Overseas investors to boost build-to-rent sector

New legislation to make it easier for overseas investment in build-to-rent housing developments will fuel the fledgling sector, the Property Council says.

Housing Minister Chris Bishop announced on Thursday that the Cabinet had agreed to make changes to the Overseas Investment Act to better support build-to-rent housing developments.

Build-to-rent developments are mediumto large-scale multi-unit residential buildings which offer long-term rental agreements, and are professionally managed.

They are usually financed and operated by institutional investors and developers, such as pension funds. Homes in the building are for renters, and are not sold to individual owners.

While it was a relatively new form of rental housing in New Zealand, with only 22 registered developments, they were common overseas and there was great potential for growth, Bishop said.

“Build-to-rent offers an opportunity to increase the supply of secure, affordable and quality rental developments in New

Zealand, placing downward pressure on rents.”

Advocates for build-to-rent have long pushed for legislative change to help the sector scale up, and on the campaign trail National promised to exempt build-to-rent developments from the Overseas Investment Act, in the same way retirement villages and student accommodation are.

When making the announcement, Bishop said New Zealand’s complex overseas investment laws were holding the sector back.

This was why the Cabinet was amending the legislation to create a new streamlined consent pathway that allowed investors to purchase land to either develop a new build-to-rent development or purchase an existing one, he said.

The Cabinet had also agreed that a ministerial directive letter would be issued to provide immediate certainty that New Zealand was open to foreign investment in build-to-rent developments.

But the Government remained committed to the ban on overseas investment into existing residential housing and land in New Zealand, unless the investor was eligible for a consent, he said.

“The changes we are announcing today are all about adding to the supply of housing and making it easier for Kiwis to get into a warm and dry home.

“There is no silver bullet to solving New Zealand’s housing crisis, so we need to take every option available to us to get more homes built.”

Property Council chief executive Leonie Freeman said the new legislation would remove the barriers to greater overseas investment in build-to-rent housing.

While the council was yet to see the full scope of the amendments, the announcement would be “music to the ears” of the nation’s build-to-rent sector, she said.

“The previous approach to overseas investment for build-to-rent is broken, and discourages overseas investors from entering the market, making it challenging for operators to access development funding, and damaging overall market liquidity.”

The council was delighted that the Government had followed its counterparts in Australia and the United Kingdom in enabling build-to-rent housing, she said.

“It is the fastest-growing type of housing in places like the United Kingdom, offering tenants increased rental options and new ways of living.

“But overseas investment is critical to unlocking its untapped potential. If we want to deliver much-needed new homes for Kiwis, at speed and at scale, this is an obvious lever to pull.”

Research by the council showed that with the right policy settings in place, such as the newly announced amendments, its 550 member companies could deliver up to 25,000 build-to-rent homes in the next decade, Freeman said.

“It will transform the experience of renting in New Zealand. Over time, Kiwis will have the option to choose between thousands of new, high-quality rental houses.”

The council was launching a build-torent tracker on March 21, she said. “It will track build-to-rent projects that have been completed, are under construction or in the pipeline via an online platform.”

There are already about 2066 homes in 48 developments nationwide, and about 1076 homes across eight projects in the pipeline, according to the most recent CBRE figures.

Some build-to-rent developments in the pipeline include Kiwi Property’s 295 apartment complex at Auckland’s Sylvia Park, due to open in May, and Simplicity Living’s six developments around Auckland, two of which have opened.