How can you rent a home for 30% below market rates?

Did you know that you can now earn more than €80,000 and still benefit from State support which could see your rental costs slashed by potentially as much as 30 per cent?

Yes, thanks to a scheme launched last year, middle-income earners, who would traditionally have been outside the scope for State support, can now benefit from below-market rents. Not only that, but if and when your income should rise, you can remain in your home, as tenancies are secured for six years and will automatically roll over thereafter unless there are issues.

With more cost-rental homes coming on to the rental market this year, we take a look at how the scheme works, its benefits, and its challenges.

State supports

Traditionally, social housing supports have been aimed at those on lower incomes. To qualify for social housing or the housing assistance payment (HAP) for example, whereby the State pays a fixed amount of the monthly rent and the tenant finds the property themselves, fixed ceiling caps apply.

Our management company met by Zoom for Covid-19. What now?

---

My neighbour’s boiler is blowing smoke into my home. What can I do?

---

Serenity, solar energy and sea views above Howth Harbour for €3.25m

---

Remodelled mid-century semi-detached in Cabinteely for €850,000

---

In more urban areas like Dublin and Cork city for example, if you’re single, you can earn up to €35,000 and will qualify; if there are two adults and four children, you can earn up to €40,250 and be eligible, or income of €42,000 is allowable where there are three adults.

This falls to incomes of €30,000 (single) and €36,000 (family) in places like Kilkenny, Limerick and Waterford, and it reduces again to €25,000 (single) and €30,000 (family) in counties like Roscommon and Sligo.

But, given sharply rising housing costs, this leaves a sizeable cohort between those who earn more than these limits – the average annual income is about €45,000 according to CSO figures for example – but still find it difficult to rent or buy their own home.

Into this breach comes the cost-rental initiative, which is aimed at helping those who don’t qualify for social housing, but who still find housing unaffordable in the open market.

Cost rental

The scheme, inspired by the Vienna model of housing, aims to provide affordable homes to generations of individuals and families, while at the same time exerting a stabilising effect on the housing market. Its focus is on offering those on lower to middle incomes a long-term secure tenancy that is more affordable than market rates.

As pointed out by St Vincent de Paul in a recent report, the basic idea of cost rental is that a social-housing provider raises the finance to provide accommodation and charges rents that are sufficient to cover current and capital costs - rather than be focused on profit generation.

Under the Government’s Housing for All plan, there are plans to deliver about 18,000 cost-rental homes between now and 2030, averaging about 2,000 a year. Last year, 65 homes were occupied under the scheme – 25 at Taylor Hill in Balbriggan and a further 40 at Barnhall Meadows in Leixlip, both by Clúid Housing. About 700 have been approved for completion this year.

Supported by the Department of Housing, Local Government and Heritage, rents are typically pitched at rates of about 25 per cent below the market – and sometimes at even greater discounts.

The schemes are being run by approved housing bodies, such as Clúid, Respond and Tuath and, thus far, the schemes are in the greater Dublin area, Cork and Wexford, but housing bodies see potential to cast the net much more widely.

Respond, for example, is currently looking at how it can deliver homes not just in the greater Dublin area, but also in Cork city, Galway city, Limerick city and “other major gateway towns”.

How it works

The key advantage of cost rental is lower rents. Residents of one of Ireland’s first cost-rental scheme, on the Enniskerry Road in south Dublin, are set to move into their new homes this month. Woodside is a development of 155 homes, 50 of which are cost-rental and 105 social, managed by Tuath and Respond.

A two-bed apartment in the scheme will rent for €1,200, compared with about €2,000 in the nearby Rockview development, for example.

Clúid meanwhile has a scheme at Barnhall Meadows, Leixlip, Co Kildare, comprising 56 terraced and semi-detached houses, including six two-beds and 50 three-beds. The houses are unfurnished but come with flooring, blinds and white goods.

The properties rent for €900 a month for a two-bed, and €1,250 for a three-bed. You’ll also need a deposit of one month’s rent less €50, so €850 for a two-bed.

In Cork, Clúid has 73 cost-rental homes at Lancaster Gate, where one-beds will rent from €990 and two-beds from €1,100.

One of the greatest advantages of the schemes is the security of tenure they offer; tenancy is for an initial period of six years, and will automatically roll over after that provided there are no issues.

Not only that, but you won’t be kicked out, even if your income increases substantially. Thus the savings can be substantial for long-term renters.

In addition, the more cost-rental schemes there are – targeting and delivering solutions to middle-income earners – then the greater downward pressure on rents this may exert on the private sector.

As SVP said in its note: “Over time as that sector of the rental market builds up it is also intended to have a moderating influence on the overall rental sector.”

Not just for families

With more single people likely to be looking for their own home, on the back of shifting demographics, cost rental is also hoping to meet their needs.

A spokesman for Clúid says it is “very conscious” of the increasing need for one-bed homes in Ireland and it will be delivering 11 one-bed apartments at its scheme at Lancaster Gate in Cork city, to be allocated later in 2022. Its upcoming scheme in Newbridge will also feature one-bed apartments.

“Furthermore, we have factored the growing need for one-bed homes into our cost-rental delivery plans for the future,” he said.

Are you eligible?

To qualify for such schemes, your net household income must be below €53,000 a year. Remember, this figure is the one most used to advertise the scheme but it is net, and doesn't include tax. Therefore, those on significantly higher incomes can qualify – a family with one earner, for example, may be able to earn about €80,000 and meet the requirements. Housebuilder Glenveagh, which is building schemes incorporating a cost-rental element in Ballymastone and the Oscar Traynor Road, both in north Dublin, has put a top figure of €82,273 on the amount a household can earn and qualify for the scheme.

To check if you might qualify, have a look at your latest earnings details from Revenue (via MyAccount) or use a tax calculator such as this one: pwc.ie/issues/budget-2022/income-tax-calculator.html

Other requirements include not owning a property; not being in receipt of any social housing supports; your household must match the size of the home; and you must only apply for one property.

Downsides

The upsides of the schemes are clear; nice, new homes, at below-market rents. Moreover, eligibility is far wider than many people may have expected.

However, while the rents are competitive, you’d still struggle to label them as “cheap”, particularly given that schemes to date have been on the outskirts of urban areas.

Tuath chief executive Seán O’Connor alluded to this recently when he noted that “when you say the rents out loud, it still makes me draw breath a bit”.

And it seems that certain schemes may offer better value than others. Consider the development at Barnhall Meadows. A one-bedroom cost rental apartment was available for €900; however a one-bed apartment in the same town on the open market was advertised for €975 on Daft.ie. Impossible to compare on a like-for-like basis but worth noting.

On the other hand in Cork, a two-bed at the Lancaster Gate development is listed for rent at about €1,700 – some 35 per cent more than the cost-rental scheme, while a one-bed is on for €1,473.

And cost-rental apartments are not immune to rent increase pressures; rents can go up, as they will be linked to inflation rates, and in particular, the Harmonised Index of Consumer Prices –- which is currently up by 5.7 per cent on an annual basis – or 2 per cent, whichever is lower.

Moreover, the schemes are quite limited, given the obvious demand to fill them. More than 1,000 potential tenants applied to live in the first 25 cost-rental homes for example – that’s a lot of disappointed people.

Unsurprisingly, given the discounts at hand, there is an element of inflexibility; you won’t be able to sublet a property, so if a relationship breaks up, you might have to move out, or if you want to rent with friends, you will likely find this difficult.

How to get a property

One of the biggest challenges of the scheme is getting a property. The housing bodies say they don’t take waiting lists, which means you must simply apply next time around if you fail to secure a home first time out.

So to find out what’s coming on stream, you’ll need to keep an eye out on tuathhousing.ie; cluid.ie and respond.ie.

In the case of Woodside on the Enniskerry Road, for example, these units were advertised on Daft.ie and on the Respond website and the Tuath website for seven days. A spokeswoman for Respond says its advice is to keep an eye on its website for updates, while Clúid adds to also watch its social media channels for updates.

If you do qualify, an independent lottery system is then used to select all successful applicants.

Middle-income earners: Other housing supports

- The affordable purchase shared-equity First Home scheme, which is due to get off the ground this May. “An affordable housing scheme which is open to FTBs with a household income of up to €73,362. A scheme of three-bedroom duplex houses at Kilcarbery in Clondalkin, Dublin, was just launched in this scheme with prices starting at €245,600.

- An expanded Local Authority Home loan, which allows home buyers borrow more than they otherwise might be able to through the banking sector. Single buyers on incomes of up to €65,000 and couples on income of up to €75,000 qualify.

- The Help to Buy scheme, which offers a tax rebate of up to €30,000 on the purchase of a new home.