Build-to-rent is a type of medium to high-density residential development, specifically built to provide long-term rental housing.
On this page you can find out further information about build-to-rent, apply for an exclusion from the interest limitation rules for your build-to-rent land, and access application guidance and general guidance for build-to-rent tenants and providers.
Build-to-rent includes the development and long-term management of a multi-unit rental property by institutional investors and developers, often financed by institutional capital (including iwi, pension funds and retail funds) over a 50-year timeframe.
Its benefits include enabling significant dedicated rental supply, including of the most-needed typologies, enabling affordability and providing better tenant experiences and wellbeing outcomes.
Increasing rental supply: Build-to-rent
Build-to-rent represents an opportunity to increase the supply of secure, affordable and quality rental developments in Aotearoa New Zealand.
Several measures have been implemented, or are in the process of being implemented, that are likely to go some way to facilitating the growth of the build-to-rent sector and supporting overall housing objectives.
These measures include the implementation of the National Policy Statement on Urban Development and reform of the Resource Management Act 1991. To help provide the certainty needed for small and large-scale investment in build-to-rent, the Overseas Investment Office issued guidance in March 2022 regarding the application of the Overseas Investment Act 2005 for build-to-rent developments.
Build-to-rent excluded from interest limitation rules
Changes to interest limitation rules took effect in October 2021 to phase out investors’ ability to deduct interest costs against the income they make from a residential property. The purpose of the changes is to support more sustainable house prices and improve affordability for first home buyers and owner-occupiers.
To ensure continued investment in new housing supply, property development and new build properties were excluded from these rules, with new build properties exempt for a period of 20-years. You can find out more about this here: www.ird.govt.nz/property-interest-rules(external link).
In March 2023 legislation was enacted to exclude new and existing build-to-rent developments on registered build-to-rent land in perpetuity from the interest limitation rules. The intent of the exclusion is to ensure the interest limitation rules do not disincentivise investment in build-to-rent developments.
For land to be registered build-to-rent, a property must meet the requirements included in the definition of ‘build-to-rent land’, as outlined in the Income Tax Act 2007. Requirements include:
- 20 or more dwellings in a single development on a single block or adjacent blocks, held in one or more titles
- owned by the same person (a person includes a legal entity like a company)
- each dwelling is being prepared for use, available, or occupied under a residential tenancy
- every residential tenancy has the option of a 10-year term, which will enable tenants to terminate the tenancy with 56 days’ notice under section 58A of the Residential Tenancies Act 1986
- every tenancy agreement includes a personalisation policy, with reference to sections 42, 42A and 42B of the Residential Tenancies Act 1986, and includes examples of possible personalisations and the landlord’s position on the keeping of pets.
Land must continuously meet these requirements to be registered build-to-rent land.
Applying for the exclusion
A register of assets, held by Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development, is being used to ensure the tax exclusion is correctly applied to build-to-rent land. Taxpayers must apply to Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development to have land registered as build-to-rent land to be able to claim a deduction for interest relating to the build-to-rent development on the land.
To ensure alignment with the interest limitation rules, the exclusion applies retrospectively from 1 October 2021. Existing build-to-rent developments have until 1 July 2023 to meet the build-to-rent land requirements and to apply for registration. The exclusion will apply to registered new build-to-rent land (developments built on or after 1 July 2023) from the date of application for registration.
Once approved, Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development will record land on an internal register of build-to-rent assets and will share relevant information with Inland Revenue.