ABS Building Activity figures released this week show an elevated number of new homes completions coming through the pipeline that will be hitting the market in 2020, and a decline in commencement activity at the end of the December quarter.
These ABS figures reveal that elevated residential completion levels of 203,536 completions to 31 December 2019 with a large tail of homes coming through that will potentially provide an opportunity for government intervention to open the door to Build to Rent.
There is a strong throughput of home completions still accompanied by declining starts that could be supported by government-backed Build to Rent initiatives.
While the completions coming through have been much needed and sit close to general population requirements, the question is whether the owner-occupier elements of the market will hold up over the period that the new homes are coming through. There is a pre-COVID-19 need for around 180,000 to 200,000 homes to meet population growth so there is a definite need for this volume historically. However, the COVID-19 buyer behaviour of investors (domestic/foreign), seniors and owner-occupiers is uncertain.
PowerHousing Members, who manage or own over 73,000 homes, have seen growth in people seeking affordable rentals and those in affordable rentals have requested rental reductions in some cases. These two factors are symptomatic of the additional pressure coming onto the broader rental market.
As was the case in the US during the GFC, there is growth in stable affordable rentals in times of economic stress as Government seeks to stabilise rentals from social through to market rents. In the current Australian context this could spur activity in the nascent Build to Rent sector.
Build to Rent see more new homes that were originally built for sale being transferred to build to rent and could be a lifeline in the coming period.
If there is elevated stock levels coming through at least over the first half of 2020 that are not being sold then this Build to Rent option will be sought as a solution.
In particular, this opens the door for Government to incentivise the residential sector through longer term tax credits, government subsidy and grant/equity structures that will assist the throughput of the rental homes needed today, but to also provide structure for the ongoing delivery of the rental homes that will be needed as we come out of the crisis in FY2021-F2022.
Supporting renters in a Build to Rent model that is government-backed will place a long-term base under the record decline in housing commencements and stimulate affordable housing and jobs which will be expected in the Federal Government’s ongoing response to the pandemic later in the year.
Two of Australia’s largest builders, Simonds Homes and Metricon, have estimated for PowerHousing that around 43 trades and sub-trades receive work from every new house delivered, and steadying the supply of new homes will support jobs as well as the economy and stabilise the rental supply.
While there are a variety of vital options to support the health and welfare of Australians today, there is a need to work through the options for supporting the growing housing needs for those with uncertain housing futures and to also structure for new build economic activity.