The rental housing system is broken and the building-for-rent model is the best way to fix it, says a recently returned property developer from Britain.
The private rental market is dominated by small individual landlords, the majority of whom own one or two rental properties.
Kent Gardner, managing director of private equity real estate firm Evans Randall Investors, said the market direction tended to be relatively short-term rather than a long-term focus on tenants.
This meant that there was poor maintenance of the buildings overall, which had resulted in deterioration of the housing stock, and that property management was often done haphazardly, he said.
* Build a dossier for “build to lease” developments
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“This leads to substandard conditions and a lack of security of tenure for tenants. The result is that the rental, and the tenants, are considered second class.
Since returning to New Zealand recently, Gardner had become an advocate for rental construction developments which he said were part of the solution to the country’s housing problems.
Rental construction involves the development of multi-unit residential buildings for long-term rentals, rather than sales to individual owners.
It has become both a major player in the rental market and a sought-after investment asset class in Europe and the United States and is currently taking off in Australia.
New Zealand is lagging behind, but supporters of the rental-building model have said the industry is set for a breakthrough this year.
Gardner said rental construction has yet to take off here because it is capital intensive with low returns, but the world has changed.
“Low return and high social impact are the holy grail of investing in 2021. In the long run, stable and low returns that make the difference are what institutional investors like me want. “
Adopting rental construction would boost housing supply and provide long-term housing that the 1.5 million New Zealanders who live in rented housing are critically needed, Gardner said.
He has embarked on several construction projects for rent. The first of these was a $ 40 million 48 apartment building located at Selwyn St in Onehunga, Auckland.
Aimed exclusively at tenants, the ARC building was due to be completed within a few months, and a website where potential tenants could pre-register their interest was due to go live this month.
Gardner said it will be a community that provides new options for tenants, while ensuring their interests come first.
“I want to bring much needed customer focus to the rental and eliminate the owner’s ‘lord’. When tenants are treated like valued long-term customers, their home really is their home ”.
The government has expressed interest in the rental construction model several times over the years and the Property Council, which was part of a reference group from the Ministry of Housing and Urban Development, recently said that progress had been made.
However, after the government’s housing policy was announced in March, concerns about interest deductibility arose.
Gardner said developers of building for rent must be able to deduct interest to ensure the industry continues to grow.
“We want the government to recognize the impact that rental construction could have and put in place policies that help the sector to grow and develop. “
But the most important thing he could do was provide better access to land in high-quality central locations for large-scale rental developments, he said.
When completed, the ARC would be one of the largest such developments in the country, but it wouldn’t be the only one. This was one of many rental construction projects.
New Ground Capital was working on 487 new homes in Auckland and Queenstown, 176 of which would be kept on long-term rentals. He had already completed several construction developments for rent.
The owner of the Kiwi Property shopping center planned to develop rental housing at its Sylvia Park and Lynn Mall shopping centers, while the Du Val Group raised funds to set up rental developments.
Smaller-scale developments, like the award-winning 26 Aroha at Sandringham, were also starting to appear across the country.