Build-to-rent changes backed despite concerns

Plans to streamline foreign investors’ access to build-to-rent housing developments could transfer wealth overseas and worsen market conditions for Kiwi buyers and renters, a renters’ group has argued.
However, Parliament looks set to move ahead with the law changes, with those in the build-to-rent sector saying change is needed to move new developments from a trickle to a rush.
In March, Housing Minister Chris Bishop announced the Government would change the Overseas Investment Act to create a “streamlined consent pathway” for foreign investors who wanted to buy an existing build-to-rent development or acquire land to build a new one.
The build-to-rent model, based on multi-unit developments designed to be tenanted long-term and sometimes run by large institutional investors, has been slowly gaining traction in the country in recent years despite facing some obstacles.
While the last Labour government also indicated support for the build-to-rent sector, industry figures said there was ongoing uncertainty about the applicability of overseas investment restrictions that needed to be addressed.
In a summary of submissions on the Government’s proposed changes, Treasury officials said 16 of the 28 individuals or organisations who shared their thoughts were opposed either to the build-to-rent bill or to foreign investment more generally. Eight submitters offered in-principle or full support, while four did not express an opinion.
Those opposed to the bill cited scepticism about foreign investment or the bill’s ability to improve housing outcomes, with submission from Renters United and the Tenant Advocates Network emphasising the need to prioritise lifting homeownership rather than increasing the supply of for-profit rentals.
Submissions in favour of the changes came largely from housing developers and sector groups who saw the bill as “a positive step to unlocking further investment to [build-to-rent] housing”.
In a submission, non-profit community housing provider Habitat for Humanity said that while the proposed changes would enable more overseas investment into build-to-rent developments, the legislation was silent on whether it would provide affordable rental solutions.
“We are concerned there would be a concentration of build-to-rent in areas where maximum rental return is delivered. There could be potential incentives to deliver build-to-rent in other geographical areas that still have housing need but cannot provide as high a return.”
Build-to-rent developer Simplicity Living, owned by KiwiSaver provider Simplicity, said allowing overseas funds to participate in the sector would likely improve the valuation of completed projects and make local investment more attractive, while a smaller potential buyer base would suppress valuations.
“If the Government is serious about addressing the housing shortfall and wants the private sector to fund the creation of many thousands of new homes it will be critical to get these settings right. Until then, new [build-to-rent] homes will continue to trickle on rather than be the rush we urgently need,” Simplicity Living managing director Shane Brealey said.
Renters United national organiser Grace Tualaulelei said the proposed changes “have the potential to increase speculation in already highly speculative markets”, and would prioritise investment in housing based on profit.
“Increased speculation through overseas investment is an approach to housing that lends itself to creating new opportunities for private investors, the transfer of capital wealth overseas, and worsening market conditions for renters and buyers,” Tualaulelei said.
While Parliament’s finance and expenditure committee recommended by majority that the bill be passed, the Labour and Green parties both issued differing views.
Labour said it was disappointed by an unwillingness to consider alternative options for the minimum build-to-rent unit settings, with the current 20-unit threshold appropriate for major cities but potentially too high a barrier for smaller centres.
While it agreed changes to overseas investment rules would likely lead to more developments being built, the party thought the law change was “a missed opportunity for rural and regional New Zealand”.
The Greens said it was unclear that overseas investment restrictions were a substantial barrier to investment in new rental developments, while its MPs on the committee were concerned the law change could lead to existing large-scale developments being sold off to overseas investors without increasing the supply of housing.
“We support strengthening controls on foreign investment to minimise the negative effects of speculative and other non-productive foreign investment, such as property investment, and reserving land ownership in Aotearoa for residents,” the party said.