The US – without the same public sector dominance that has occurred in the UK, Australia & New Zealand since the Second World War – has a long-established corporate-built & -owned rental housing sector, commonly called multifamilies.
On a graph, the US stock looks like it hasn’t grown much since 2012, but the near-flat line equates to nearly 2 million homes (look at the left-hand column).
On the same graph (but referring to the right-hand column), UK build-to-rent accommodation has grown from zero to 45,000 over those 7 years, Australia has begun the exercise (217 homes so far, 2665 in the pipeline) and New Zealand’s low number of small developments (96 homes so far, 174 in the pipeline) doesn’t yet register.
But there is growing support for both this concept and for development led by social housing organisations, which was evident at a Property Council seminar on housing in February.
The makeup of the sector differs markedly between countries. The US, which I’d thought would have far more 3-bedroom units given the “multifamily” tag, has only 9% of its stock of 20.8 million units in that category. 45% are 1-bedroom, 42% 2-bedroom.
The UK is more evenly split, including studios at 16%, which may have arisen through the development of corporate-owned student accommodation alongside an increase in family tenancies.
In Australia, build-to-rent has been almost entirely 2-3 bedroom homes. In New Zealand, the spread is more even between 1 & 3 bedrooms. Studios don’t feature in either country’s developments.
US corporate developers & owners include some of the big names of finance such as Goldman Sachs, Morgan Stanley & JP Morgan, and 2 of the big names of commercial portfolio investment, Blackstone & Brookfield.
CBRE NZ head of research Zoltan Moricz says in a research paper on the overseas markets that 9 million of the UK’s 24 million dwellings are rentals, and just under half the rentals are social rentals, many of them built between 1945-80 as council flats, “structured as secures tenures at reasonable rents for the working class”.
However, in 1980, the Housing Act gave council tenants the right to buy their property at a discount to market value, reducing the pool of social rental stock and making way for a resurgence in private rental construction.
Mr Moricz said conversion of the London Olympic Games village into 1400 affordable rental units was the first major build-to-rent project in the UK: “This was effectively a largescale experiment that worked. The success of the Olympic village conversion encouraged other developers & market participants to consider entering the build-to-rent race, and the size of the build-to-rent pipeline has since exploded due to local & national government support, having been identified as a means to increase the supply of housing in areas that were becoming increasingly unaffordable.
“Stock has grown around 20-fold to approach 30,000 units, with a pipeline of more than 100,000 units either in planning or under construction.”
CBRE, February 2019: Prospects for build-to-rent in NZ
Build-to-rent seen as a developing asset market
US multifamilies long-established with better investor support
Support structures the big question for multifamily growth in NZ
How does this sector stack up?
Attribution: CBRE report & releases.