Build to Rent’s next chapter: From alternative asset class to housing system infrastructure
Australia’s Build to Rent sector is evolving from a niche investment strategy into a critical component of the nation’s housing system. Drawing on insights from leading housing researcher Emeritus Professor Hal Pawson, this article explores how institutional capital, supportive policy settings and changing rental market dynamics are reshaping housing delivery and long-term supply.
Setting the context
Reflections from a recent boardroom discussion with Emeritus Professor Hal Pawson, attended by leaders from Barings, Investa, Plenary and other institutional investors.
Australia’s housing debate has become increasingly polarised between supply targets and affordability outcomes. Yet beneath the headlines, a quieter structural shift is underway — one that may ultimately reshape the composition of the nation’s rental housing market.
At a recent boardroom lunch, Hal Pawson of UNSW City Futures Research Centre presented analysis of Build to Rent (BtR) and its growing role in Australia’s housing system. His central proposition was not simply that BtR will grow, but that it is becoming an increasingly important institutional pillar within a broader restructuring of the private rental sector.
From his long-term perspective, Pawson suggests BtR is best framed as part of a multi-decade transition across Australia’s rental housing ecosystem, rather than a cyclical investment theme.
Numbers suggest momentum, but is the real story market transformation?
Whilst growth is accelerating rapidly, the Australian BtR sector remains relatively small by global standards. Pawson highlighted estimates suggesting approximately 16,000 operational BtR apartments nationally in 2025, alongside a development pipeline exceeding 50,000 units. Annual completions are forecast to rise materially through the remainder of the decade, with Sydney becoming an increasingly important growth market as Melbourne’s dominance moderates.
However, Pawson’s most significant observation was not the scale of today’s sector, but the direction of travel.
Australia appears to be transitioning from a rental market historically dominated by individual investors toward a more institutionally owned and professionally managed model. Growth in traditional “mum and dad” investor-held rental stock has slowed over the past decade, while policy settings increasingly favour institutional rental investment.
For investors and developers, this distinction matters. The question is no longer whether BtR will exist as an asset class, but what share of future rental housing supply institutional capital will ultimately provide.
Canadian lesson: why scale matters
One of the most thought-provoking aspects of Pawson’s presentation was the comparison with Canada, which has achieved something Australia continues to struggle with: maintaining strong apartment development activity through periods of market volatility.
Pawson argues a key reason is Canada’s mature purpose-built rental sector, which has expanded consistently across economic cycles. In 2024, purpose-built rental represented approximately 42% of Canadian housing construction, compared with roughly 2% for BtR in Australia.
The implication is significant.
Australia’s apartment development market remains heavily dependent on Build-to-Sell (BtS) demand underpinned by pre-sales for construction finance. When those conditions soften, supply slows.
Institutional rental development introduces an alternative source of housing delivery that can potentially continue building even when traditional development models weaken. In this sense, BtR should not be viewed only through an investment lens, it may also act as a stabiliser of housing supply.
BtR alone will not solve Australia’s housing shortage
Importantly, Pawson cautioned against overstating the immediate impact of the sector.
Despite strong growth, BtR currently contributes only a small proportion of national housing completions. Australia remains well short of the National Housing Accord target of 1.2 million homes over five years, and even under optimistic growth scenarios BtR will account for only a modest share of total supply in the near term.
Yet its value proposition extends beyond volume alone.
Institutional rental housing offers professional management, more consistent customer experience, improved operational data, and potentially more predictable long-term rental stock retention. For governments seeking more durable housing outcomes, these characteristics may become increasingly attractive.
From asset class to urban infrastructure
Perhaps the most compelling idea from the discussion was that BtR is beginning to resemble infrastructure more than traditional property development.
Like renewable energy, social infrastructure or transport assets, institutional rental housing relies on long-term capital seeking stable income streams. It rewards operators who take a long-term view, where performance is driven as much by operations as by development.
This perspective is increasingly relevant for investors such as Barings, Investa and Plenary, all of whom are active in sectors where long-term stewardship is central to value creation.
As Australia’s superannuation system continues to mature and global capital searches for stable, income-producing assets, the alignment between institutional investment and professionally managed rental housing is becoming clearer.
Looking ahead
The next decade is unlikely to be defined by whether Build to Rent succeeds. The more meaningful question is how large a role it plays in reshaping Australia’s housing system.
If Pawson’s analysis proves correct, today’s expansion may be viewed not as a property trend, but as the early stages of a broader restructuring of the private rental market, one where institutional ownership progressively supplements, and in some markets replaces, fragmented individual investor stock.
For governments, the challenge will be creating settings that encourage this capital while maintaining affordability objectives.
For investors, the challenge is execution at scale.
And for cities, the opportunity lies in harnessing BtR as part of a more resilient, professionally managed and sustainable housing system.
The sector may still represent only a small share of Australia’s housing output today, but its trajectory suggests it is becoming far more important than its current scale implies.
