BUILD-TO-RENT: COULD IT SOLVE IRELAND’S HOUSING SHORTAGE?
Investments soar in the Build-to-Rent sector in Ireland in line with the major increase in demand for rental accommodation. Sandra Egan, Partner, accommodates the pros and cons.
Build-to-Rent (BTR) accommodation is built specifically for the purpose of long-term renting, in an attempt to address the shortage of houses in Ireland today. Despite this objective, the obligation for investors to retain ownership of such a development for a minimum period of fifteen years is a major deterrent in putting forward a development as a BTR scheme. This article explores the lucrative appeal of BTR developments for big-time investors, while also considering the drawbacks of such an investment.
Historically Ireland has a reputation for having high levels of home ownership, but it appears that the nation is currently undergoing a major shift. Although a large proportion of the Irish population is likely to continue to aspire to home ownership, for many this may not be feasible. For some, home ownership will be delayed until such time as they are capable of saving the necessary deposit and for others, such as the millennial generation and people in transient employment, renting is an increasingly attractive option. It was therefore inevitable that a professional BTR sector would emerge in Ireland.
Despite the sector only being at an early stage in Ireland, BTR developments have become a mainstream investment sector in their own right and such developments are set to become an even more prominent feature of the Irish market. BTR investments accounted for 30% of investment in Ireland throughout 2018, showing a major increase from 2015’s 4 %. Marie Hunt, executive director and head of research at CBRE, a leading real estate company, commented that “the growth of the Build-to-Rent sector in Ireland has been phenomenal with more than €1.167bn deployed in 2018 compared to just over €70m when multifamily investment first materialised in the Irish market in 2012”.
GOVERNMENT SUPPORT FOR BUILD TO RENT DEVELOPMENTS
In an attempt to resolve the major imbalance between supply and demand in the Irish housing market, the Irish Government have been seen to be largely supportive of large-scale purpose-built accommodation to service the rental sector. The Minister for Housing, Planning and Local Government has acknowledged that BTR projects are likely to have an important role in addressing some of the critical shortages of rental accommodation. In line with this, the Minister has instructed local authorities and planners to prioritise the delivery of such schemes. It is unsurprising therefore that we can see an increase in BTR units in Ireland and we can expect to see even more focus being put on the delivery of BTR developments in Ireland.
The Minister has issued guidelines under Section 28 of the Planning and Development Act 2000 (as amended) which include specific planning policy requirements (SPPRs). The planning authorities and An Bord Pleanála are required to consider these guidelines and apply any relevant SPPRs when carrying out their roles.
Linesight, in their report on the BTR sector in Ireland, have noted that while it is a relatively new asset class in Ireland, BTR has provoked substantial interest from both national and international developers and investment funds. The multinational construction consultancy firm have suggested that there is a potential for an additional 23,300 households to enter the rental sector in Ireland by 2021. Linesight have commented that “despite the challenges that the BTR sector faces, our research indicates that there is a fundamental desire to build this asset class in Ireland at scale”.
While there has been a major increase in investments in the BTR sector in Ireland, which looks set to continue, whether or not BTR developments will solve or even have a significant impact on Ireland’s housing shortage, only time will tell.
For further information contact Sandra or one of our Commercial Property team members.