Farewell to the humble bedsit

Thu, Jan 17, 2013, 00:00

Tighter regulation of rental properties may force many landlords to sell up, writes JOANNA ROBERTS

When the humble bedsit is consigned to history on Friday next, 2013 thanks to regulations setting out minimum standards for sanitation and heating in rented accommodation, the landscape of the Irish property market – particularly in Dublin– is set to change. The ban on shared bathrooms and landlord-controlled heating means many properties may not be rented out without significant upgrades, and a number of multi-occupancy properties may hit the market as landlords struggle to meet the cost of compliance.

“There are two issues for landlords: planning permission and cost,” says Margaret McCormick, information officer with the Irish Property Owners’ Association. “A number of houses aren’t suitable for the integration of bathrooms into the units, and people can’t get credit from the banks.”

Although the Housing (Standards for Rented Houses) Regulations 2008 have been in effect since 2009, there has been a four-year grace period for the implementation of articles 6, 7 and 8, which concern sanitation, heating and food preparation and storage. From February, all dwellings available for rent, including those within multi-unit properties, will be required to have their own bathrooms, independently-controlled heating appliances, a four-ring hob, oven, grill and extractor fan, a fridge and freezer, a microwave oven and access to laundry facilities.

Enforcement

Enforcement will be carried out as part of existing local authority inspections, starting in spring 2013. Where properties do not comply, landlords will receive an improvement notice requiring them to bring the property up to standard. Should this not happen, a prohibition notice may be served to prevent the landlord from re-letting the premises.

Because most modern-built accommodation will already meet the required standards, it is older properties that will be most affected, specifically pre-1963 buildings that have been divided into bedsits. Landlords are faced with three options: to upgrade the property to the required standard, leave it vacant or sell up.

An impact assessment of the regulations carried out by the now-defunct Centre for Housing Research in 2008 estimated that the cost of upgrading an eight-bed pre-1963 house into a six-bed unit with individual bathrooms and heating could be €120,000.

“For some landlords the timing could not be worse,” says Michael Walsh, partner and head of property with ByrneWallace. “In theory one should be able to borrow against future rental value but in the current market the commodity in scarcest supply is capital. Not every landlord will have the capacity or appetite to take on the necessary work, even though it ultimately should add to the value of the premises.”

He says landlords who do choose to sell may find an appetite for multi-unit properties among families who want to convert them back to single-occupancy houses. But he warns anybody considering buying such a property to be aware of the regulations and make sure the cost of any work is factored into the buying price.

Sherry Fitzgerald say they have not yet seen evidence of a huge influx of such properties on to the market. However, there is some indication that conversions are already taking place.

The 2006 census recorded 8,751 bedsits in the country; by 2011 this number had fallen to 5,695, the vast majority in central Dublin.

Angela Keegan, managing director of myhome.ie, sees the regulations as a “huge positive” for the rental market but, as landlords have known about them since 2009, she thinks the effect will be slight.

“It’s the market that sets the rent,” she says. “Rents have been creeping upwards in urban areas over the past year but you can’t point all that to the regulations, although they may play a part. Most upgrades will already have been done.” She adds that the regulations do not apply to certain types of housing, including accommodation provided by the HSE. “I hope this doesn’t mean you would get a worse standard of accommodation from the HSE than you would in the private sector.”

As for sales, she doesn’t foresee a huge influx of properties because “the landlords that decided to exit would have put their properties on the market before now.”

Ronan Lyons, economist, says there are two types of landlord. “There are those who we might call professional landlords, who started preparing a few years ago and put some of their income aside for the upgrade. These are probably the people who’ve switched over already. Then there are the landlords who live off the income and don’t put any aside for maintenance. I think there will be a number of people offloading properties closer to the time.”

Experts agree that the main impact will be felt at the lower end of the rental market, as landlords attempt to recoup the cost of works by charging higher rents. This could lead to a shortage of low-budget accommodation, particularly in Dublin city centre.

“The obvious solution, although it’s not a popular one, is that people get pushed slightly further out,” says Lyons. He says the potential impact of the regulations is in danger of being overshadowed by the debate surrounding rent supplement and property tax, but it will be a key issue in the property market. “Behavioural economics says that people will put off things until tomorrow,” he says. “Now it’s tomorrow.”

Multi-unit properties for sale

442 South Circular Road, Dublin 8

Agent: Young’s, 01-4975581

An eight-bedroom end-of-terrace house in Dublin 8 is on the market for €410,000. Billed as an investment opportunity, the pre-1963 property is divided into eight units: six are self-contained and two share a bathroom. The rental income is €38,000 per annum.

64 Marlborough Road, Dublin 4

Agent: Turley Property Advisors, 01-4791500

Laid out over three levels with a large garden to the rear, this double-fronted house is currently divided into 14 bedsits, providing an annual income of €72,800. It has off-street parking, and has potential to be restored to a large family home. It is on the market for €850,000.

11 Old Cabra Road, Dublin 7

Agent: The Lansdowne Partnership , 01-6601922

This two-storey house has an asking price of €275,000. It is currently divided into six bedsits, three on each floor, four of which are occupied. The rental income is €17,472 per annum, but with modernisation and redecoration, this could rise to €36,000.