If you’re a residential property investor, you may have heard about build to rent (BTR) and wondered what it means for your business.

With the passing of the Overseas Investment (Build to Rent and Similar Rental Developments) Amendment Bill in late February, some small-scale landlords might worry that large-scale BTR developments could take tenants away from their properties. But the reality is different – BTR is not here to compete with mum-and-dad investors, but rather to complement the rental market by filling critical gaps.

What is build to rent?

BTR developments are large-scale, professionally managed rental properties designed specifically for long-term tenants. Unlike traditional rentals, they often offer secure, extended leases, on-site management, and shared amenities, catering to a different demographic than those renting standalone homes or smaller investment properties.

BTR has been a recognised asset class in New Zealand since 2023, but its growth has been slow due to regulatory and investment hurdles. The new Amendment Bill introduces a “large rental development test” to ensure overseas investment can flow into these projects, giving BTR the boost it needs to gain momentum.

Why BTR won’t replace small-scale landlords

There’s a misconception that large BTR developments will saturate the rental market and make life harder for smaller landlords. The truth is, BTR caters to a niche segment of renters who value a specific type of living arrangement – high-density living with on-site amenities that is professionally managed. Many tenants will still prefer the unique benefits of smaller, privately owned rentals, such as standalone homes, townhouses, and smaller apartment complexes, which offer greater flexibility and personal relationships with landlords.

Moreover, BTR developments are mostly concentrated in high-demand urban centres where housing supply struggles to keep pace with population growth. These areas already experience strong rental demand, meaning additional housing stock is necessary to ease market pressures rather than replace existing rental options.

How small investors can benefit

By increasing overall supply and offering renters additional choice, BTR can help create a more balanced market, reducing extreme rent fluctuations and making renting a more attractive long-term option.

Smaller landlords should see BTR as a market-improving force that can benefit the wider rental sector and its reputation. BTR’s rise could drive improvements in property management standards across the industry. With BTR setting a high bar for tenant experience, private landlords who adopt professional management practices, responsive maintenance, and tenant-friendly lease structures may find themselves in even higher demand.

From an investment perspective, BTR also provides an avenue for those who prefer a more passive approach to residential property investment. Rather than managing individual rental properties, investors can gain exposure to the BTR sector by investing in funds that back these large-scale developments. This allows for portfolio diversification and the potential for steady, long-term returns without the hands-on responsibilities of direct property management.

The future of renting in New Zealand

The passing of the overseas investment legislation is a step towards diversifying New Zealand’s rental landscape, ensuring there are quality housing options for different types of tenants. While large-scale BTR developments will play an important role, small-scale investors remain a crucial part of the market.

At Property Council, we believe that a well-functioning rental sector includes a mix of BTR and traditional private rentals. With the right policy settings, both can co-exist – as they do in many cities around the world – providing tenants with better housing choices while ensuring that small-scale investors continue to thrive.

Rather than being a threat, BTR is an opportunity to strengthen New Zealand’s rental market as a whole. The key is to adapt, stay informed, and focus on delivering the best rental experience possible.

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