Build-to-Rent short series | Has the planning scheme caught up?

The Gadens Build-to-Rent short series will focus on emerging property and development issues that affect Build-to-rent (BTR) projects – covering planning, subdivision structuring, fund-through models and management issues. Click through the following links to read each instalment. 

Build-to-Rent short series | Subdivisional solutions

Has the planning scheme caught up?

As BTR projects are increasing in popularity as a result of recent tax changes, we delve into the question of whether the Victorian Planning Provisions (VPPs) are adequately equipped to deal with BTR projects.

What is BTR accommodation?

Currently, there is no specific land use definition for BTR accommodation in the VPPs.

BTR accommodation is treated as a ‘Dwelling’ (i.e. a self-contained residence, which is separately leased on long-term basis to a tenant) which sits under the ‘Accommodation group’ nesting diagram.

How is BTR accommodation different to a conventional apartment? 

BTR developments are, by their very nature, designed differently to conventional apartment buildings and, in many respects, are more akin to serviced apartments and hotels, which are defined separately in the VPPs.

BTR developments generally include a variety of shared amenities such as communal gardens and shared BBQ areas, communal working spaces, pools and swimming classes, gym classes and food and drink premises. In light of these shared amenities, a BTR development by its very nature will arguably have a higher standard of amenity than a conventional apartment development. There may also be flexibility under a BTR lease agreement to say, allow a tenant to choose the number of car parking spaces or storage units that it seeks to include in its agreement.

The absence of a specific land use definition for BTR accommodation raises a number of concerns as it does not take into account the fact that BTR developments are purpose built, typically with common amenities and are held in common ownership, as a super lot in the long term. This effectively means that BTR projects are classified and assessed in the same way under the VPPs as conventional, build-to-sell apartments – although they are being designed for a very different type of end user.

For example, without a separate land use definition, a BTR project is required to provide the requisite number of car parking as a conventional dwelling under clause 52.06 of the VPPs. This should be queried, particularly given that BTR developments:

• are typically located in metropolitan areas with excellent access to public transport and sustainable transport alternatives; and
• often incorporate Uber / Taxi drop-off zones, as well as allocated car spaces for tradespersons and deliveries, to reflect that many tenants in BTR developments do not own cars.

Additionally, the standard ResCode apartment design guidelines of clause 58 would generally apply to a BTR development. This would, for example, include a requirement to provide adequate private open space for the reasonable recreation and service needs of future residents. We query whether this objective ought to be strictly imposed in a BTR development that may feature expansive communal gardens as part of common property which can be accessed by all residents.

Just as a hotel has its own land use classification under the VPPs and is assessed differently to a conventional dwelling, we say that amendment is required to the VPPs to carve out a land use definition for this particular use that takes into accounts its unique characteristics.

Public Open Space Contributions

Unlike conventional apartment developments that are subdivided into individual titles and sold ‘off the plan’, BTR developments are held under a single title (as a super lot) in the long-term.

Accordingly, given there is no subdivision of land, there is no requirement to pay public open space contributions (POSC) under the Subdivision Act 1988 (Vic).

POSC are used to pay for the provision of new and/or improved public open space land and infrastructure needed by the future community that results from subdivided land. In this way, POSC are a form of ‘user payment’ for public infrastructure.

While the current arrangement assists in ensuring that BTR projects remain feasible, there is ongoing discussion occurring within the industry about whether it is appropriate to have an alternative one-off development contribution as a solution, given that the residents of BTR developments also place demand on public infrastructure.

We would be very cautious about introducing further contributions and levies on BTR projects. If the Government was minded to explore a contribution regime, it is imperative that there is an obligation placed on local Councils to ensure that any contributions received are used to fund public infrastructure in the locality of the specific BTR project and that this public infrastructure is delivered at the same time (or very shortly after completion) of the specific BTR project.

How is VCAT treating BTR developments?

In the VCAT decision of Mirvac BTR Developments Pty Ltd v Moreland CC [2022] VCAT 300 (Mirvac), which concerned a BTR development in Brunswick, a large dispensation of car parking was sought by the Applicant. At paragraph 159 of its decision, the Tribunal noted that ‘the reliance on the BTR model to justify assumptions about resident parking demand is also queried given its relative recent emergency in the property market’.[1]

This signals that the VPPs have not caught up with new housing typologies, including BTR accommodation.

In the Mirvac decision, VCAT imposed a condition that the development must indefinitely be maintained as a build to rent development within the meaning of s 70 of the Land Tax Act 2005 (Vic), which defines a BTR development as follows:

A BTR development is one or more buildings that are constructed or substantially renovated for the purpose of providing multiple dwellings for lease under residential rental agreements.

To ensure consistency, the above definition could be reflected in a specific land use definition for ‘BTR Accommodation’ in the VPPs. A specific land use definition would also enable specific BTR provisions to be built into the VPPs, such as:

• car parking rates for BTR developments;
• design standards (including the ability to provide public open space through communal gardens and shared facilities); and
• one-off development contributions, in lieu of POSC, which will not be triggered under section 18 of the Subdivision Act, as BTR developments are held in common ownership as super lots.

With inflation and a string of recent interest rate rises, these changes are important to ensure that BTR developments, which provide an alternative to home ownership, are appropriately assessed by local Councils and VCAT.

If you have any specific queries regarding planning considerations in the BTR space, please contact Andrea Towson.

The next article in this series will focus on subdivision structures of BTR developments.

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Authored by:

Andrea Towson, Partner
Maria Anenoglou, Senior Associate

[1] Mirvac BTR Developments Pty Ltd v Moreland CC [2022] VCAT 300, paragraph 160.