By Scott Laycock, Partner and Camilla Counsel, Associate
On 29 July 2020, the NSW Government confirmed it will be introducing an unprecedented land tax discount for all new build-to-rent (BTR) projects across the state.
As well as reducing land tax, the Government will be granting BTR developers an exemption from foreign investor surcharges.
As the policy basis for these incentives, the Treasury’s media release cited the capacity of BTR projects “to provide more housing options, greater surety for renters, boost construction and support jobs during the COVID-19 recovery.”
Applying to BTR projects from 1 July 2020 until the year 2040, the discount will equate to a reduction in land tax of at least 50%, calculated by reference to the unimproved land value.
To be eligible, metropolitan developments must consist of a minimum of 50 units. The full suite of eligibility criteria, which is expected to prescribe a different unit threshold for regional projects, is due to be unveiled in coming weeks.
Promoting an emerging market
A recent entrant into the Australian market, BTR is a flourishing sector overseas, especially in the United Kingdom and United States. In providing a model under which tenants may be offered benefits such as greater freedom to personalise and keep pets in their home, elimination of bond payments and the option to enter into longer-term leases, BTR is favoured for promoting better housing quality, flexibility and affordability.
For all these reasons, removal of barriers to BTR’s expansion in Australia has been the subject of extensive lobbying, including by the Property Council of Australia. In announcing the above incentives, the Government’s response has been welcomed as a positive step towards increasing options for buyers, especially young people and families, who are seeking greater residential continuity but are unready to buy a home.
New Housing Diversity SEPP
To support the roll-out of these new initiatives, the NSW Government is exhibiting a proposed Housing Diversity State Environmental Planning Policy to provide development standards and design guidance tailored to BTR to ensure its smooth and effective expansion.
The Policy will be exhibited until 9 September 2020.
To view the NSW Treasury’s announcement of the incentives, click here.