Build-to-Rent Schemes to Change to Build-to-Buy Standard

Speculation has been building in recent weeks that the Minister for Housing Darragh O’Brien is to announce the abolishment of separate rules for build-to-rent or “BTR” developments. There has also been suggestions that the Government may mandate the Land Development Agency to take steps to utilise some of the permitted BTR developments to meet social housing needs under the Government’s Housing for All initiative.

Whilst an official government publication is awaited and any respective updated Guidelines have yet to be published, on 4 October 2022, addressing the Oireachtas in relation to Housing for All, Minister O’Brien confirmed:

“I am eliminating the separate build-to-rent standards. That means that, from the end of this year, every apartment application will involve a single build-to-buy standard and those apartments will be allowed to be sold and will not be restricted to rental".

We consider the impact that the emergence of this new asset class has had since significant steps were taken by the Government to promote its development. This included the introduction of exemptions to the application of mandatory apartment standards to BTR developments in 2018 under the Sustainable Urban Housing: Design Standards for New Apartments – Section 28 Guidelines, as updated in 2020.

Arguments for and against BTR Schemes

The rules mean apartments owned by institutional investors and developed specifically for the rental market do not have to comply with minimum size standards required in homes for sale. There are less stringent storage requirements and more apartments permitted per floor.

These rules were introduced to:

• Attract new investment
• Facilitate intensification of development, and
• Make a significant contribution to the required increase in housing supply nationally

These standards were introduced to accelerate BTR development, with a view to providing choice and flexibility to people and in supporting economic growth and access to jobs in Ireland.

Official figures demonstrate that significant BTR investment has established BTR developments as an element of the overall housing mix between 2018 and 2022. It is notable however, that of the BTR schemes permitted, the majority of planning permissions have not yet progressed to development.[1] The Department of Housing’s figures show that, at the end of last year, there were 42,725 un-commenced planning permissions for apartments in the four Dublin local authorities alone.

Since 2020, there has been mounting criticism as to the proliferation and quality of these developments, particularly in Dublin. Those opposed to the over-dominance of BTR schemes have argued that the current policy has benefited both institutions and developers at the expense of individual buyers. They argue that the current high level of house prices and rents in Ireland in the residential property market has been driven to a significant extent by such housing policies aimed at attracting institutional investors into the market. [2]

As set out in our article, Dublin City Council (DCC) had cited the “over-dominance” of BTR schemes being permitted in Dublin as the reason that measures had been introduced into the draft Dublin City Development Plan 2022-2028 (the Draft Development Plan”) to curb this type of development they considered “unsustainable” with the potential to have “significant long-term adverse impacts on the housing needs of the city”.

Industry sources have stated that axing the development standards would add to the cost of building homes in urban areas and will have an impact on delivery and investment in much needed housing.[3]

One of the key objectives of the introduction of BTR at the outset, is to increase the supply of housing units onto the housing market. It is evident that under supply is one of the main contributory factors to rising rents and house prices. It is further evident that the current policy has facilitated the development of, and grant of planning permission for, a high number of units to increase housing supply. It has been considered that there is a market for certain tenants that the BTR scheme seeks to address.

Impact of the proposed changes to the standards applied to BTR apartments

The Minister has not provided details of the new “build-to-buy” schemes so, aside from the change from rental to purchase, it is unclear whether there will be specific design standards. Although on the face of it, the commitment of the Minister to abolish the current BTR regime may be a welcome development to those opposed, it is unclear to what extent it will address their complaints. It will need to be considered to what extent the changes would affect processes that are already underway. For example, DCC are due to adopt the Development Plan, with or without amendment, at the end of October. The Office of the Planning Regulator (OPR) lodged a submission regarding the departure from national policy on BTR guidelines. It remains to be seen what the section 28 guidelines would prescribe, if anything, for such processes

In the Housing for All initative, the primary focus of the Government is delivering social and affordable housing. It remains to be seen if and when the Minister will progress any steps to implement new rules surrounding BTR schemes.

Conclusion

In an ever-challenging environment, where developers face unprecedented levels of uncertainty in both the planning process and the supply and cost of materials, the current position certainly warrants careful consideration for developers seeking planning for a BTR development. This is particularly pertinent in the Dublin area given the level of uncertainty arising from the approach of both the Government and DCC. However, it is unclear what the new “build-to-buy standard” will require in terms of design specifications and planning restrictions.

For more information, please contact a member of our Planning & Environment team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] https://www.oireachtas.ie/en/debates/debate/seanad/2022-10-05/3/ Strategic housing development, SHD, permissions made to An Bord Pleanála show that, as of July 2022, the board had granted permission for 50,792 apartments, of which 12,230 were specifically BTR units at the time of permission. Of the 12,230 approved BTR units, 2,669, or 22%, have commenced on site and 9,561, or 78%, have not started.

[2] Dail debate – 15 February 2022

[3] https://www.irishtimes.com/ireland/housing-planning/2022/10/01/controversial-planning-rules-for-build-to-rent-apartments-to-be-axed/