Can build to rent work for tenants?

If build to rent will work for renters or tenants will really depend on what one means by the term “working”.
Will build to rent make affordable housing possible? Yes, and it could even provide up to 20% more affordable housing, but there is a catch for that to work. The current tax treatment in Australia makes Build to rent investment less profitable, which means in current terms, the homes may not be cheaper, until there is working tax reform. Unless that is done, the tax laws can be a big problem. Although labour has provided distinct initiatives for affordable housing, build to rent homes themselves will not directly provide affordable housing until the laws are reformed to favor commercial property investment.

In other parts of the world, it is hard to categorically say how much it cost to rent a build to rent home, since most often times, rent may be associated with some other services such as laundry, cleaning or domestic services, but until the tax reforms take effect and help ease the cost on commercial property investment, there might be a need for a higher return on the part of the investor, which will mean the rent may be somewhat high.

However, it is common knowledge that rents will drop as more people go into one build to rent investment or the other, the competition will push down the price and provide more options for renters.

This will be the case when more players enter the commercial property investment sector and force prices to fall. This can also be done in the form of a ‘filtering process’ such that an increase in the number of build to rent homes provide options for renters, thereby forcing a reduction in price since there is reduction in scarcity – freeing up more affordable stock somewhere else, property managers will reduce their rental prices, so their property will be rented.

Another reason why build to rent is good for renters is that institutional investors seek long-term passive income and are not after capital gains through property purchasing and sales, so they tend to keep their assets for long. Thus, tenants can be certain that there will not be a need to vacate premises due to the sale of the property they live in.

From a hypothetical point of view, different providers of rented apartments would create competition which will attract tenants. This is evident in the commercial sector, where the institutional investments have provided high-quality office amenity and equipment to attract tenants.

By encouraging build to rent investment and extending this idea to residential homes, better rental conditions could be created with an increase in the number of investors interested in commercial property investment. So there is possibly going to be responsive building management and even a slower increase in rent.
Ultimately, the build to rent model will work for tenants in Australia when the competition comes in among the providers. And of course, the sector needs to be matured enough in order to scale its services. In order to speed this up, the tax reforms alone may not be enough (yet), so there might be a need for subsidies instead of just the supposed withholding tax rates.