Blurring the lines between public and private

The private rented sector, or PRS, in Ireland has changed significantly over the past decade and the emergence of build to rent, or BTR, as a new asset class is driving further changes. These changes have been broadly criticised outside of the industry for a whole range of reasons, from lack of affordability to the disproportionate, institutional gobbling up of already low supply, leading to homebuyer shut-out. And the list continues… Some of this criticism is warranted, some is not. It is fair to call this a misunderstood asset class, with commentators failing to understand the amenity value or failing to appreciate the importance of this for an entire new generation of occupants who are demanding greater choice, greater flexibility, greater quality and a sense of community. While the sector in Ireland is just getting started, build to rent as a concept is long established in the US (although it is more commonly referred to as ‘multifamily’) and in other markets. As a preferred asset class, it is considered to be a resilient investment that offers strong returns for investors, while providing a superior offering for tenants. 

According to industry news website www.btrnews.co.uk, annual investment in the UK BTR sector “could soon sit as high as £5.8bn a year”, following an estimated £4 billion investment in the sector in 2020.  This marks a 300 per cent increase on 2015 investment levels, with further growth expected. Given that the UK is ahead of the Irish sector by a number of years, this is an interesting trend to watch. However, it should be pointed out that growth in the Irish sector is forecast to be even more aggressive. Whichever figure you rely on, it is eminently clear that there is huge growth potential within the sector. 

But the court of public opinion will play a part. As mentioned here on many occasions, the 1,000 per cent increase in observations/objections, including Judicial Review proceedings, is a worrying trend. Rather than positioning the public sector against the private sector, institutional investors against private investors, or indeed the rented sector against the residential sales sector, there needs to be a better explanation or demonstration of the vital role each plays in tackling the housing crisis.  In furtherance of this, earlier this week divisional director at Savills Ireland, Ebba Mowat, published an opinion piece in The Irish Times stating that ‘Time has come for institutional investment to address the affordable housing crisis: Ireland’s social housing needs can be met by private finance and approved housing bodies’.  This article gives some much needed perspective by outlining that “While the Government should be commended for its efforts to address the issue of affordability through the introduction of the cost-rental and shared-equity schemes contained within the Affordable Housing Bill announced in Budget 2021, the €110 million of allocated funding is a proverbial drop in the ocean compared to the more than €15 billion that transacted in Ireland’s residential market in 2020 alone”. The article also points out that an urgent solution is required to address the worsening affordability crisis. Like other European countries, Ireland will need to look to the private sector to fund the documented gap in delivering social and affordable housing. By doing so, institutional investors achieve consistent cash flow with low vacancy rates, tenants pay below-market rents, and the State benefits as the private sector provides the up-front capital to build. “Taken together, it creates a win-win situation for the tenant, the investor and the Government”, now we just need to let the people know.

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group