Improving the rental pool
A‘‘build-to-rent’’ model that provides new rental houses in Britain could be one answer to New Zealand’s inadequate rental stock, an industry group has suggested.
About 35 per cent of New Zealand households living in rental accommodation, and the number of people under 65 years old in rental housing is set to double between 2013 and 2018.
New Zealand has relied on Ma and Pa landlords owning standalone dwellings. But a report by the Building Research Association suggests the ‘‘build-to-rent’’ concept and REITS (real estate investment trusts) as alternatives.
REITS, which are common in the US apartment market, act like a syndicate, offering investors a slice of a rental portfolio rather than having to own an entire rental property.
‘‘REITs are common in New Zealand for commercial-type construction; however, to the best of my knowledge, we have yet to look into it as a solution to residential housing choices,’’ the report’s coauthor, Matt Curtis said.
In the UK, ‘‘built to rent’’ companies or sometimes local councils constructed housing expressly for rental purposes. The houses were either kept and rented out, or sold to another property manager.
They were not to be confused with ‘‘rent-to-buy’’ schemes, which allowed tenants to eventually buy their homes.
Curtis said new models of investment needed to be considered because most of New Zealand’s rental stock was old.
‘‘It’s not a rosy picture across New Zealand in terms of the building stock.’’
Previous BRANZ research into health conditions in rentals showed that they were not as well maintained or well-built as privately owned houses.
‘‘Having said that, there are a lot of privately owned houses that are really poor quality and uninsulated as well.
‘‘The best way in my view of improving the rental stock is to increase what’s at the top, what are we aiming for and that’s more houses built to the current building code.’’
In many cases overseas, tenants were given the chance to fit-out the houses at their own cost, in return for long guaranteed tenancies, in a similar manner to commercial properties.
The closest New Zealand came to these models was social or state housing, rather than for profit, Chris Litten, BRANZ’s general manager of industry research, said.
‘‘This isn’t social or state housing, this is providing affordable rental properties for people whose choice is to rent.’’
Another idea to lift the quality of rental properties was an energy performing certificate for rentals, not unlike to the ratings given to appliances.
Curtis said it was hard for tenants to tell at first blush how warm and dry a rental was.
An energy rating would benefit them and perhaps provide an incentive to landlords.
‘‘It’s hard to justify improving your rental house because they can’t show people it’s better than anywhere else.’’
According to BRANZ, over half of New Zealand’s current rental stock required less than $5,000 worth of minor repairs to bring it up to the same standard as owner-occupied houses.
But about half of the tenants surveyed said that they could not afford to pay any more in rent.
And with 35 per cent of households now in rental accommodation, improving the rental stock was vital.
‘‘We’re expecting to see a whole lot more people in rental accommodation and a changing demographic in rental accommodation as well,’’ Curtis said.