide a strong incentive to stay in a regional community.
Build-to-rent-to-own offers an alternative to the‘ build to sell’ model. It challenges the status quo where only those with the capacity to own a home or secure finance can access the benefits of home ownership.
Our research identified that there are challenges with bank lending in small regional towns, as regulatory oversight of liquidity effectively incentivises lending in the major cities. Build-to-rent-to-own may provide an alternative to traditional bank lending and therefore support the rejuvenation of regions.
A key challenge is that the housing supply chains in the regions are different to cities. Our research identified that establishing build-to-rent projects in regions may therefore be built in a different way, for instance, incrementally building dwellings or smaller low-rise developments or partnerships with prefabricated building manufacturers.
CONCLUSION Build-to-rent is in its infancy in Australia. Over the coming decade, with supporting financial incentives and a financial track record, it can be expected that institutional investors- including Australian superannuation funds- will allocate capital to new projects. Ultimately, build-to-rent will become part of the housing landscape.
However, as it stands, we can expect that build-to-rent will mainly benefit major cities.
UTS’ proposed build-to-rent-to-own model has the potential to drive housing investment in the regions in a way that aligns with institutional investors and communities. For institutional investors, the benefit of build-to-rent-to-own is to secure long-term tenants that want to reside in a development. This reduces the financial costs of resident turnover and increases long-term risk-adjusted returns. For residents, the ability to own a share in the corporate entity that owns their housing development offers a way of building an ownership stake in their home without a bank mortgage. Over time, the ownership of a build-to-rent-to-own development would transition to the community, releasing capital for superannuation funds to invest in future projects.
For regional communities, the build-to-rentto-own model offers the ability to attract institutional investors who can invest at scale. Institutional investment in Australia’ s regions will have multiple benefits, including widening the opportunity for increased housing supply and supporting Australia’ s transition to net zero through investment in renewable energy across renewable energy zones.
REFERENCES
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ABOUT THE AUTHORS
GORDON NOBLE Gordon Noble is an Industry / Professional Fellow at UTS Institute for Sustainable Futures where he was previously a Research Director. Gordon co-authored the Australian Sustainable Finance
Roadmap released by the Australian Sustainable Finance Initiative in 2020. He is currently an Associate Director at the Committee for Economic Development of Australia.
CAITLIN MCGEE Caitlin McGee is a Research Director at the UTS Institute for Sustainable Futures, where she co-leads the housing research. Her research into sustainable, climate resilient, affordable and community-led housing has informed policies and programs for all levels of government. Caitlin was an author of several award-winning guides, including the Australian Government ' s ' Your Home ' guide to sustainable housing.
DR MATTHEW DALY Dr Matthew Daly is a Research Principal with the Institute for Sustainable Futures, focusing on sustainability and innovation in the new and existing housing sectors. His transdisciplinary research tackles complex and systemic problems in the housing, energy and sustainable built environment space. ie City Council.
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