New build-to-rent plan expected to put downward pressure on rents
The government will amend the Overseas Investment Act 2005 to make it easier for foreign companies to invest in local build-to-rent (BTR) projects.
Under the current system, foreign companies struggle to secure investment approval for BTR projects, because they're treated like ordinary residential developments and therefore require ministerial direction. However, under the new system, the Overseas Investment Act will be amended to create a streamlined consent pathway that will allow investors to purchase land with the intention of building new BTR developments or purchasing existing ones.
The Government has also decided that a ministerial directive letter will be issued to provide immediate certainty that New Zealand is open to foreign investment in BTR developments.
Housing Minister Chris Bishop said BTR housing offered a chance to place downward pressure on rents by increasing the supply of secure, affordable, quality rental developments.
“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,” he said.
“The sector is currently small in New Zealand with only 22 registered developments, but there is great potential for growth. New Zealand’s complex overseas investment laws are holding the build-to-rent sector back.”
Minister Bishop said BTR developments were often financed and operated by institutional investors and developers, such as pension funds, and were common overseas.
“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.”
Property Council endorses government’s plan
Property Council Chief Executive Leonie Freeman predicted BTR would transform the experience of renting in New Zealand, and said policy settings developers could build up to 25,000 BTR homes in the next decade, provided the right policy settings were in place.
“The previous approach to overseas investment for build-to-rent is broken. Current provisions within the Overseas Investment Act treat build-to-rent like ordinary residential property and require ministerial direction for investment. This uncertainty discourages overseas investors from entering the New Zealand market, making it challenging for operators to access development funding and damaging overall market liquidity,” 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.”