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Build to rent

Build-to-rent is a term for medium to large scale residential housing developments that are specifically built to provide long-term rental accommodation to tenants. It encompasses the development and professional management of a property by institutional investors and developers. 

The model is of interest to institutional investors with long-term horizons for returns on patient capital, such as superannuation funds, as well as those interested in providing market and community affordable housing, such as community housing providers. 

Increasing rental supply

Build-to-rent represents an opportunity to increase the supply of secure, affordable and quality rental developments in Aotearoa New Zealand. 

The development of this asset class aligns with a number of housing objectives including improving rental supply, quality, affordability and security of tenure. 

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.  

The Government has released legislation containing the proposed rules to limit interest deductibility for residential property investors. The changes to interest deductibility were first announced in March as part of the Government Housing Package and a discussion document on the proposals was released in June. 

The legislation does not include a carve-out from the interest limitation rules for the build-to-rent sector. However, Cabinet has not yet made a final decision on whether build-to-rent should be exempted from the interest limitation rules. Cabinet will consider the impact of the interest limitation rule on build-to-rent alongside further advice on the role the sector can play in the supply of high-quality rental stock (both market and community affordable housing). It expects to do this in early November. 

Published: September 28, 2021

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