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‘Built-to-rent will create a class system’: CEO

By Orana Durney-Benson
15 July 2024 | 11 minute read
james alexander hatziplis reb u5rmcx

A proliferation of build-to-rent housing could create a class divide on par with the US, a Sydney architectural firm has stated.

James Alexander-Hatziplis, managing director and CEO of Place Studio, recently delivered a strong criticism of the build-to-rent sector, arguing that build-to-rent housing would exacerbate housing unaffordability, rather than provide a solution as purported.

He has argued that build-to-rent housing is more expensive than traditional private rental properties, absorbing tenants’ surplus income and pushing the goal of home ownership further from reach. For young Australians struggling to afford a home, build-to-rent “puts the nail in the coffin”, according to Alexander-Hatziplis.

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“We feel that build-to-rent is a bad model,” the managing director stated.

“If you have a group of people that can own, and people that can’t own, and it’s divided by generation because of when they were able to purchase, then you will only solidify some hereditary inheritance or class.”

“Take anywhere that build-to-rent exists, like Europe, like America – that’s the case.”

He posited lease-to-own as an alternative model to build-to-rent that he believes “solves the fundamental issue about housing affordability” and “serves a social good”.

Under a lease-to-own model, tenants rent out a property for up to five years. Rents are set at market rate, with an agreed rate of increase each year, and anything a tenant pays above the price of rent is equity.

At any point during that five-year period, tenants can opt to purchase the property, and the amount of equity already contributed will act as a discount off the sale price – which is “predetermined at the commencement of the agreement”.

If the tenant opts to move elsewhere, they can reclaim the equity already contributed and transfer that to a new mortgage.

“Lease-to-own is taking the idea of a car finance, and applying it to housing,” explained Alexander-Hatziplis.

“When you go to BMW to buy a BMW car, and BMW are giving you the financing for it, and they’re telling you they’re going to buy it off you at the end of a five-year period at a guaranteed price, you feel comfortable […] that if there’s a problem over those five years, they’re going to fix it.”

He also suggested that lease-to-own housing developments may have a greater sense of community for residents.

“You’re able to establish much more bespoke communities, because everyone wants to live there – it’s not just this transient thing,” said the managing director.

“It’s a different mindset, it’s a longer mindset. Maybe we shouldn’t be looking at these short, sharp exchanges. People should be willing to invest and see those returns over a longer period of time,” he said.

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