(Image: AAP/David Gray)

State governments are moving to reform their respective tax regimes to encourage the build-to-rent market in Australia. In lending their support, the states are priming a new asset class to sustain the real estate and institutional investment sectors under the guise of providing greater housing choice.

Build-to-rent refers to a residential development designed and financed solely for renters, with an institutional investment group, such as a super fund or the developer itself via a Real Estate Investment Trust (REIT), maintaining ownership of the development and managing the tenancies within.

The NSW government recently enacted land tax and stamp duty concessions to support build-to-rent projects. The Victorian government followed suit and announced in the 2020-21 budget a 50% land tax discount for build-to-rent projects, including an exemption from the absentee owner surcharge.