Page 89 - Build 165

Build-to-rent schemes
Build-to-rent (or build-to-let) is a term used to describe the purchase of a property o the plans and then rented out after completion. In the UK, build-to-rent models have provided improved housing quality, greater security and length of tenure and the freedom for tenants to customise housing.
One application of build-to-rent is a shell and t-out model that resembles a commer- cial lease. The tenant commits to a basic shell structure in a multi-year lease and is responsible for completing the interior t-out in a way that suits them.
Renting out new dwellings instead of the older existing stock o ers greater long-term value to investors and provides a better- quality private rental sector. Adoption of a shell and t-out model would be a signi cant change from current practice in the private rental sector. However, the shell and t-out model can provide signi cant bene ts to the tenants, particularly those who anticipate renting for the long term.
Implementing such a model would require market acceptance from both tenants and landlords, which has not been tested. Amendments to the Residential Tenancies Act would also be required, as landlords currently have an obligation to provide and maintain certain interior facilities. Maintenance of interior facilities would logically lie with the tenant under a shell and t-out model.
Real estate investment trusts
Real estate investment trusts (REITs) can increase housing supply by providing capital for development and long-term ownership of real estate assets. In the US, residential REITs typically own and operate large apartment complexes, and in the UK to date, residential REITs have provided capital to housing associations that provide a ordable rental dwellings.
As long-term investors, REITs would be well placed to o er the long-term tenancies required for the shell and t-out build-to-rent model.
A sufficiently large REIT would enable individual investors to enter and exit the trust without disrupting long-term tenan- cies. However, for REITs to be viable in New Zealand, they would require equivalent or preferable tax treatment to small-scale property investors.
Energy performance certi cates
Energy performance certificates are common across the European Union. They are similar to common rating schemes on many consumer products such as clothes dryers and washing machines. They address imperfect information in the housing market and increase landlord investment in energy-efficiency measures such as quality of insulation, ventilation and indoor air climate, solar systems and built-in lighting.
These certi cates provide landlords with a way of showing interested renters that their house performs better than the average rental house. It is unlikely to make nancial sense to invest in features that improve the performance of the house where renters are unable to compare the performance to other rental properties.
Opportunities for improved rental stock
Matching what the rental stock is delivering with needs is going to be di cult. This is an opportunity for landlords and govern- ment to look into solutions for the rental industry. Looking at replicating energy performance certi cates, promoting real estate investment trusts or investing in different models to deliver rental housing could lead to better housing outcomes and an improved rental stock.
Build 165 — April/May 2018 — 87