Student landlords over-egging the pudding on lease length limits

Threatening to set lawyers on the Government was certainly one option for the purpose-built student accommodation (PBSA) sector after the fast-tracking of a ban on 51-week leases earlier this year. But it might not have been the most wise move.
As reported on Friday, UK group Global Student Accommodation (GSA) wrote to Minister for Higher Education Patrick O’Donovan in July. Among other things the group, which operates some 4,000 beds in the Republic through its Yugo platform, threatened legal action over the Bill, which was sped through the Oireachtas before the summer recess and the start of the new academic year.
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While the group might have the kernel of a valid point about the lack of engagement from the Government on the matter, GSA might also be accused of over-egging the pudding. It argued that by capping lease lengths, the Government’s “interventionist” policy would make student housing a tougher sell for investors. Why? Because, GSA argued, their tenants – 70 per cent of whom are international students – want longer leases for the security they offer. Coupled with the Government’s rent cap system, this appears to be the final straw for Yugo, which told the Minister in July that it plans to pursue other legal avenues to get its point across.
[ Landlord threatens legal action over ban on forcing students to take 51-week leasesOpens in new window ]
But GSA and other international investors can still offer those contracts to students who want them. The new law does not preclude student tenants from requesting leases that run longer than the academic year, typically about 41 weeks. Instead, it stops Yugo and other operators from effectively mandating students – and their parents – to pay for accommodation that they don’t need over the summer months.
Even with the new rules, market dynamics here are still extremely favourable for PBSA investors. Based on Higher Education Authority figures, Dublin alone has a shortfall of about 65,000 bed spaces. “Addressing this accommodation crisis presents a lucrative investment opportunity,” wrote Kevin McMahon, director of investments at Savills Ireland, in The Irish Times in May. According to the property agent’s estimates, student accommodation investments can yield returns of 5-7 per cent, better than many traditional real-estate sectors.
From this vantage point, it’s hard to imagine many tears being shed on the PBSA sector’s behalf.