It is estimated that there are currently 10,442 student beds in operation in Dublin, catering for just 13.2% of the student population. At a national level, Ireland has 21 student accommodation projects in the pipeline which could supply 7,181 beds by 2019. Of these, over 4,000 are under construction, 1,027 have planning permission and 1,957 are in the planning process. However, the demand and supply dynamic in the student accommodation sector is “likely to remain imbalanced for the foreseeable future”. As investors look to student accommodation as an alternative asset class, there are a number of factors that need to be considered before engaging in development.
Check your planning permission to ensure it allows for (i) student accommodation and (ii) use of the property as short-term holidays rentals outside of term time.
In order to maximise your investment, a property should yield a rental income for every month of the year. As the rental income generated from student lettings is limited to the academic term of approximately eight months in each year, it makes financial sense for an investor to seek to rent the accommodation as short-term holiday rentals during the summer. This must be specifically set out in the planning permission for the property.
The Planning and Development (Housing) and Residential Tenancies Act 2016 (2016 Act)
The 2016 Act introduced, amongst other housing initiatives, a fast-track planning process for student accommodation of 200 or more beds. Where applicable, planning applications are to be made directly to An Bord Pleanála. The fast-track planning process will apply until 31 December 2019 or an extended period to be determined by the Minister, but no later than 31 December 2021.
2. The Property Services (Regulation) Act 2011 (2011 Act)
The 2011 Act is the statutory framework which governs the provision of property services by auctioneers, estate agents, letting agents and managing agents in Ireland. The 2011 Act established the Property Services Regulatory Authority (PSRA), the main function of which is the licensing and regulation of property service providers (PSPs). Subject to very limited exemptions, PSPs in Ireland engaged in the provision of property services must be licensed. It is a criminal offence for a person to provide a property service without holding a licence. The person must be a holder of a licence for the property service concerned. Developers should be aware of the need for their provision of “property management services” to comply with the requirements of the 2011 Act.
Developers and owners should, at an early stage, determine their proposed strategy for the renting of beds in a student development complex. Developers and owners can rent accommodation to tenants directly or can enter into a rental arrangement with a college, university or service provider who in turn will liaise with students directly.
Student rental agreements typically fall within the parameters of residential tenancies legislation in Ireland and in particular the Residential Tenancies Act 2004. This means that students after six months’ occupation of a residential dwelling may acquire tenancy renewal rights. There are also cost and administrative red tape implications. This can have a significant impact on an investor landlord’s ability to freely deal with its property. The risk can be avoided by engaging with a college or university that falls outside the scope of the legislation for the purpose of residential lettings.
4. Obligation to register student rentals
As a Landlord, you must register any residential letting agreement with the Residential Tenancies Board (RTB). If you do not register, then you will not be able to avail of the RTB’s dispute resolutions service and you may be prosecuted for failure to comply with the Residential Tenancies Act. The cost of registering a letting with the RTB is currently €90 per letting registration provided the tenancy is registered within one month after the commencement of the tenancy.
The student accommodation market in Ireland continues to perform strongly for investors seeking a long-term investment option given existing and future demand. While investors are attracted to the sector and its proven resilience to economic downturns, the practicalities and legal implications of this specialist real estate sector must be considered carefully.