A major expansion of Ireland’s Rent-a-Room scheme is being considered as part of efforts to increase the supply of accommodation for students, with homeowners who rent out multiple rooms potentially able to earn up to €20,000 a year tax-free.
Higher Education Minister James Lawless is understood to be pushing for the change as the Government looks at ways to address shortages in student accommodation, particularly in Sligo and across the North West.
Under the proposal, the current tax-free threshold would be increased for homeowners who make more than one room available. Rather than introducing a blanket increase to the allowance, the Minister is understood to favour a system where the tax break is linked to the number of rooms being rented.
The approach is intended to encourage homeowners to provide additional rooms while limiting the possibility that a general increase in the allowance could simply lead to higher rents.
The proposal comes as students face growing difficulties finding suitable accommodation, with demand placing additional pressure on the private rental market.
In Sligo, the shortage of accommodation for students attending third-level institutions has become a particular concern. Students are increasingly competing with families for available rental properties, making digs-style accommodation an important part of efforts to increase supply.
The Government's plan could see the number of students living in digs-style accommodation double to around 20,000.
At present, the Rent-a-Room scheme allows homeowners to earn up to €14,000 a year in gross rental income tax-free when renting rooms in their main residence.
Revenue rules provide that the €14,000 limit applies to the combined gross income received from rooms in the home. Where the income remains below the threshold, it is exempt from Income Tax, PRSI and USC. If the limit is exceeded, the full amount becomes taxable.
The existing scheme is already widely used, with more than 18,000 taxpayer units availing of the relief in 2024.
The proposed expansion would give homeowners an additional financial incentive to rent out spare bedrooms to students. The precise structure of the increased allowance has not yet been finalised and would be subject to the Budget process.
The Government is also expected to consider how any increase could be structured to ensure that it results in additional accommodation rather than simply increasing the cost of existing rooms.
The proposal comes amid wider efforts to tackle the student accommodation shortage, with policymakers examining measures that could quickly increase the number of rooms available without relying solely on new purpose-built developments.
