Average monthly rents rose from €589 to €1,084 in nine years - ESRI

Average private rents in the Republic have almost doubled in 10 years, with young and low-income renters bearing the brunt of the increased costs, a new study has revealed.

The research by the Economic and Social Research Institute (ESRI) found that average private rents rose from €589 to €1,084 per month between 2012 and 2021, an increase of 84 per cent.

The average figures detailed in the report differ from those published on the quarterly basis by the Residential Tenancies Board (RTB) and property website Daft.ie as they reflect existing private tenancies, not just new rental agreements.

“These rising rents have led to a substantial decline in the affordability of housing for young and low-income private renters,” the ESRI said.

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To illustrate this, the study calculated that the average housing cost to income ratios — a common measure of housing affordability — rose from 0.226 to 0.304 for private renters in the lowest fifth of the income distribution.

In other words, more than half of low-income private renters are spending more than a third of their income on housing. This compares with just 15 per cent for supported renters (those in local authority housing or those in receipt of housing assistance payment [HAP]) and just 7 per cent of people who own their own homes.

Younger age groups in the private rental sector had experienced a similar affordability squeeze, the study found.

The deterioration in housing affordability for renters comes despite what the ESRI described as the continuation of broad-based income growth for the population as a whole “which has left income inequality at a new record low”.

The report also showed that a third of people below the poverty line last year were in work, while many of them held a third-level degree.

Such “working poor” individuals make up approximately 220,000 of the 625,000 below the income poverty line before housing costs, and 333,000 of the 740,000 below the income poverty line after housing costs.

“This is despite their much lower income poverty rates, and reflects the fact that households with someone in paid work make up the bulk of the working-age population,” the ESRI said.

While 56 per cent of the working poor are in a household where at least one person possesses third-level educational attainment, the corresponding figure for those in working households above the poverty line is 76 per cent.

“Therefore, while it is true that, on average, those non-poor working households are more likely to include someone with third-level education, the educational attainment among the working poor is still relatively high,” the report said.

“We estimate that there are approximately 122,000 individuals who, despite being in a working household with a highly educated person, are still at risk of poverty.

“It is important to fully understand the reasons behind this. It may be that many highly educated individuals with valuable skills are precluded from fully utilising their qualifications due to, for example, childcare constraints.

“On the other hand, it may be that some individuals possess third-level qualifications that are not in demand in the labour market. This could be due to, for example, technological change rendering skills obsolete.”

Income inequality in 2021 was a fifth lower than its historic high in 1987 and its pre-financial crisis peak in 2006, the think tank said.

The report estimated that the at-risk of poverty rate in 2021 was 15.6 per cent (amounting to 785,000 people) after housing costs were factored in, compared with 12.4 per cent on a before-housing-cost basis (625,000 people).

“These (perhaps surprising) declines in after-housing cost income poverty and inequality are largely driven by patterns of housing tenure and mortgage interest rates,” it said.

It noted that most of the Republic’s population live in owner-occupied accommodation, with just 12 per cent of the lowest-income bracket living in the unsupported private rental sector.

However, it also cautioned that the headline finding on income inequality and poverty hides the financial strain on younger and lower-income renters from increased housing costs.

“Addressing the challenges of housing affordability highlighted in our report will require a sustained increase in supply, particularly of social and cost rental housing,” the report’s author, Barra Roantree, said.

“Until that is achieved, and despite the large costs involved, supports like HAP will continue to play a key role. Given this, more regular review of the income and rent limits governing the scheme will be needed if the exposure of more households to unaffordable housing costs is to be avoided,” he said.