Renting is seen by many as a staging post to home ownership as tenants accumulate sufficient savings to secure a mortgage. That has now changed. One in five households is in rented accommodation which is more than at any time since the 1950s. And often their status derives from necessity rather than choice. Home ownership is an aspiration that many tenants are struggling much harder to achieve – as outlined in the recent series in this newspaper on “Solving Ireland’s rental crisis”.
Average rents in the third quarter rose by 9.3 per cent, according to the property website Daft.ie. That is the fastest rate since the financial crash. Soaring rents have made it harder for tenants to save towards securing a house mortgage and, for an increasing number of people, have made renting less affordable. In Dublin, some 1,500 people are in homeless emergency accommodation.
Since January, the Central Bank’s mortgage lending rules, which were introduced to check spiralling house prices, have made it more difficult for some to move from renting to home ownership. To secure a loan, first-time buyers must save a 10 per cent deposit on the first €220,000 of the value of the property and a 20 per cent deposit on any higher value. In consequence more tenants have been forced to rent for longer in a sector of the housing market beset by problems; not least the growing imbalance between supply and demand for rental property. Supply of rental homes is at its lowest in almost a decade. With fewer properties available at a time of rising demand, rental prices have continued to increase. In the private rental sector, two-thirds of all landlords own just one property and many are in negative equity and in arrears on their loan repayments. At the end of June, more than 15,276 buy- to-let mortgage accounts were in excess of two years in arrears, owing banks €4.6 billion.
The Government’s response to the rental accommodation crisis, ensuring landlords can raise rents only every two years rather than annually, and proposing some other benefits to tenants, will offer greater rent certainty and some increased security. But changing the structure of the private residential sector and ensuring there are fewer accidental landlords and more professional managers involved, will be necessary if Ireland is to move closer to a rental sector based on a continental European model.
Stricter rental regulations operate in Europe where tenants have more security and long-term renting is seen as an acceptable alternative to home ownership. In Ireland, short-term renting has been viewed as a prelude to home ownership. But with rents rising rapidly, the sector no longer eases that transition. And many, no longer able to buy a home, are left paying a high rental price for accommodation with limited security of tenure.