Housing shortage crisis: Build-to-rent has the potential to play an important role in our housing equation - Clive Mackenzie

Clive Mackenzie expressed satisfaction about progress on the new Sylvia Park scheme. Photo / Michael Craig

OPINION

That New Zealand has a major housing problem is no secret.

Not a day goes by without the headlines including some reference to our housing shortage.

Over the past couple of weeks, we’ve heard Prime Minister Christopher Luxon say we have a “major problem” with the housing supply, the IMF tell us that housing affordability issues in New Zealand were “particularly severe” and Westpac suggest that 125,000 additional homes are needed over the next five years to meet housing demand.

How we got to this point is the topic of much hot debate, but without a doubt we have to act, and act decisively. It’s clear the measures we’ve taken to address our housing shortfall haven’t worked.

We need to do things differently - more densification, more development at the city fringe and more focus on delivering purpose-built rentals.

Ivy-covered bund and poplars between Sylvia Park and the new BTR scheme. Photo / Michael Craig

Around half of all Aucklanders over the age of 15 currently live in rented accommodation, with the figure expected to increase to 60 per cent over the next 20 years.

That’s a staggering statistic and shows the importance of delivering quality houses for Auckland’s rapidly growing rental population. At a time when home ownership is becoming less affordable and, in some instances, less attractive, it’s time to rethink our attitudes to renting.

If we’re to address New Zealand’s housing shortage, the narrative around renting, which has historically been seen as a less desirable or temporary step before homeownership, must evolve.

Rental accommodation needs to be regarded for what it is - a home where people can live their lives, raise families, and contribute to their communities. This shift in perception is crucial not only for social acceptance but also for driving policy and investment.

A new type of accommodation designed and built specifically for the needs of long-term renters - called build-to-rent - has the potential to play an important role in New Zealand’s housing equation.

While this type of accommodation is still in its early stages in New Zealand, it already makes up a significant proportion of homes in countries such the United States, where almost 20 per cent of all housing is build-to-rent.

Many New Zealanders will have only just started to learn about build-to-rent and I would urge them to consider the very real benefits this type of accommodation can make to our burgeoning crisis.

In my opinion, build-to-rent is a smart and effective way to supercharge the housing supply in this country.

The property type offers secure homes for renters with longer tenancy options available. As well as offering the flexibility of renting, tenants have stability and access to well-managed, high-quality homes in well-connected locations with a range of services and amenities.

Over the past five years, Australia has made strong inroads with build-to-rent, with 51,000 dwellings in the pipeline and about 350,000 expected to be built over the next decade.

The Australian Government has already offered incentives to the property industry to help increase the supply of new housing (specifically build-to-rent), including reducing the withholding tax rate on residential build-to-rent projects from 30 per cent to 15 per cent.

This sort of incentive will be required to bring more participants to New Zealand’s build-to-rent sector and drive the scale-up of rental accommodation this country desperately needs.

The coalition Government has recently announced several policies designed to accelerate the growth of build-to-rent, such as revising the Overseas Investment Act to make it easier to attract capital from international investors.

These amendments are a great first step, but there is more to do to put build-to-rent on a level playing field with other types of commercial property.

Two cranes were swinging on the Naylor Love site at Sylvia Park for build to rent homes but the apartments will soon be opened. Photo / Michael Craig

Enabling depreciation and/or GST to be claimed on build-to-rent accommodation would help unlock the sector and support the construction of thousands of new homes.

Given the nascent nature of New Zealand’s build-to-rent sector, the current tax take on build-to-rent is extremely small, so the out-of-pocket cost to the Government of taking these steps would be negligible.

Housing supply is not just about owning homes, although that has been Kiwis’ preference. There is also a real supply and demand imbalance between quality rentals and potential tenants; build-to-rent is a practical solution to addressing this challenge.

And as a nation, let’s embrace it as an attractive and modern way of giving more New Zealanders access to warm, dry, and healthy homes. Build-to-rent offers residents, no matter their age or stage, the security of long-term tenure and the opportunity to put down roots, be part of a community and create a home for themselves and their families.

Ultimately, Kiwis should not have to surrender the safety and sanctuary that a quality home can offer. Introducing solutions like build-to-rent simply makes sense to help alleviate the housing pains that New Zealand is facing, and will continue to face, if we do not adopt and embrace innovative new ways of living.

Clive Mackenzie is Kiwi Property’s chief executive officer.