Money Times - August 1, 2017

Posted by Jill Kerby on August 01 2017 @ 09:00



The Irish housing crisis has affected pretty much every age group except one – older, late middle-aged people and retirees, the vast majority of the latter - 92% - who already live in owner-occupied houses.

Not only do the majority of retirees have a place of their own, but 83% own their homes outright, with just 8% renting, according to Tilda, the TCD research group into our ageing population.

And while half of these properties have quality issues that need to be addressed, Tilda, in its 2016 housing report confirm what most of us know already: there is a serious and growing mismatch in housing occupancy in Ireland, with hundreds of thousands of older, single people and couples residing in properties that are more suited to families.

A functioning property market is one that keeps the flow of all types of property moving between the generations. Instead, we have a market in most of our larger cities that is forcing prices relentlessly upwards for people wanting to buy, or who rent. The solution is to start building more appropriate properties for the rapidly ageing – and demanding - cohorts of current retirees and ‘baby boomers’ who are keen to downsize even before they reach 65.

Nearly 24 years ago, my husband and I moved from a small, two-bedroom starter home in Dublin’s city centre to a larger, Victorian terraced property about a mile away.

It has served its purpose. The Child is about to fly the nest (we hope permanently) and the next logical step is to downsize and let a new family upsize into this bigger house. With its proceeds, we would buy (or even rent on a long term lease) something smaller, using any balance to boost our part-time earnings and retirement income.

Unfortunately, this virtuous property circle has broken down. Just like everyone else looking for a home, there’s a chronic lack of suitable and decent value smaller properties in or around this neighbourhood.

I admire people who intend to move to the country in their retirement thus almost guaranteed to maximise their dual goal – a nice, smaller place to live and money in the bank for their old age.

But the countryside isn’t for us. We are privileged to live in a very mixed neighbourhood of Victorian and Edwardian terraces, private semi-d’s built in the 1930s and 40s, privatised council houses from the 1950s and 60s and rather too many dubiously constructed apartment blocks that went up in the boom years, but are lacking any storage for suitcases, let alone boxes of Christmas decorations. Cash investors-cum-landlords are buying a disproportionate number of the properties that are for sale…and I believe its just a matter of time before this latest price bubble meets its pin. 

There’s also no point fighting city hall.

The down-sizing supply roadblock for already privileged older homeowners is not a priority. No one cares that ‘baby boomers’ and home owning retirees can’t find the perfect smaller house or apartment in their neighbourhood.

But that doesn’t mean that there are no options other than cashing in and moving to the country (or to a sunnier country like Spain, or the bargain basement that is Greece…)

Here are three ideas that I’m checking out right now…

1) Turn a larger, older property into a “duplex” with two self-contained units. Live on the bottom floor and sell the top floor. You shouldn’t have trouble selling the upstairs to a singleton, downsizing retired couple who want to stay in the city or even a small family (especially if you have a convertible attic). You get to stay put without all the responsibilities of a large property.

The downside is securing planning permission and refurbishment costs, etc.

2) Convert part of the house to a self-contained rental apartment. You get to downsize and still own the entire asset.

The downside is cost of refurbishment, the inconvenience and costs of being a landlord and big income tax liability: you can only claim 80% tax relief on allowable expenses. About half your rent could disappear in tax.

3) Upgrade the house but rent out that spare floor (once you move downstairs) under the Rent a Room scheme and earn up to €14,000 tax free.

“This certainly appears to be the best option,” says (my) financial adviser and planner Marc Westlake of Global Wealth Management. “Earning €14,000 tax free from renting rooms in your home, or even self-contained flat [in an attic, basement or unused floor] is a no-brainer.”

The Rent-a-Room scheme is, ironically, just another roadblock in helping to release much needed family homes. But until the supply shortage is comprehensively resolved, it may very well become the default option for the growing number of home-owners who want or need to downsize.

Get a good team of advisers together if you decide to downsize, including your financial and tax adviser and solicitor. Check local planning regulations. (See www.citizensinformation.ie then search Rent a Room Scheme.)


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