Build to Rent and Co-Living – The Future Accommodation Model?

What is “Build to Rent”?

Build to rent (“BTR”) is an emerging sector in the Irish property market. BTR schemes are purpose-built residential accommodation and associated amenities which are built specifically for long-term rental.  The schemes are managed and serviced in an institutional manner by an institutional landlord.

Residents share communal spaces, such as lounge areas, but have their own private en-suite bedrooms.  The aim of BTR is to provide an affordable alternative to independently rented accommodation – the traditionally preferred rental method in Ireland.

BTR is becoming an increasingly attractive option for:

• a population that increasingly values convenience due to its flexibility and lifestyle and
• Irish and European investors, developers and funders alike due to its stability.

The housing climate in Ireland is also now more in favour of BTR due to the demographic shift towards younger people renting for longer, which would generally have been considered a mainland Europe trend.

Who owns the scheme and the individual units?

Ownership and management of BTR developments are usually both carried out by a single entity that invests in the project as a long-term commercial rental undertaking.  Unlike traditional housing schemes, individual residential units within the development are not sold off separately for private ownership or for individual sub-lettings.

What is the Government’s view?

  • The Department: The Department of Housing, Planning and Local Government published design guidelines for BTR developments in March 2018 which is the first time the concept of shared accommodation, co-living and communal living have really been addressed.
  • The Minister: The Minister for Housing has also encouraged the planning authorities to approve such developments, particularly for the regeneration of older buildings in city centre locations – just one type of scheme that is being considered for such regeneration initiatives.
  • The Legislature: BTR projects have been established as a specific use class under the Planning and Development Regulations 2001 (as amended).  Under Specific Planning Policy Requirement 7 specific planning conditions may be attached – for example, the development remains owned and operated by the institutional entity for a minimum of fifteen years.  Planning applications for BTR must also contain detailed proposals for the communal and recreational facilities to be provided.  These communal and recreational facilities will vary depending on the size and location of the developments.

And for Investors?

Funding models for these type of projects will likely be similar to those used in other similar purpose-built medium and large scale accommodation projects, such as student accommodation or aparthotels, which are a relatively common feature in Ireland.  This reflects the types of investors in this sector.

BTR developments offer investors attractive, risk-adjusted returns with relatively low volatility, while annual leases allow for quick adjustment to market conditions.

And the Conclusion?

BTR developments can deliver the large-scale housing numbers that Dublin (and, increasingly, other Irish cities and large towns) needs to address the severe housing supply shortage.  Increased flexibility, a high-quality amenity offering and a sense of community within a scheme are just a few of the attractive elements of a BTR scheme.  Recent press coverage suggests that BTR may not be everyone’s favoured model for future accommodation in Ireland, but the resounding feedback in the construction and residential sector is that BTR is on the up, and is likely to become more popular in the coming years.

Please contact Rob Gibbons, in the Real Estate Department of BHSM on 01 440 8300 and rgibbons@bhsm.ie for further information.

This article is for general information purposes. Legal advice must be obtained for individual circumstances. Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.

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