Govt turning to foreign investors to increase supply of rental housing
The Government will introduce legislation to make it easier for overseas investors to invest in build-to-rent (BTR) developments in New Zealand, a decision expected to be “music to the ears” of the country's fledgling BTR sector.
Housing and Associate Finance Minister Chris Bishop said Cabinet had agreed to make changes to the Overseas Investment Act 2005 to better support BTR housing developments.
Currently, the act treats BTR projects like ordinary residential property, which makes it hard for overseas companies to receive investment approval. However, the Government has decided to create a new streamlined consent pathway that will allow investors to buy land with the intention of constructing a new BTR development or purchasing an existing one. The government has also agreed that a ministerial directive letter will be issued to provide immediate certainty that New Zealand is open to foreign investment in BTR developments.
“Build-to-rent developments are a relatively new form of rental housing in New Zealand, which are common overseas but rare in New Zealand,” Minister Bishop said.
“They consist of purpose-built, medium-to-large scale rental properties developments, often within walking distance to key transport links. The developments tend to be professionally managed, with good amenities, and offer residents a variety of lifestyle options. These types of developments often offer longer leases to tenants, making them a popular choice for renters. They are often financed and operated by institutional investors and developers (such as pension funds).
“Build-to-rent housing offers an opportunity to increase the supply of secure, affordable and quality rental developments in New Zealand, placing downward pressure on rents. The sector is currently small in New Zealand with only 22 registered developments, but there is great potential for growth.”
BTR is the “obvious lever to pull”
Property Council Chief Executive Leonie Freeman said the Government's decision “will be music to the ears of the nation’s build-to-rent sector”.
Ms Freeman said Property Council research showed that, with the right policy settings, developers could build up to 25,000 BTR homes in the next decade.
“Property Council has been working constructively with both the current Government and its predecessor to ease the barriers to investment in this exciting new housing model for close to five years,” she said.
“We are delighted that the Government has followed its counterparts in Australia and the United Kingdom in enabling build-to-rent housing. Overseas investment is critical to unlocking the untapped potential of build-to-rent. If we want to deliver much-needed new homes for Kiwis, at speed and scale, this is an obvious lever to pull. Build-to-rent 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.”