Can Build-To-Rent Generate Affordable Housing Outcomes? A Whole-Life Costing Approach to Investment Analysis

Abstract

Doubts remain among stakeholders in academia and the housing industry about the potential success of build-to-rent to generate positive outcomes for institutional investors and affordable dwellings for low- and moderate-income households. However, a systematic study on the viability of build-to-rent to deliver affordable housing in Australia is largely rare and non-existent in the literature. We fill this gap in the literature by investigating the financial viability of build-to-rent and its potential to generate affordable rental housing outcomes in Brisbane, Australia. Using rental prices from CoreLogic (Formerly RP data) and construction-related costing data from WT Partners Australia for 2019, we apply the whole-life costing approach to investment analysis and confirm that build-to-rent can be feasible in Australia under equity financing. Also, we find that under the current regulatory regimes and market structure, build-to-rent will fail to deliver affordable housing outcomes. Moreover, providing free land alone cannot help to make build-to-rent affordable. Thus, significant public subsidy and tax concessions, particularly on Goods and Services Tax (GST) on construction-related costs, may be required if build-to-rent developments are to generate affordable housing outcomes in Australia.

Perceptions of Young Adults on the Critical Success Factors of the Build-to-Rent Housing Model in Sydney, Australia

“…For instance, an institutional investor is likely to view BTR as a financial asset, but from the perspective of policymakers, it will be expected to generate social investment returns. The literature covers wide-ranging areas across different countries, including the understanding of the asset class, assessing its financial viability, examining government intervention models, and exploring the barriers [8,26,28,[56][57][58]. A more forward-thinking school of thought discusses it in the light of an affordable housing provision [30,[59][60][61].…”

“…Socialising and cultural bounds foster a sense of community and enhance the social appeal of BTR properties. Credit availability, in turn, depends on the economic conditions and lending practices [4,28,29,60]. The availability of credit and alternative finance sources, such as crowdfunding, have profound implications for the willingness of financial institutions to advance credit for major projects.…”

“…This ranking is highlighted in Figure 3, showing each CSF's relative importance index in descending order. and lending practices [4,28,29,60]. The availability of credit and alternative finance sources, such as crowdfunding, have profound implications for the willingness of financial institutions to advance credit for major projects.…”

“…The pace at which BTR is advancing has inspired experts to draw linkages between institutional investors and the affordable rental housing supply in Australia [24][25][26][27]. However, there is no clear evidence on whether the asset class could help meet the housing shortfalls [28][29][30]. Although the literature on Australia's BTR housing industry is growing, not many empirical studies have been conducted on the operational aspect of the asset class.…”

Systematic Literature Review to Identify the Critical Success Factors of the Build-to-Rent Housing Model

“…Support for BTR projects is present within the younger population in Australia [3], yet their success is still being evaluated [7]. Previous studies such as Acheampong and Earl [8] discuss the economic feasibility of BTR projects but more insight is required into the critical success factors (CSFs) in order to achieve a clear understanding of what is to be considered while embarking on a BTR project in PRS. A thorough review of pertinent literature related to BTR can help in the identification and ranking of CSFs related to BTR.…”