Today’s Senate Economics Legislation Committee heard evidence from multiple witnesses who savaged Labor’s Build to Rent legislation.

While Labor has claimed that their plan to give more tax handouts to property investors could result in 150,000 more homes, according to both the Property Council and the Housing Industry Association themselves, Labor’s bill will do little to nothing to add to housing supply in its current form.

Experts testified that Build to Rent projects attracted premium rents and high rent increases, and that the requirement for projects to include 10% “affordable” rentals would not lead to any genuinely affordable housing for low or middle income households.

Concerns were raised about the total lack of protections in the legislation for tenants from large corporate landlords, with international experiences of build to rent resulting in algorithmic “rent maximisation strategies”, strategically keeping units vacant to drive up rents, exploitation of tenant data and developers meeting affordability requirements by building lower-quality one bedroom “dogbox” apartments. No protections exist to ensure the units will remain affordable after the initial 15 year period, potentially resulting in another NRAS-style rental affordability disaster.

Treasury officials said this scheme may result in no rentals at all that were affordable to low-income families, saying keeping rents low would impact commercial viability.

Last week, the Greens wrote to the new Housing Minister offering to work with the Government to pass an ambitious response to the housing crisis, such as phasing out capital gains and negative gearing, freezing rent increases and investing in building publicly owned housing. The Greens also asked the government to guarantee that 100% of the units built under the Build to Rent plan be genuinely affordable to people on low and middle incomes.

Lines attributable to Max Chandler-Mather, Greens housing spokesperson:

“Today expert after expert savaged Labor’s broken Build to Rent plan, revealing it will create a powerful class of corporate landlords who will jack up rents, exploit tenant data, and build no new homes all while collecting tax handouts from the government.

The government’s own treasury officials admitted the scheme may not actually build any affordable homes for low income families, while other experts highlighted Australian build to rent projects that have jacked up rents by 50% in the last two years.

Millions of renters are suffering, crying out for real relief from Labor and all this cowardly government can offer is more tax handouts to developers to build expensive apartments they already planned to build.

The new housing minister should take this chance to come back to the drawing board and negotiate a real plan with the Greens that includes a nationwide freeze and cap on rent increases, phaseout of tax handouts for property investors and a mass investment in public housing.

This was a humiliating day for a government that still doesn’t get how angry people are at Labor’s refusal to take this housing crisis seriously.

Quotes from Senate hearing:

• Francesca Muskovic, Property Council: We don't think any additional build to rent apartments would be produced over and above business as usual

• Mike Zorbas, Property Council: Drafted as it is, this legislation won't produce much at all to that supply

• Tim Reardon, HIA: I don't see it as being a fundamental change to the housing dynamics in Australia. It would be a good opportunity to see I imagine a small number of small-scale build to rent projects

• Dr Megan Nethercote, RMIT: I think most build to rent operators openly concede there will be a rental premium on their rental products of some 10 per cent to 20 per cent. [..] The build to rent model is designed around securing increasing rents”

• Dr Cameron Murray: “At the Smith Collective on the Gold Coast, the largest build to rent project in Australia, rents there have increased 50 per cent in two years”

• Senator McKim: So just to be clear, Treasury can't give [an estimate], about how many of the units delivered through this proposal will be available to low-income households, so it could be none.
  Treasury official: No, we haven't, I think within the affordable housing tenancies we haven't done any modelling as to which cohort might be part of that, and that is right, technically it could be none at that really low end. [...] One reason for that is the more that you lower the bar for the rent for those affordable housing tenancies, that does impact on the return to the project and so it may impact on whether the project is commercially viable or not.

• “The more that you lower the bar for the rent for those affordable housing tenancies, that does impact on the return to the project and so it may impact

• Dr Liam Davies, RMIT: My research has generally found that when you create incentives to the private market they will try to exploit them. [...] Simply put, why would a build to rent investor signup for this scheme unless they are going to get more out of it than they put in?

• Karl Fitzgerald, Grounded: “A 74.9% threshold in inner Sydney or Melbourne is not going to be affordable for anyone on Social Security, anyone earning under $60,000”

• Hal Pawson, UNSW [Submission to inquiry]: “Rents in this range would be beyond the means of any household receiving a gross weekly income belowthe range $2,035-$2,334. Thus, the so-called affordable rent dwellings will be beyond the means of even median income households.”

• Senator Nick McKim: So just to be clear, there are no protections in place for retaining affordable rents after the 15 year period? Is that right?
  Karl Fitzgerald, Economist at Grounded: No, there is no incentive [...] We've seen in New York, a lot of private capital zeroing in on these sort of investment opportunities in that last 10 years to really turn these into penthouse developments