HOUSING MINISTER EOGHAN Murphy raised a few eyebrows lately when he claimed that young workers should be excited about a new model of accommodation called ‘co-living’.

Co-living provides small ensuite rooms for rent, with large shared kitchens and other shared communal facilities. It is similar to student housing but is aimed at young workers.

A controversial planning application for co-living in Dun Laoghaire envisaged as many as 42 people sharing a large kitchen.

This model of housing was introduced by the Minister when his chief advisor was Niall Cussen, who is now the new planning regulator.

“I think people will be very excited by this,” said Murphy.

There are some people in Dublin getting very excited about co-living – they are the developers who own land.

They could treble their land value if they succeed in getting planning for one of these developments.

The problem is that co-living will push up the price of land and therefore the price of houses, too. It will also make developers more reluctant to build normal residential homes in areas where it is approved.

Whether you believe that co-living is a reasonable option for young workers or not, I would ask you to consider for a moment the mindset of the property developer.

Yield (rent) = value

Property developers are business people, they want to get the best possible return for their shareholders and that is totally reasonable.

Developers will want to apply for planning permission to build whatever type of property development is the most profitable.

If you live in Dublin you have probably noticed the number of student developments that have sprung up all over the city in recent years.

I am regularly asked if there are special tax incentives for developers to build student accommodation. There are not – the popularity of this model comes down to the increase in land value associated with it.

Each piece of land is valued according to the expected yield (the rent) on each of the units.

Co-living represents a unique opportunity to increase the site value – by increasing the number of units that can fit on the site.

The recent controversial planning application for a co-living project in Dun Laoghaire is a perfect example of this.

Five co-living bedrooms can fit in a site the same size as a typical two bedroom apartment.

Just like the student accommodation schemes, these medium-stay, intensive uses are also cheaper to build than residential accommodation.

Granted the rooms are en suite so they contain more bathrooms than some apartments – but there are fewer kitchens, no balconies, no parking and crucially there is no obligation to provide the legally mandated 10% social housing that every other developer has to sell to the state at a discount.

Looking at that planning application for the co-living project in Dun Laoghaire it appears that the main differences between co-living and student accommodation are that the student accommodation has more kitchens and the developers of the co-living scheme intend to charge more rent.

Think like a developer

Every landowner and developer wants to increase their site value.

There are ways to increase the land value – one way to get more units in is by building more stories, so developers will try to go higher when they can as this will increase their overall site value.

In a typical residential scheme in Dun Laoghaire, a rent of €2,250 per month suggests a sales value of around €500,000. Those values are broadly in line with rent and sale values in that area.

However, in the co-living scheme proposed in Dun Laoghaire with a suggested rent of €1300 per month, five units of co-living would generate a monthly rent of €6,500.

These units will be built on the same site that could have fitted the two-bed apartment.

Long story short that means that any landowner or developer who secures planning permission for one of these co-living projects has effectively trebled his or her site value overnight.

So a professional, advising an owner on the feasibility of a site, will be suggesting co-living as being one of the most valuable uses which will give the greatest uplift in site value.

Less viable

We have already witnessed this happen in central Dublin with the proliferation of purpose-built student accommodation.

These developments are in sharp contrast to the fact that very little ordinary residential property is being built in the city centre – and when it is those developments are usually very high end.

Developers have jumped on the profitable student accommodation model and when one developer gets planning for student accommodation, all the others want that too.

As a result of poor housing policy and crude market dynamics, residential developments are now not feasible in many locations.

This might be great for international students but it is not good for families and workers who want to live in Dublin.

It is obvious to me that the same thing will happen with co-living – when it is approved in an area it will drive up land values.

By promoting alternative short-stay uses such as ʻco-livingʼ in an unstructured fashion, the Department of Housing are making normal residential schemes less viable.

Residential developments in areas where alternative short-stay uses are permitted will have to be aimed at the very upper end of the rental and sales market, in order to make financial sense.

The role of government is to regulate all of this. That is why we have zoning – certain areas are zoned for residential use and so you can’t get permission to build a hotel there.

This is not just about the co-living planning application in Dun Laoghaire, the same goes for all forms of ʻinnovative’ development including co-living, executive hubs, live-work office pods, student accommodation and other intensive, dense, medium-term accommodation.

Simply put these uses are so lucrative, that they are inflating site prices and making it unattractive for developers to build ordinary, residential homes.

Maoilíosa Reynolds is a registered architect with a masters in urban and building conservation, with 30 years experience in Ireland, the UK and the USA in project management, conservation, urban design and developer-led housing.

Mel has lectured on property development, procurement and professional practice and has presented papers on housing policy, including recent Joint Oireachtas Committee submissions on the vacant site levy, building control, costs in the residential sector and the re-use of vacant buildings.