The highly anticipated Overseas Investment (Build-to-Rent and Similar Rental Developments) Amendment Bill (Bill) was introduced by the coalition Government yesterday to amend the Overseas Investment Act 2005. The amendments aim to encourage overseas investment in build-to-rent housing (BTR) by introducing a new streamlined test (the "large rental development test") for residential (but not otherwise sensitive) land, allowing investors to acquire existing large rental developments provided they meet the investor test requirements. The legislation follows recent Ministerial Directive letters which have indicated a clear policy shift by government to attract foreign capital into New Zealand.
The Bill seeks to address liquidity issues faced by overseas investors into BTR schemes – while the "increased housing" pathway has previously allowed for foreign investment into new housing developments, that test does not assist where existing schemes are being acquired (as the "increased housing" test is not satisfied where an overseas purchaser acquires existing supply to continue to operate it). There has therefore been a concern that BTR schemes would be difficult to sell, discouraging foreign investment at the outset. The Bill allows for the acquisition of operating BTR schemes under the new "large residential development" test.
The new test requires that:
· at least 20 residential dwellings (on a single site or adjacent sites) will be available for use under a residential tenancy under the Residential Tenancies Act 1986;
· the overseas person (and certain related persons) cannot occupy the land.
Where the above criteria are no longer complied with, the overseas person will be required to sell the development.
The Bill also provides that an overseas person may apply for a standing consent for the operation of large rental housing developments (meaning a separate consent does not need to be obtained for each acquisition).
It is worth noting that the Bill does not change screening requirements for residential land (including those that comprise the "foreign buyers ban") beyond those for large-scale rental housing.
The Ministerial press release can be found here. You can read the Bill here and follow its progress on Parliament’s website. Our summary of previous Ministerial Directive letters can be found here and here.