Dublin: rising to the build-to-rent challenge

Bryngriffiths02

Bryn Griffiths

Director, Dublin

Europe

Build-to-rent (BTR) will become an integral part of the response to Dublin’s acute housing challenge, delivering enhanced housing options for its residents and maximum returns for investors.

Known for its bustling streets and bars, and close enough to explore the idyllic coast, it’s no wonder that Dublin attracts many people and companies to the city. With population predicted to increase by 31.9 percent to 1.74 million by 2036, the need for housing is pressing.

In Dublin’s traditional build-to-sell residential sector, a perfect storm of high build costs and low sales values has delayed investment in new city-centre schemes. As a result, Ireland’s capital is currently marked by insufficient housing stock, ever-increasing rents and a frustrated workforce compelled to live in the suburbs and beyond, placing stress on the city’s transport system and surrounding road network.

Increasingly onerous financial demands on private landlords have led many to exit the sector, combining with strict mortgage lending criteria that place house buyers on the endangered species list, to pile yet more pressure on Dublin’s rental market.

Build-to-rent: hard to ignore

Given the supply and demand disconnect, things are inevitably starting to give, with BTR presenting its credentials as a potential solution to the issues at hand. Although the BTR sector is only in its infancy, the demand for it is clearly out there, with turnover doubling in 2019 and buy-in from the Government. What’s more, institutional funds have begun to bulk-buy apartment blocks, affording economies of scale, while minimising risk and providing a swifter return on capital.

BTR traction has been helped by new dedicated legislation, which seeks to address restrictions on building heights and density and allows for greater autonomy on project type and size.

Broadening the scope like this serves as a shot in the arm for the potential viability of BTR schemes, constituting welcome news for commercial developers and institutional investors alike.

The sheep in wolf’s clothing

The battle for hearts and minds must also be won, moving away from the binary view that to buy is good; to rent is bad. With BTR funds gaining the label ‘cuckoo funds’, implying that aspiring homeowners are being pushed out of their nests by self-serving, exploitative investors.

With the shortage of housing in Dublin, BTR is well positioned to gain credence as part of a broad solution through its provision of purpose-built, large-scale developments backed by international investment.

Meanwhile, for investors, although BTR may not amount to a mainstream asset yet, it offers up the prospect of more sustainable returns, given the enduring resilience of the rental market through boom and bust.

Good omens

Whether BTR version 1.0 becomes 2.0, where apartment buildings are routinely specifically designed and planned for rental, as they are in Germany, the Netherlands and the UK, remains to be seen.

With Dublin’s young, international demographic well-placed to revise the city’s definition of what constitutes an acceptable home, there is cause for cautious optimism.

Indeed, recent changes regarding what is permissible on the construction front suggest an increasing acknowledgement from lawmakers that a built environment must adapt to meet changing needs, rather than be preserved as a museum piece at all costs.

The best way to further enhance viability would be for developers and funds to partner up, and employ a more strategic and planned approach to procurement and delivery, across a programme of projects.

In contrast to the current market’s one-off transactions, this would allow for tighter control of construction costs through homogenous design, purchasing at scale and modular off-site construction methods. This would help to minimise the issue of labour shortages and enable greater efficiency by keeping the same (increasingly knowledgeable) team on.

For further information contact:

Bryngriffiths02

Bryn Griffiths
Director, Dublin

t: 00353 86 4671080
e: