Our rental market is failing, and we must take action now

Leonie Freeman is chief executive of the Property Council, which connects over 10,000 property professionals and 550 member companies.

OPINION: If we all closed our eyes and imagined a well-functioning rental market, most people would envisage it would have a plentiful supply of good-quality homes. It would be a market where people could rent at a reasonable and stable price point. Renters would have choices and the opportunity to stay in their home for the long haul.

New Zealand has truly failed. This country’s rental market is unsustainable. Rents are rising, with a growing shortage of properties heaping pressure on the market. The properties that are available are often unhealthy and of a low quality.

Renting is an important part of living in New Zealand. For many Kiwis, of all ages and walks of life, renting is how they put a roof over their head. Tenants should be able to make their house a home, but I keep hearing stories that our rental market is failing to deliver for renters.

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Something clearly needs to change. We urgently need more and better-quality rental accommodation. Every organisation with a stake in housing, from government to the private sector, needs to take ownership of the issue and commit to practical solutions.

As Property Council CEO, I’m proud to help represent the private sector – and collectively we have a viable solution for the rental market, one that is ready to put into action today: Build to Rent.

Build to Rent (BTR) is one of the fastest-growing sources of new housing overseas and has the potential to transform the New Zealand rental market with tens of thousands of new, quality homes.

Unlike a classic property development, BTR houses are designed and built specifically as long-term rental accommodation. BTR properties are owned and maintained by specialist operators, where tenants are treated like valued customers, not money-making machines.

BTR developments typically provide for long-term certainty of tenure, giving prospective renters the stability of living in their home. In other countries, it’s common for BTR leases to be for three or more years duration with investors desiring a longer stay – but, critically, renters can depart the tenancy much earlier if they wish to.

Flexibility, quality and certainty – a combination of these factors would make a tangible difference to the New Zealand rental experience.

In addition, BTR residents overseas enjoy the benefit of living in purpose-built accommodation with a range of high-quality amenities and stable, sustainably priced rents.

BTR is a powerhouse overseas, with Australia experiencing a BTR housing boom of nearly 16,000 homes as at the end of 2021.

New Zealand has fallen behind the curve on BTR, and unworkable legislation and ongoing investment restrictions are squarely to blame. Our members estimate they could provide 6,100 BTR homes within two years, increasing to 25,000 built within 10 years if the right policy decisions are implemented with haste. New Zealand has a few small BTR projects underway, but the sector is being held back by needless red tape.

Property Council has been working for the past year with the Government to illustrate the benefits of BTR and to highlight the very real hardships facing Kiwi renters. We are also hosting an industry conference, the Residential Development Summit, to raise awareness of BTR and educate stakeholders on the benefits of BTR, and the steps needed for it to succeed in New Zealand. For BTR to truly flourish, and for renters to have stability, it is important that the Government urgently acts to define BTR as an asset class.

We are hoping that the Government recognises the transformative potential of this emerging asset class; one that comes at no cost to the Crown.

BTR is one of the obvious missing pieces of the New Zealand housing puzzle. It could be rapidly unleashed by the private sector and would deliver thousands of new, warm, dry rental homes to a housing market in desperate need of change.

This would have a massive impact on the trajectory of our rental market. More supply means less pressure on rent rates and more choice for Kiwi renters. It will also improve the lives of the most vulnerable in our society, by cutting down on social housing wait lists that are currently stretched to breaking point.

All renters deserve the ability to rent a good quality home, with stable rents and reasonable certainty of tenure. BTR can help make this happen.

Why wait?

Small legislative change, at no cost to the taxpayer, could help tens of thousands of Kiwis find a stable place to call home. The onus is on the Government to fast-track change.