Monday 14 October 2019

How State policy is feathering the cuckoo funds' nests

This will mean fewer properties for first-time buyers to purchase. Stock: PA
This will mean fewer properties for first-time buyers to purchase. Stock: PA
Charlie Weston

Charlie Weston

State policies are feathering the nests of cuckoo funds, meaning developers are set to favour build-to-rent projects for years to come.

The scale of benefits for build-to-rent developers is such that they will inevitably choose this path, architect and UCD lecturer Orla Hegarty warned.

This will mean fewer properties for first-time buyers to purchase.

Ms Hegarty says build-to-rent projects have lower planning standards than ordinary apartment blocks, they are more profitable and will draw the majority of investment.

This is bad news for first-time buyers as fewer homes will be built that get put on the market, she says.

It is reported that the yield, or investment return, on rentals here is already the highest in the European Union, while tenant protections are lower than in other countries.

Orla Hegarty: Smaller units to be the focus of development
Orla Hegarty: Smaller units to be the focus of development

Ms Hegarty said there was no requirement for a mix of different unit sizes when it came to a build-to-rent block, which meant developers can put in a lot of smaller units.

One-beds and studio apartments do not count for calculating requirements for a crèche, under changes made by the Department of Housing last year to encourage the building of more rental units.

Build-to-rent also has lower standards for amenity space, storage, lifts, stairs and parking, making the buildings cheaper to construct.

"The consequence of this is that a lot of money can be made by building smaller units than bigger ones. Per square metre, there is a lot higher return to be made on smaller units," the assistant professor in UCD's school of architecture said.

This means the emphasis will be on build-to-rent developments in urban areas rather than build-to-sell.

And investors and funders such as banks were looking more favourably on build-to-rent proposals.

"Build-to-sell is bottom of the pile for investors. Student housing, co-living blocks and build-to-rent have all been favoured in policy, and give substantially higher profits. We will see a lot more build-to-rent than build-to-sell."

But the attempts by the State to concentrate new developments in urban areas will have the "wrong consequences", she added. Her comments come after it emerged that plans were lodged for more than 6,000 residential properties in the space of five days - many of which will never go on sale to families.

Build-to-rent apartment blocks have a restriction so that the homes cannot be sold individually for at least 15 years. Some 2,814 (47pc) of the total are for build-to-rent apartment developments for the capital.

The figures from An Bord Pleanála show that the stampede by developers to obtain planning permission for large-scale housing and apartment developments continues under the Government's fast-track planning rules.

Ms Hegarty said developers would still build traditional lower-density houses for sale in commuter areas, meaning more car commuting.

The yield, or return, on a one-bedroom apartment in parts of Dublin is as high as 12.8pc, according to Daft.ie.

Yields are about half that for a three-bed house in the same areas.

The Department of Housing said it is important to recognise the positive effects that institutional investment can have on the supply of housing, "particularly apartment developments in the main urban centres".

Irish Independent

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