Mirvac tackles housing affordability with build-to-rent

Mirvac tackles housing affordability with build-to-rent

17 August 2017

Property giant Mirvac Group plans to develop Australia’s first major build-to-rent apartment scheme with the backing of major superannuation funds in an attempt to ease stress on the housing market, reports The Australian.

The novel scheme would see institutional investors back Mirvac to build and hold units in capital cities and reap returns from tenant rentals.

“Mirvac believes that the time has come for an institutional build-to-rent sector in Australia to provide better certainty and quality to tenants,” Mirvac Group CEO Susan Lloyd-Hurwitz told The Australian.

Last February, the company unveiled a 690-apartment development at Sydney Olympic Park, and executives said parts of this four-building project could be suited to multi-family accommodation.

Ms Lloyd-Hurwitz declined to confirm that the Olympic Park development was the chosen site, but added: “We have earmarked a potential site in Sydney as the first opportunity.”

Earlier this month, an Australian Housing and Urban Research Institute report revealed that 1.3 million—or nearly 14 per cent— of Australian households have been unable to access market housing or are experiencing rental stress. This number is expected to rise to 1.7 million households by 2025.

According to The Urban Developer, the Property Council of Australia’s chief of housing, Glenn Byres, said that allowing managed investment trusts to develop or acquire affordable housing sends a positive signal to the industry but that it was still early days for build-to-rent.

The Federal Government is encouraging investment in new and existing affordable rental housing by increasing the capital gains tax discount from 50 per cent to 60 per cent for affordable housing from 1 January 2018.

And from 1 July 2017, managed investment trusts (MITs) are allowed to develop or acquire affordable housing to hold for rent.

The Property Council of Australia said that these reforms offer foreign and domestic investors, including superannuation funds, new long-term, stable investment opportunities in the property sector and may direct more investment into affordable housing.

“These are good first steps – and we see this as a sign the government understands it will need to progressively re-gear the policy settings to encourage more investment in new rental market product,” Mr Byres said.

“But the Federal Government will need to go a lot further to get the scale of institutional investment required for build-to-rent product.”

Last Friday, the AFR reported that the NSW government would join with the NSW Property Council to establish a working group to look at creating a “build-to-rent” housing sector in NSW.

“Creating a sustainable, affordable housing market in NSW means providing a diverse range of housing options and build to rent could be a viable choice to provide certainty and security of tenure to people who want to rent rather than buy,” said Property Council NSW executive director Jane Fitzgerald.

On Monday this week, the AFR also reported that the NSW government had appointed Mission Australia Housing, Frasers Property Australia, and Citta Property Group to redevelop the 8.2-hectare social housing Ivanhoe estate in Macquarie Park, 13 kilometres north of the Sydney CBD.

The project will feature more than 3000 dwellings with at least 950 social housing dwellings and 128 affordable homes.

The NSW government said the project will be delivered in stages over 10 to 12 years, with work expected to start in late 2017. The first stage will kick off with 259 social housing units, expected to be completed three years after approval.

The Ivanhoe project is the first of five projects to be delivered under the Government’s Communities Plus program. The program hopes to deliver up to 23,500 social and affordable dwellings, and up to 40,000 private homes over the next 10 years. Other major sites include Waterloo, Arncliffe, Telopea, and Riverwood.

Meanwhile, the City of Sydney has decided to sell three of its city depots at Zetland, Redfern, and Alexandria to affordable housing providers. The Redfern depot could reportedly provide more than 100 affordable housing sites.

Lord Mayor Clover Moore declared: “The sale of surplus operational and commercial land will enable us to further invest in our City’s future, while helping to provide affordable housing in Redfern, which is so urgently needed now.”

Other local players forming vehicles to invest in housing include Melbourne-based developers Grocon and Salta, student accommodation specialist Scape, and US giant Sentinel.