Inventive to build to let apartment attached to main house

In Ireland you can rent a room in your home tax free up to €14,000 per year which is a great incentive from the government.

This also applied to small 1 bed self contained apartments attached to the main house.

The rental yield, especially in Dublin on these small self contained apartments can be around 10% and provide a steady stream of cash for families and help alleviate the housing crisis without having a stranger living in your main home.

This sounds like a quick and easy way to solve the housing crisis where everyone benefits.

If there was a fund set up by the government where people could access it to cover the capital cost and the interest rate was reasonable at around 2% this would be a winner for the government also and they wouldn't have to assume the role of landlord and it would also drive down the cost of the HAP scheme.

There are a huge number of builders that could build these type of accommodations that wouldn't have the skills and resources to build large apartment blocks.

The pros of this far outweigh the cons as far as I can see.

What do you think of this?

Ray Palmer

It sounds like you got something wrong. Rent a room is that not a self contained unit. There are restriction if not attached to the house but I also believe spaces must be shared to be rent a room. You can make arrangements with your licensee but there still needs to be an opening to the main house AFAIK. At best you can fudge parts of it so they are self contained at worst you will have to pay tax you evaded.

The government aren't going to join in with such an obvious misuse of the policy objective which would facilitate tax evasion

Mrs OBumble

Have you tried getting a builder for a smaller job lately?

Or planning for a granny flat, which won't be occupied by a granny?

Mrs OBumble

(Cool ... new boards-mobile allows empty posts!)

https://boards.ie/discussion/comment/117631682#Comment_117631682

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/what-type-of-residence-qualifies.aspx

Self-contained unit

The rented room or rooms can be a self-contained unit within the house, such as a basement flat or a converted garage.

I imagine that an extension build for this purpose would be the same as a converted garage, neither requiring direct access to the main house. Anybody know for certain how Revenue treat a purpose built extension?

Deeec

I think most people wouldnt want their tenants living in an apartment attached to their house. It would be a nightmare!

It would be open to abuse aswell - people applying to avail of the scheme and then moving their son/daughter into the property or even using it as a cheap way of extending their property.

https://boards.ie/discussion/comment/117631916#Comment_117631916

While it is in the list of cons the government can change the planning guidelines or allow an extra bit of flexibility to allow this if it is deemed that it will have a material impact on the current housing crisis.

Builders will appear if there is a sustainable amount of work for them at a rate that is competitive. They showed up in 2006/07 during the height of the building boom and will do so again.

Your objections are not really against the idea as such but rather details on the execution which can be solved if the will is there.

https://boards.ie/discussion/comment/117633537#Comment_117633537

I think there would be many people who would be delighted to have up to €14,000 tax free income each year helping them to pay off their mortgage or provide a steady stream of cash flows in retirement.

The issue would be the capital outlay and planning permission, both of which can be addressed by government.

As per the link above;

"Exclusions

You cannot claim the relief against income received for the use of the room or rooms from:

your child or civil partner

an employer

short-term guests (including those who book accommodation through online booking sites)."

-

Wouldn't avoid the scheme and all the numerous benefits because a few people may use it to build an extension at a lower rate of interest than what is available from their bank / mortgage provider.

Ray Palmer

https://boards.ie/discussion/comment/117633519#Comment_117633519

Not quite the same as building something precisely to rent out. I don't like your suggestion and the idea to change planning laws for it shows that you have a bit of an unreal expectation from the local council, planning nor government. It is good to know it can be self contained and I was not aware of that but citizen's information is a guide not absolute information.

Claw Hammer

https://boards.ie/discussion/comment/117636525#Comment_117636525

The Revenue are clear it can be a self contained unit, but if it is, the RTB regulations apply other than the fact there is a shorter notice period for terminating the letting if the tenant has been told about it before the letting commenced. If it is a full sharing situation as in the landlord and tenant living in the same dwelling, there is no RTB which is far better IMO.

https://boards.ie/discussion/comment/117636525#Comment_117636525

It's the Revenue website, not CI.

Planning laws may not need to be changed at all in the vast majority of cases.

You seem to be totally against the idea but I'm not sure why. Can you explain a bit more as I would be interested to identify the main flaws in the plan overall while accepting that in a minority of cases there will be issues that are less than ideal.

Ray Palmer

https://boards.ie/discussion/comment/117638846#Comment_117638846

I am not totally against it just think it is flawed. People are already building log cabins out their back and having family members live in them with it against planning. I have also seen converted garages that people lived in. It is basically any relaxing of the rules would lower standards far below that. It doesn't seem like a good development strategy. Why should the government incentivize\subsidise people so they can earn more money tax free?

https://boards.ie/discussion/comment/117640251#Comment_117640251

Because it solves two major issues we face: (1) Housing shortages (2) Pension funding.

I'm not talking about log cabins out the back which is occupied by family. The current scheme does not allow this. I have provided you with the link to the Revenue website previously about this.

Building standards don't have to be lowered.

Thanks for your input, have a good day:)

Del2005

https://boards.ie/discussion/comment/117640620#Comment_117640620

1) We don't have enough builders to build proper homes. Why would we put the resources to small temporary solutions when we need permanent proper solutions. And there's a shortage of builders world wide, so we can't pay them to come here as there aren't many spare.

2) The best way to fund your pension is with a pension fund where you get huge tax breaks, building a granny flat isn't a good investment for a pension.

The other issue is that as WFH becomes more common, or hybrid WFH which seems to be the new way to work, then the demand for crappy rentals will disappear and people will have large debts with no income.

It would be much better to build lots of accessible 1 and 2 bed apartments in all areas and give tax incentives for empty nesters to move into them to free up the family homes in that area. My parents estate of 3 and 4 bed semi d's only have 1 or 2 70+ years old living in each house, nearly every estate around them is the same, that's a terrible use of a precious resource.

Ray Palmer

https://boards.ie/discussion/comment/117640620#Comment_117640620

The tax break is the incentive no others needed.

Claw Hammer

https://boards.ie/discussion/comment/117638846#Comment_117638846

Planning laws require permission to subdivide a planning unit into 2 dwellings. The fact that the revenue allows tax relief does not change that. Most councils will only give planning for a "granny flat" on the basis of household need i.e. there is a granny, subject to a condition that when the household need is no longer in being i.e. granny has died or gone into a nursing home, the property is reverted to a single dwelling. That is much different to what you are proposing.

I do believe that proper subdivision of existing dwellings might alleviate some of the pressures on the housing market but i believe a better way of doing it is to facilitate downsizing.

A lot of those elderly people who would be willing to downsize if they could stay in their area with their community don't have the option of an apartment in many places in Dublin that has an elevator and is wheelchair accessible which is a major concern. If you restrict new apartment builds for them then where do the 20 year olds rent and without investment funds many apartment blocks won't be built.

https://boards.ie/discussion/comment/117641097#Comment_117641097

Many people don't have access to the capital required.

Deeec

https://boards.ie/discussion/comment/117644663#Comment_117644663

While downsizing suits some people it doesnt suit all. My husbands parents downsized to a small 2 bedroomed house a few years ago - they thought it was a great idea. None of their 4 kids live within commuting distance - 2 live in England and the other 2 live over 4 hours drive away. These 4 kids now have kids of there own and partners. Ourselves we are a family of 5 so when we visit them all 5 of us are crammed into one tiny bedroom which is a nightmare. We are getting to the stage now that this is not working and will have to book into a hotel/BnB instead of staying with them which is expensive and means we wont be able to visit as oftern. There is no way the whole family can visit at the one time which is a real dispointment. Truth be told they regret ever downsizing as with growing families its becoming more harder and expensive for their family to visit them. If they had an extra 1 or 2 bedrooms this would be alot easier and they would see alot more of their grandkids.

Remember your kids grow up and leave and then they come back to visit with more ( ie. their kids and partners) - Unless all your kids live close by downsizing is a very bad idea. This decision takes alot of consideration and doesnt suit everyone.

2ndcoming

It doesn't solve any problems and in fact it should be cut back massively. It allows and in fact encourages people to charge 1100 a month for a bedroom. If you think this helps resolve the housing crisis I'm not sure where to start. And yes, HAP which you mention in your opening post is a similar vehicle for money to the privileged that as a program should be launched into space.

2ndcoming

https://boards.ie/discussion/comment/117644760#Comment_117644760

That's so inconsiderate of them. I can't believe they didn't just keep all those spare bedrooms in perpetuity for the odd time you and your family decide to grace them with your presence. Have they no shame?

Deeec

https://boards.ie/discussion/comment/117644778#Comment_117644778

All right smart ass - Where did I say it was inconsiderate of them?

We love visiting them. The want us to stay with them and love seeing us but its becoming very difficult as our kids are growing bigger due to inlaws living in a 2 bedroomed tiny house. The other siblings have the exact same issue as us. My in laws regret leaving their bigger house due to this issue as they would love to be able to accomodate visiting family comfortabley.

My inlaws have 4 kids + partners , 12 grandkids who have to book into hotels 8 miles away from their house ( because they live in a rural area) just to see them. My inlaws would prefer if their family could stay with them in their own house - Is that clearer for you to understand.

2ndcoming

Given this obvious hiccup then why did they think downsizing was a "great idea"? It seems like to me they might not be as disappointed at not being able to accommodate all 20 of you as you think they are...

https://boards.ie/discussion/comment/117644776#Comment_117644776

If there were enough built then the rent would come down well below €1,000 while still providing a good return on the capital investment.

Deeec

https://boards.ie/discussion/comment/117644858#Comment_117644858

2ndcoming just because your parents dread you coming to stay - it isnt that way for most people though

Anyway

They regret ever downsizing. My mother in law says it was the worse mistake they ever made. They are locked into it now though as once you downsize its impossible at their age to now buy a bigger house. They also love gardening and miss their old large garden - now they only have a tiny patch out the back which they hate.

All Im saying is it takes alot of thinking through. My in laws moved to a smaller house when their kids were in their early to mid twenties. They did not think to the future that their kids may not end up living locally and they completely forgot that some day they would have grandchildren. Now their family is much larger and they would like nothing more than to be able to have family come to stay in their own home ( and not in a hotel ) but with 1 spare boxroom thats a problem as each family has 5 members.

https://boards.ie/discussion/comment/117644778#Comment_117644778

You are going off topic and bringing in an unnecessary nasty edge to the chat. I would like to keep on topic as it is something I am interested in exploring in a bit more detail. You may find a better thread elsewhere for that.

Ray Palmer

https://boards.ie/discussion/comment/117644666#Comment_117644666

So you want to give them another tax break. What about the people who don't own? The public might find that hard to swallow if they don't own. If you want to ignore the flaws in your idea you maybe shouldn't ask what people think.

Mrs OBumble

https://boards.ie/discussion/comment/117645264#Comment_117645264

Parents of adult children who forgot that one day they would have grandchildren. Really???

Deeec

https://boards.ie/discussion/comment/117645478#Comment_117645478

I think you know well what I meant but prefer to analyse the language I use which is very sad really - They didnt think ahead when they downsized is what I am saying.

You are completley missing the point Im making - downsizing sounds like a great solution but my inlaws regret ever leaving their larger house for a tiny house.

Claw Hammer

https://boards.ie/discussion/comment/117645504#Comment_117645504

That is one couple. In other cases I am aware of there is a widow or widower who can't maintain the gardens and negotiate stairs very well.

The trauma of undergoing the current regime for downsizing is way too much for them.

Deeec

https://boards.ie/discussion/comment/117645681#Comment_117645681

I agree with you - its a tough emotional decision to make and moving is very stressful for elderly people. It needs be well thought through as I think it must be awful to move and then hate it for the rest of your life.

It is true that mobility, house and garden maintainance, driving to shops etc becomes a big issue as people age. I hate seeing people being forced to move from a home they love for these reasons though.

JimmyVik

The problem with building these kinds of things is that that they are expecsive. and then who knows what new legislation will be against the owner next week.

On old folks downsizing, i agree that it would be a good idea.

Only if suitable downsizing options were available in Ireland. They are not available in Ireland by a long shot.

And for the folks looking to tax old people who have a pare room or two for when the grandchildren come over, just remember that a couple who buys a 3 bed semi and have no children yet, will effectively be taxed for not having enough children to fill the rooms under the same tax system. Or do we want to tax based just on the age of the owner?

He is very much against giving people another "tax break" despite it not being a tax break at all, just access to capital at a rate much closer to European rates with the legislation put in place to support it under an existing scheme. It might be a bit of the bitterness some people have towards others who have a few quid in the bank or assets for their retirement.

We need more homes and they have a garden or a garage that they can convert if the circumstances are in their favour.

Build the extra houses we need also and have them as a option for the downsizers if they want them but don't force old people out of their home and what they know and are used to with taxes and general blame for not moving on. Land is not that scarse yet.

wildwillow

Downsizing is a personal choice, but it is often silly to maintain a 4 bed house for the odd stay by children or grandchildren. It suits some people to have regular visitors, while others feel invaded.

Finding smaller houses in the locality is a problem for most. A few bungalows with reasonable outdoor space should be included in each scheme. Means people can downsize but stay local, freeing up a family home. Also frees up some money in most cases to allow them enjoy their later years.

I was very lucky to find a perfect house yards from my own when I wanted to downsize. Many of my widowed friends envy me my little house with little maintenance and wish they could do the same.

Claw Hammer

https://boards.ie/discussion/comment/117646056#Comment_117646056

It is worse being forced to stay in a home they hate and can't enjoy but can't possibly contemplate a move.

That is an ideal scenario @wildwillow and one that is viable in areas where the cost of a site per square meter is still reasonable enough to build small bungalows on it. I don't really think the same holds true for the cities where demand for housing is at breaking point.

https://boards.ie/discussion/comment/117647457#Comment_117647457

Have there been studies done on this and can you point me in the direction of them. You make it sound like these people are in a terrible situation but through a study we could hear from them and be able to see a report where motivations and concerns are laid out clearly for all to see.

My mother worked very hard for her home and loves having a nice big home and a garden she can potter around in after living for many years in smaller places. She likes her neighbors and they look out for eachother. She doesn't want to move to a small place and I haven't encountered many other elderly people who are struggling with the process of moving home. Obviously someone widowed and without kids to help might feel overwhelmed with all the step required but what percentage of people is that who actually want to move?

Ray Palmer

https://boards.ie/discussion/comment/117647169#Comment_117647169

It will cost money to enrich these people. What happens if they don't pay it back? You seem to want to magic away all the problems because you think you have a good idea. There are much better ways to do it and encouraging downsizing is one but impossible to implement as people see it as an attack on the elderly. The fact you want to ignore the public feelings on such types of things.

Do you know what happened with the shared ownership scheme when prices dropped? People abandoned the properties and moved to rentals as it was cheaper briefly.

Claw Hammer

https://boards.ie/discussion/comment/117647509#Comment_117647509

What is known is that when new developments of apartments went on the market in Mount Merrion, the majority of prospective purchasers were downsizers. I don't see what the requirement for percentages of old owner occupiers who want the move is. When executor sales of the houses happen, it is rare that the house is in turnkey condition. Often there hasn't been much work done in years. It can't have been particularly comfortable for the elderly person living there. Just because your mother likes house doesn't mean that rain of her age likes their house I wouldn't move to smaller accommodation if it is available in their area.

https://boards.ie/discussion/comment/117647772#Comment_117647772

2% interest rate is sufficient to cover this risk in my opinion. In France mortgage interest rates are much lower than that and the banking system has not collapsed. They get the loan having shown a good track record with the main mortgage or putting up the main residence as collateral.

Where are people going to move to that is cheaper than the mortgage amount that people would be willing to rent at to break even in cash flow and over time benefit from capital appreciation in a worse case scenario for their own apartment?

This in no way is the same as shared ownership and really shouldn't be in the same conversation.

https://boards.ie/discussion/comment/117647806#Comment_117647806

Some will want to move and some won't and you and me speculating on percentages on boards is not much use as we are both in the dark on this and going on anecdotal evidence based on the limited number of people we have knowledge of in this situation.

I wouldn't be surprised that many of the houses sold in mount merrion (quite a wealthy area of dublin) were bought by downsizers who were willing to pay a big premium per sq meter for the right place in the right area at a price that a young couple couldn't match. the link there should be easy to make?

Claw Hammer

https://boards.ie/discussion/comment/117647961#Comment_117647961

The houses were sold by downsizers, who bought apartments nearby. You started this thread with a proposal for granny flats. You said there were a huge number of builders available to do the work. Have you done a study? Why are these builders not available to people looking to have extensions built and have repairs done?

There is more skill needed to properly extend or convert a house than there is to build from new. There is a general shortage of tradesmen. Your proposal is not going to cause a sudden appearance of qualified tradesmen.

Do you think if a scheme were put in place where people could access funds, possibly from a government fund, to build a self contained attached "granny flat" or covert a garage into one that it would have a material impact on the number of new build houses in the country?

There was a huge influx of Eastern Europeans into Ireland during the last building boom, there can be again if there is work for them at a multiple of what they can make in their home country.