Unviable build-to-rent schemes could be converted to cost-rental homes, Dublin City Council chief says

Unviable private build-to-rent schemes could be converted to cost-rental apartments by local authorities, Dublin City Council chief executive Owen Keegan has told the Oireachtas housing committee.

It was reported earlier this month that developers expect a major slowdown in the market for institutionally backed build-to-rent apartment schemes, with international financiers withdrawing their support for planned developments amid rising interest rates.

Minister for Housing Darragh O’Brien has also said he intends to abolish the build-to-rent system, where apartment schemes can be built to lower-size standards than general apartments as long as they are retained in the rental market and not sold to individual buyers.

Mr Keegan said there was an opportunity for the council to do deals with developers who have planning permission for build-to-rent schemes but no longer have the financing to build them.

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“We certainly have been approached in the last two or three months by developers with permission for build-to-rent units who don’t see any prospect of developing them,” he said. “The market has fundamentally changed, so I think there is a real possibility that we could get heavily involved in taking those units for cost-rental.”

Cost vs market rate

Cost-rental developments are similar to build-to-rent schemes in that the apartments must remain as long-term rentals and cannot be bought by their occupiers. However, unlike in build-to-rent schemes, the cost-rental tenants pay a rent based on the cost of building, maintaining and managing the complex rather than market rates.

The cost-rental apartments are also built to general apartment standards, rather than the lower standards permitted in build-to-rent developments.

Dún Laoghaire-Rathdown County Council chief executive Frank Curran told the committee he had also recently been approached by developers who could not afford to build their schemes.

“Similarly to Dublin city, we went out a year-and-a-half to two years ago looking for turn-key opportunities for social and affordable and cost-rental and there was very little interest from the market,” he said.

“A lot of the people I spoke to then are now coming back, with the changes, and asking are there possibilities now with the turn-key and cost-rental. That change in the market does present opportunities, absolutely.”

Different models

Committee chairman Steven Matthews TD said he would be concerned about sub-standard accommodation being used for long-term rental housing.

“Cost-rental is meant to be long-term, secure rental, livable for life. I would have a concern if the build-to-rent standard was now to be converted to long-term cost-rental. They are a very different model.”

Mr Keegan said not all build-to-rent schemes were designed to lower standards.

“A lot of the ones that are build-to-rent are actually designed to the full spec anyway, but there is no market for them. The market to sell apartments is even worse,” he said.

“So I could see circumstances where they would be attractive units for us to take, for either cost-rental or social housing, or indeed affordable purchase as well. It is a new thing that has opened up because of the recent changes in the economic parameters.”