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How BTR can help create more sustainable cities

Build-to-rent (BTR) has gained significant momentum in Australia in recent months. Driven largely by overseas investment, proof of concept now exists across several Australian states, with a range of service models demonstrating commercial viability. More operators and investors, including increasing numbers of locals, are attracted to the strong growth potential of this emerging residential asset class.

BTR is well-established in other parts of the world and sits alongside commercial, retail and hotels as a property investment type. Put simply, BTR dwellings are rented to tenants over the long term, with the investor retaining the building as an income source. Tailored to Australian lifestyles, BTR offers a new choice for a generation priced out of home ownership and seeking relief from the unpredictability and poor service they often experience in the current rental market.

As a bonus, BTR has the potential to ramp up environmental, economic and social sustainability. How? Done right, BTR raises design standards, supports mixed-use precinct development and creates socially focused communities where people feel they belong. That’s good news for our cities, the people who live in them and the planet.

The growing need for investors to meet targets for ESG reporting puts sustainability credentials at the forefront of their decision-making. BTR assets that can reduce carbon emissions and show positive social benefits make an attractive choice for investors and developers wanting to diversify their portfolios.

With the developer retaining ownership of a BTR building for potentially 30 years or more, there’s an imperative to maximise the longevity of materials, fixtures and finishes. This goes hand in hand with strategies to minimise life cycle and running costs and improve building performance. Residents can be encouraged to contribute – for example, to use less energy and reduce waste – through shared data from smart apartment and building technology and resident apps. All combine to minimise the building’s carbon footprint over time.

For renters, BTR has many benefits. The long-term lease provides a secure, permanent home within a like-minded community. On-site staff will take care of maintenance issues and can offer additional services like receiving deliveries and walking the dog. Is your household changing size? Easy – move to a different apartment on another floor. Moving cities? No problem – transfer to a building run by the same operator in your new location. It’s all about trusted brands.

For operators, being a trusted brand means retaining tenants – critical to commercial success. In Australia, BTR typically targets millennials. People under 40, millennials tend to be tech-savvy and have a focus on health, well-being and community. They often work from home or remotely and see the sharing economy as normal. They’ve grown up adopting technology and automation and are open to new ways of living, even if not necessarily by choice.

Importantly, millennials are ethically and environmentally conscious. As consumers, they ask, “How can I do my part to make things better?” A housing choice aligned with their values will be somewhere they can feel proud of and will have strong appeal.

These tenants will favour affordable apartments with a low carbon footprint and a social focus. They will take a holistic view of environmental and economic sustainability, from the design of their individual dwelling to the broader impact of their BTR building on the surrounding precinct. How does the building support a sustainable lifestyle, a social connection and the local economy?

BTR developments that can deliver on these challenges and aspirations and provide much-needed choice in the market will be rewarded with “sticky” tenants – those who will stay for two years or more. At least 70% of a building’s tenants must fall into this category to optimise commercial return.

This emphasis on designing for operations and managing the day-to-day needs of residents makes BTR very different to a build-to-sell model. Architects with experience in retail, commercial and hospitality, as well as residential, are best placed to assist developers here.

To provide sustainable and affordable homes in the future, our housing sector must, and is, changing. BTR encourages progressive practices where sustainability guides development and emerging lifestyles and technologies shape the renting experience.

As an architect, I’m excited by the design innovation that BTR in Australia will encourage. It’s an opportunity to work alongside developers to create sustainable, “20-minute neighbourhoods” – urban hubs that build connected communities, support local economies and reduce urban sprawl in a win for people, cities and the planet.