Melbourne housing crisis: Build-to-rent schemes could help affordability

HOUSING model which guarantees residents long-term rent could be the answer to Melbourne’s house affordability squeeze.

So-called “build-to-rent’’ schemes offer renters certainty of their lease, allowing them to make modest changes, such as painting kids’ bedrooms and hanging pictures, to make the home feel like their own.

Experts believe a cultural shift to Australians’ commitment to home ownership would be required, as well as removing the negative stigma to renting.

The scheme is driven by superannuation and other investment funds which build properties, but instead of selling them off at completion, offer families long-term leases.

Sophie Dimond, 21, and Aaron Leckie, 21, with their daughter Violet, 15 months, rent in Melton West. Picture: Ian Currie.

PwC partner Amy Brown said more households in Melbourne own their own home compared to New York and London.

“So why does there seem to be a need among Australians to own over renting, at almost any cost?’’ Ms Brown said.

She said renting was often stigmatised as a last resort or a short-term option, and that a combination of weak tenancy laws and the fact most rental homes were owned by individual investors meant the tenant had few rights.

“(This) makes renting a very unappealing place to be,” Ms Brown said, but suggested Australians could attain their Great Aussie Dream of a stable home while still renting.

“We need to have a new conversation about how to provide renters with the stability they need to make renting a viable and attractive option for living — a conversation about the ‘Great Aussie Rental Dream’.”

PwC analysis revealed one third of Australians were in the rental market with the numbers increasing in major cities and among young people.

Build-to-rent programs have had success in the UK, Germany and the US. In America, build-to-rent is largest real estate class and generates more than $215 billion in revenue a year.

In the UK, it has proved to be beneficial, with rent increases linked to inflation.

“This has provided security for renters and the long-term tenancy, and has allowed them the scope to make the property their own — from painting rooms to small-scale amendments to the property,’’ the report said.

For young couple Sophie Dimond and Aaron Leckie, both 21, who dream of owning their own home, the build-to-rent scheme could be a realistic option.

The Melton couple and their one-year-old daughter Violet have been renting for over 2½ years.

“I’m constantly aware that we live in someone else’s property,” Ms Dimond said.

“If the homeowners decide they want to move in one day, we as tenants would have to leave.

“In an suburb with so much housing development, the concept that we might have to move out before we’re ready is what worries me.

“Houses being built to rent permanently are a great idea. They already exist in the UK and other parts of the world — Australia needs to catch up.’’

Ashton de Silva, Associate Professor at RMIT’s Centre for Urban Research, said superannuation funds were already being invested in commercial property, so a precedent existed for a residential model.

Super funds would seek guarantee of return and protection from property market fluctuations, he said.

“Many people already do stay in the one rental property for a long time but there needs to be more security and guarantees from both sides — landlord and tenant,” he said.

Basic economic modelling showed the repayments on interest-only loans equated to a rental payment, he said.

Published in The Herald Sun

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