Tens of thousands of students have this week received offers of places in third level colleges across the State. Now, having navigated the pressures of the Leaving Cert, many of them will face a scramble for accommodation close to their college of choice.
Those looking to reside on campus may find that their colleges do give preference to incoming first year students. The rest will join returning students who had a head start in sourcing somewhere to live for the upcoming academic year. But even they have struggled with the limited options available.
Digs, staying with a local family, is very rarely the preferred option for college students but, for many it will be a choice between that and a potentially very long commute if they are to follow the third level path to their careers.
UCC Student Union president Alex Angland says more than a thousand of its 26,000 students live in Gigs, with thousands of UCC students struggling to find accommodation every year.
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In Maynooth, although 70 per cent of students commute, that still leaves around 5,000 students looking for accommodation every year in a town with a population of around 18,000, according to Maeve Farrell, president of its student union.
On that basis of a survey conducted last year, around a third of those end up in Digs – around 1,650 students.
“Seventy-two per cent of students surveyed reported that searching for accommodation has had a negative impact on their mental health, with 64 per cent believing it has negatively impacted their academic experience and 72 per cent saying that it has negatively impacted their overall student experience,” she said.
As summer passed, students unions from five Dublin universities launched a joint effort to address this issue, reminding homeowners of the possibility of tax-free income which could also deliver much-needed housing for students.
Rent-a-room relief
Rent-a-room relief is certainly worth considering. You can earn up to €14,000 a year totally free of any tax. Alongside relief on pension contributions and the small gift exemption, it is probably the most generous tax relief available to ordinary taxpayers. But there are conditions.
So what do potential landlords and student tenants need to know about this arrangement to make it work for both parties?
For the homeowner, the rules around the relief are fairly straightforward. The relief is available only for the letting of rooms in your own family home – i.e. living alongside you – though it can include self-contained units such as a converted garage or attic flat.
However, if the accommodation is not attached to your home, it will not qualify and any income you receive will be taxed in full as normal rental income.
That aside, in an effort to stem the flow of accommodation to the short-term holiday let / Airbnb market, the key thing is that that relief does not apply to short-term stays. In general, that means the person needs to be staying at least 28 consecutive days. However, that can include scenarios where someone stays only Monday to Friday before going home for the weekend and returning at the start of the next week.
It does not have to be just one student or one room but any income under the scheme cannot exceed the €14,000.
Finally, that €14,000 is all in. It covers not just rent but any other service for which you charge tenants – such as utility bills, laundry or cooking. And it is an all-or-nothing limit. Go a single cent over the €14,000 and the whole thing is taxed as normal income.
In truth, the rules are few, simple and clear. And the potential is huge. For anyone paying tax at the marginal income tax rate of 40 per cent, you would need to earn almost €28,000 more from your employment to match to increase your take home income by €14,000.
People who are on means tested social welfare income, who might worry that getting involved might see their welfare cut can rest assured. Until at least 2027, there is a disregard, meaning that you can earn up to the full €14,000 without any impact on your welfare payments.
That includes people on the Living Alone Allowance – a group that might well benefit from and welcome the company.
And this is open not just to private homeowners but also to local authority tenants and even private sector tenants (with the approval of their landlord). Local authority tenants may, however, find their rental adjusted depending on the income they receive under the scheme.
One other thing, as Tommy Walsh, a tax partner with Orbitus Tax, notes s to make sure that your home insurance covers such an arrangement, especially any damage caused by a paying tenant.
What about for the student side?
Well the biggest thing to be aware of is that you have fewer protections under Rent-a-room than you would do in normal rented accommodation. Most notably, you are not covered by the tenant protections available under the Residential Tenancies Act, nor do you fall under the protection of the Residential Tenancies Board in terms of dispute resolution.
The landlord is also not bound by the accommodation specifications covered in other forms of rental.
In fact, you don’t even have a contract as such, only a “licence”. That essentially means you are only in the room at the homeowner’s invitation or with their consent. It also means they can ask you to leave, albeit with some notice.
Making it work
So how do you make the whole thing work? For both sides, it makes sense to have a simple written agreement. There is a template available at most student unions but homeowners may prefer to draw up their own.
It should cover certain basics. First up, that includes name, address and contact details of both parties. Next, it needs to state how long the licence will run, generally the academic year, including a start date and an end date. Importantly, it should state whether the room is available seven days a week, or only from Sunday evening to Friday morning, and also what is the arrangement during college breaks for Christmas and Easter.
It needs to set down what the agreed rent it, whether it is paid weekly or monthly, how it should be paid (cash, electronic transfer or whatever) and when. That includes whatever deposit is payable and, if so, how much, when it is to be repaid as or after the tenant leaves and under what circumstances some or al of it can be retained – generally to cover for damage.
A record of rent paid, either by text message confirmed receipt or whatever is also useful to allow for.
It should also include any charges for utilities such as electricity, gas, wifi, waste or whatever, how they are calculated and paid, and, if relevant, whether a charge will be made for using clothes washing and drying facilities.
Details of any notice periods should also be included. So, too, should a clause confirming what happens if rent is not paid on time in the prescribed manner(s) – generally immediate termination.
Clearly, you’d expect to pay less than you would in college accommodation or the private rented sector. A quick run through the digs.ie website suggest you can expect to pay anywhere between €150 and €250 a week in Dublin for a room.
An inventory of any furniture /furnishings in the room being used by the tenant should be set down in writing and agreed by both sides, including notes as to their condition. Generally, the furniture will not be new so both sides need to be realistic about the state of things at the beginning and end of the licence period.
Finally, and critically, any house rules that will apply should be set down in writing. Rent-a-room is very different from old style “Digs”, where the landlord would generally cook at least some meals for the tenant. These days students will be expected to provide their own food and prepare their own meals.
Clearly this means there needs to be agreement on fridge/freezer/cupboard space. It would be normal for the student to use the landlords crockery, cutlery and glassware but, if there are limits on this, note them down.
Similarly, if the student is expected to otherwise have use only of their room and a bathroom, write that down. If, hopefully, they have access to some communal areas – kitchen, sittingroom whatever – it should also be noted along with areas that are out of bounds.
On the flip side, generally a landlord should not have any reason to access the student’s room. If such access is entertained in exceptional circumstances, any agreement should document what is allowed, what notice is required and how often.
Are they allowed bring guests home to their room? If so, can those guests be brought to the kitchen etc? The more that is agreed, the less scope for upset on either side. Rent-a-room by its nature requires a careful balancing act between the arties so it makes sense to think through what you will or will not countenance before agreeing a deal. If something is going to drive you nuts, let it be known that you will not entertain it.
It sounds like a lot but it doesn’t have to be really, just a written note covering the understanding
Practicalities
Rent-a room really only works for students where it is convenient to their college. Unless they have there own transport – a car, scooter or bike – that generally means close to relevant bus, Luas or DART routes.
It also requires some give and take. Regardless of how detailed an agreement, if every day and every movement if going to be referred back to the agreement, it is not going to last.
Students are generally away from home for the first time and finding their feet with independence and responsibility. With the best will in the world, small issues will arise. Someone will have left their laundry in the washer all day just when you want to use it, or whatever.
While no one expects parties to be allowed or a gang of students occupying public areas into the small hours, sharing a beer with a friend in their room before they go out is not really a federal offence.
If you cannot talk these tings through without aggravation, maybe Rent-a-room is not for you.
But if your children have left the family home or you are living on your own with significant space, Rent-a-room can provide a welcome boost to your income and, indeed, company – even the buzz of someone being around without necessarily always being under each other’s feet or feeling beholden to engage.
And with a bit of give and take, both sides can find unexpected advantages in helping each other out. It can even give comfort to children worried about an elderly parent living alone away from them.
“For anyone with spare capacity in their home, the scheme is an easy way to help students in need while benefiting from genuinely tax-free income,” says Tommy Walsh. “With demand for student accommodation so high, Rent-a-Room Relief is a practical, win-win opportunity.”
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.
