Mr Zorbas said in their current state the Bills with undermine the government's stated intention of encouraging more rental housing.
"All sides of politics know Australia is in a housing crisis. The average age of a first home buyer is 37 in Sydney and 36 in Melbourne," Mr Zorbas said.
"We can deliver 105,000 rental homes, and immediately unlock 1,200 affordable tenancies through the changes proposed and that is a big contributor to getting to our national housing targets.
"Build-to-rent is the missing piece of the Australian housing puzzle. At the time when new housing supply is desperately needed, the current settings are repelling investment. Thousands of new rental homes that should be under construction are not.
"Build-to-rent offers high amenity, secure tenure for renters in comfortable, energy efficient homes with shared facilities and community programs.
"As CHIA and Shelter agree, we must make urgent changes to the draft legislation. We hope all parliamentarians will support our proposal to significantly increase housing supply.
"We simply won't solve the housing puzzle without build-to-rent," he said.
Full opening statement from Mike Zorbas - Chief Executive, Property Council of Australia (check against delivery):
Thank you for the opportunity to appear and in so doing I acknowledge the traditional custodians across more than 500 indigenous nations throughout Australia and pay our collective respects to their elders past and present.
I am joined by two active build-to-rent (BTR) practitioners – Ange from Mirvac, Christian from Home and Frankie who is also from the Property Council.
Our membership are all the significant global investors in BTR housing and the leading owners, operators, and investors in Australia's own nascent BTR sector.
We are having this conversation about a national housing crisis because the average age of a first home buyer is now 37 in Sydney and 36 in Melbourne.
Despite Australia's global advantage in wealth and land supply our housing hopes have been undone by a lack of national and state government vision and planning across every type of housing, to rent, to buy and social housing since the turn of this century.
By the National Housing Supply and Affordability Council's own estimates, we are on track to deliver 297,000 new homes under our national target 2029 of 1.2 million homes.
This stable platform for individual investment is part of the solution.
What is at stake in this Committee's deliberations today is bigger than the government's Housing Australia Future Fund's 40,000 homes by 2029.
Your support for the changes we propose to this legislation can turn on 40,000 - 50,000 new homes over the next five years. Or you can choose to turn new housing supply off.
If you agree with CHIA, Shelter and ourselves that it would be helpful to add more than the housing stock promised under the HAFF by 2029, taking pressure off the broader rental market, you also get the essential improvement of adding low income housing into this mix.
Unamended, this BTR legislation is just a sad bookmark about a type of housing supply that should have attracted a pool of large-scale patient capital but won't as it stands.
You know but it should be emphasised, the RBA says three per cent vacancy is a healthy rental market and we are currently at one or so percent in many parts of the country.
So new supply is essential.
Drafted as it should have been, this legislation could have delivered 160,000 new apartments to 2033, including 10,000 affordable homes.
That opportunity has been squandered, but sensible and simple fixes can still deliver 105,000 rental homes.
Build-to-rent is part of the supply solution
BTR is purpose built and designed long-term residential rental accommodation predominantly owned, managed and operated by an institutional investor for a long-term investment period.
It is customer-led and provides secure tenure for people who rent in good quality accommodation that is comfortable, energy efficient and includes shared facilities and community programs.
BTR is a missing piece of the Australian housing puzzle.
Although it is five per cent in the UK and twelve percent in US, BTR here it is only 0.2 per cent of our housing market.
The reason BTR is stunted in Australia is that long-term patient capital - mostly foreign pension funds - currently has to pay double the amount of tax they would if they were investing in offices, shopping centres, hotels and industrial property.
Over a decade, we have consistently championed the benefits of an Australian investment regime that would put BTR on a level playing field with other property types.
The Property Council welcomed the Government's initial announcement in the May 2023 Budget to lower the managed investment trust (MIT) withholding tax from 30 per cent to 15 per cent, bringing it in line with other property types.
Uncertainty and delay
The anticipation of the Australian government's public ambition to add to BTR housing supply, following US, Canadian and UK governments, has been the sole reason for tens of billions of dollars of BTR investment to date.
Uncertainty caused by the 11-month BTR consultation delay post the May 2023 Budget announcement, and material issues introduced in the early exposure draft, have already eroded investment.
Capital flows into the sector have effectively stalled. We are currently repelling a patient pool of institutional capital. Thousands of new rental homes that should be under construction are not.
Key areas of improvement
In their current state, the Bills will undermine the government's stated intention of encouraging desperately needed rental housing.
- Limiting access of the most common trust structures to the concessional tax rate
In our detailed submission we have raised some technical issues which, if left unaddressed, will render the legislation completely ineffective. These must be dealt with.
- Maximise the supply of at-market and affordable housing and deliver 105,000 rental homes
EY modelling shows that the best opportunity to maximise supply of BTR housing while retaining mandatory affordable housing requirements is to implement changes proposed by CHIA, National Shelter and the Property Council.
This includes lowering the managed investment trust (MIT) withholding tax rate to 10 per cent, making a proportion of the 10 per cent affordable tenancies available to low-income households and ensuring affordable tenancies are managed in partnership with registered not-for-profit community housing organisations.
These settings could result in the delivery of 105,000 rental homes.
- Extending the concessional tax rate to BTR projects that were operating or in development prior to the 2023 Budget announcement
This could immediately unlock over 1,200 affordable tenancies. At a time of severe rental crisis, the National Rental Affordability Scheme (NRAS) is coming to an end and up to 6,750 properties will cease to be affordable under the scheme in the period of April - December 2024. There is therefore a strong imperative to unlock affordable rental housing as soon as possible.
Investor sentiment in a low supply environment
We need to correct the negative perception investors have about the viability of BTR investment in Australia.
Further, Australian super funds have made it clear that they cannot scale investment in Australian BTR projects until the sector is a more mature, well-capitalised, 'liquid,' asset class.
This occurs against the glaring backdrop of low Australian housing starts. The latest figures from the Australian Bureau of Statistics released in July 2024 showed approvals for apartments in May 2024 are down almost 32% per cent from the same time 12 months ago.
Our engagement
Since the draft legislation was released by the Government, we have engaged with the Treasury, ATO and Government to try and make these Bills work.
We have partnered with CHIA and National Shelter to seek broad agreement on the settings that will maximise both the supply of at-market rental housing and the provision of affordable housing as part of BTR projects.
We now strongly urge the Parliament to support our joint proposal and enable the delivery of 105,000 rental homes by 2033 - again, more than the HAFF will deliver over the decade - because the housing crisis that we are in demands that all solutions be brought to bear.
