NSW Build-To-Rent Changes Win Sector Approval

Fifteen months after New South Wales first introduced build-to-rent housing into its planning framework, the government has made more changes to legislation designed to further boost housing diversity and affordability.

In introducing a raft of changes to the State Environmental Planning Policy (SEPP), the Department of Planning and Environment’s deputy secretary Brett Whitworth said the government had wanted to increase the number of build-to-rent housing developments that will be considered of state significance, speeding up the assessment process.

They did that by lowering the State Significant Development threshold for build-to-rent housing from $100 million to $50 million in Greater Sydney and $30 million elsewhere.

Further, the new policy removes the requirement for build-to-rent housing in B3 commercial zones to be readily convertible to another use.

The policy changes have been applauded by the industry, which had felt regulations in NSW—while welcome— did not go far enough to encourage the emerging property asset class.

The Property Council of Australia’s NSW executive director Luke Achterstraat said the council had advocated strongly for several substantive amendments to the SEPP since its introduction.

“These amendments to build-to-rent, floorspace, seniors living and self-assessment pathways for the Aboriginal Housing Office are examples of red tape removal, which we support,” Achterstraat said.

Ethos Urban’s planning director Tom Goode welcomed the decision to remove the requirement for build-to-rent housing in B3 commercial zones to be readily convertible to another use.

“Effectively, build-to-rent providers were designing commercial buildings to meet residential standards, including higher floor-to-floor ceiling heights, fire requirements, as well as services and lifting  requirements of a commercial building.  That is far greater than residential requirements and would be in most cases abortive works,” Goode told The Urban Developer.

“Many build-to-rent providers are looking beyond the 15-year horizon and therefore shouldn’t need to demonstrate it can be fitted out for any other use.

“So now they’ve loosened up the legislation whereby when you design a build-to-rent building in a commercial core, you don’t have to show it can be retrofitted to another use.

“So that was a pretty big win for build-to-rent delivery in NSW.

“It will still be hard to get good build-to-rent sites in commercial cores because of amenity drivers, such as getting access to solar and building separation that are still required under the Apartment Design Guidelines. 

▲ GreenFort Capital is seeding the new build-to-rent platform with a 30-level, 364 apartment development on a site at 2 Cordelia Street, South Brisbane.

“If you think of the busy skylines of Sydney, Parramatta or North Sydney, getting access to solar and adequate building separation is tough.”

With house prices thwarting many home buyers and the rental market tightening in most Australian capitals, the build-to-rent sector is becoming increasingly popular with investors and developers.

Last month, the South Carolina-based real estate giant Greystar revealed it has been quietly carving out a big share of Australia’s BTR market with interests now in three states.

And in February this year, in a powerhouse joint venture, GreenFort Capital said it had teamed with Canadian property management giant BentallGreenOak and Swiss-based private equity firm Partners Group to also target a share of the Sydney, Melbourne and Brisbane markets.

Goode and Ethos Urban had been consulting for a number of build-to-rent providers during discussions with the NSW government on the proposed changes to legislation.

He said lowering the capital investment threshold for build-to-rent housing from $100 million to $50 million in the metropolitan area would make the development process easier for smaller build-to-rent builders.

The NSW government considers some developments are deemed significant because of their size, economic value, or potential impacts.  The advantage to developers is they get an alternate, consistent approval pathway for projects or sites that are considered to be of state significance.

▲ A render of Greystar's South Yarra project.

“Originally, for a project to trigger a State Significant Development it had to be $100 million and if you were planning a mixed-use building, at least 60 per cent had to be build-to-rent,” Goode said.

“They have brought that down to $50 million so it will enable some of the smaller BTR developers.”

However, Goode believes the government could have gone further with build-to-rent zoning policy.

He points to B3 commercial core zoning, which allows for 100 per cent of a building to be build-to-rent, apart from the ground floor.  Whereas in B4 mixed-use zoning, a non-residential Floor Space Ratio (FSR) still applies to build-to-rent.

“There are actually plenty of sites across Sydney where there are non-residential FSR controls in a B4 zone,” he said.

“And those still apply to build-to-rent which I think is a bit of a hole in the legislation, because that non-residential part, that is effectively the B3 part of a mixed-use site.  So you can do 100 per cent on the site next to it if it is B3 commercial core, but not on B4 mixed-use site.”

And while the NSW legislation does allow for flexibility in apartment design guide, Goode says developers are looking for more assurance from the government on how that flexibility works with build-to-rent.