Modular homes: Government drops plans to cap rental income on back-garden units

Move comes amid a warning that the measure could lead to a proliferation of 'poor quality, very expensive' rental units

Work in progress on a modular home from Big Man Tiny Homes in Bandon

Homeowners will be allowed charge market rents for modular units in their back gardens after the Government decided to drop plans to cap annual rental income at €14,000.

Cabinet will agree today to permit such units to be rented on the open market, shelving earlier proposals to restrict their use to the rent‑a‑room scheme, which permits up to €14,000 a year in tax‑free rental income.

Sinn Féin housing spokesman Eoin Ó Broin warned that it could lead to a “proliferation of very, very poor quality, very expensive rental units”.

The 'Irish Examiner' reported earlier this month that there was disagreement within the Coalition over whether modular units should be restricted to the rent-a-room scheme. Some Fianna Fáil members reportedly wanted to go further and allow the units to be rented out beyond the scheme.

Under the new agreement, to be discussed by Cabinet on Tuesday morning, the rent‑a‑room scheme will still apply, but landlords will also be allowed to charge rents above €14,000 — with any income above that threshold liable for tax.

The plan is aimed at tackling the housing crisis.

The most recent figures show 36,284 houses were built last year. The Government had set a target of 41,000.

Taoiseach: 'Practical and pragmatic' 

On Monday, Taoiseach Micheál Martin confirmed an “accommodation” had been reached between the parties about how the modular units would be occupied.

Asked whether the modular structures would be permitted to be rented outside the rent-a-room scheme, Mr Martin said they would.

“We believe they should be available for rent,” said Mr Martin. He added: 

It is about supply. It’s about alleviating pressures on the housing sector. 

The Taoiseach said it “makes sense” to have a variety of housing options for people, adding that Ireland’s population is continuing to grow.

“I don’t think people, or parents, for example, would build something costing up to €80,000 if it was only to be used for a son or a daughter, who might leave after two or three years,” said Mr Martin. 

“I think we have to be practical about that and pragmatic about it.”

Mr Martin said the Government would be keeping the proposed change under review, accepting it is a “new departure”.

“If we need to change or amend that in two years’ time following a review, I think we will. It’s a balance.”

Modular homes 'will abide by regulations' 

Housing minister James Browne said cabins would have facilities including kitchens and bathrooms. They will be “of a very high standard and abiding by building regulations”, he said.

Government sources indicated the proposal will require a change to the Residential Tenancies Act and that cabins would only be permitted to be rented out if the main house is the landlord’s primary residence.

The move to allow back-garden cabins to be rented out comes as new exemptions are due to be introduced by planning minister John Cummins.

This will allow households to build a 45sq m cabin at the rear of a property without planning permission.

Tánaiste Simon Harris said the use of modular units is a “secondary issue” and that the primary concern is ensuring the planning exemption is applied.

A “balance” is required, he said. “If all of a sudden people can develop this in their garden, can we put that to good use from a rental point of view in a housing emergency?” said Mr Harris.

“I think there’s some merit in that but needing to get that balance correct.

“I expect Government to be updated on this [on Tuesday] and the Government to adopt a final position.”

Mr Cummins said that the planning exemption for cabins is “out for screening” and that he hopes it would be brought to the housing committee soon.

Mr Ó Broin criticised the moves by the Government, saying there needs to be “detailed scrutiny” by the committee. He said: 

The potential for this to go very badly wrong and negatively impact on people for decades to come is very, very great.

• Tadgh McNally, Political Reporter
• Louise Burne, Political Correspondent