9 Sep 2019

Building to rent: the pros and cons

From Afternoons with Jesse Mulligan, 2:23 pm on 9 September 2019

As the government cuts back on state housing – and more people choose to rent – Massey University researchers are investigating New Zealand's new rental landscape.

Residential building. (File image).

Photo: 123RF

Housing that is 'built to rent' usually consists of multi-unit residences – such as apartment blocks – with recreational spaces or gardens, says White, author of the most recent Massey University Home Affordability Report.

“You see apartment blocks going up and they’re usually untitled and sold off to owner-occupier or they have some investors.

“But in this case, you’re building a multi-unit property and you intend on renting them all out and remaining as a single asset under management with tenants rather than being separated out in terms of ownership.”

This may be the best time to expand the rental sector, White says, as rental demographics are growing and changing and some New Zealanders are renting for longer.

“People in Auckland, in particular, are choosing to rent for a number of reasons. But the New Zealand rental market in the past has tended to be the same housing stock as houses that people own, and they seem to be tangible between the two classes – the house they occupied turns into a rental property or vice versa.”

David White, senior tutor at the School of Economics and Finance, Massey Business School

David White, senior tutor at the School of Economics and Finance, Massey Business School Photo: Massey University - Te Kunenga ki Pūrehuroa

The NZ Housing Satisfaction survey showed 18 percent of rental households were 'dissatisfied' or 'very dissatisfied' with their dwelling, compared with 5 percent of owner-occupiers.

Fifty percent also report major problems with their rental accommodation.

The group with the highest rates of dissatisfaction were families with children, with 62 middle-aged solo parents reporting major problems with their rental dwelling, White says.

“The more rentals units we can have available and the better quality of those units, then I think it’s better for all of the market.”

The government’s push to improve the standard of rental accommodation – via mandatory insulation, smoke detectors and ventilation – has been an incentive for the private sector to follow suit and aim for better quality, White says.

But property developers also have to think about returns from rentals.

“If you’re a developer and you regularly develop apartment buildings … one of the questions is because the rental market doesn’t attract GST … you can’t claim the GST back on your input like you could with an offer for a building or you could for an apartment that you’re selling.

“But it comes down to returns at the end of the day. The build-to-rent sector overseas tends to get somewhere between 9 and 10 percent better rentals than comparable properties outside of that sector."

David White and fellow Massey University professor Graham Squires have been holding seminars about housing affordability around the country this month.

Get the RNZ app

for easy access to all your favourite programmes

Subscribe to Afternoons with Jesse Mulligan

Podcast (MP3) Oggcast (Vorbis)