The latest Daft.ie rent report confirms once again the crisis in our private rental market. Rents are too high. Supply is too low. And the Government's rent regulations are not working.
Much of the public debate has focused on short-term problems. Brexit and Covid have disrupted supply chains, stalled construction and increased costs.
Public health advice to work from home has shifted demand away from city centres. The result is double-digit rent increases in counties outside rent pressure zones.
The solution, according to some, is to encourage new supply of any kind and at any cost. The build-to-rent model funded by institutional investors is presented as the key solution to increasing supply and reducing rents.
Such arguments are fundamentally flawed. They are based on a superficial understanding of the causes of the crisis. It is time we looked deeper into the underlying factors driving our dysfunctional private rental sector.
The standout figure in the Daft report was the fact that rents have increased for 36 consecutive quarters.
Nine years of rising rents demonstrates beyond any doubt that the causes of the crisis in the private rental market are structural. There are four key factors that explain this trend.
Government social housing policy has for many years been over-reliant on the private rental sector to meet social housing need. The introduction of the Housing Assistance Payment (HAP) in 2014 marked a significant step change.
Rebuilding Ireland set a target of 91,510 HAP tenancies to be created between 2016 and 2021. Every year the annual target has been exceeded.
When you add to this the targets for new RAS and Long Term Leasing Scheme tenancies, the number of private rental properties to be used for social housing under the plan is 106,146.
This compares with a real social housing target, built and bought by local authorities and Approved Housing Bodies, of 41,040 during the same period.
Seventy-two per cent of the last government’s social housing targets were to come from the private rental sector.
Private supply
This has absorbed an enormous volume of private rental supply. Almost a third of all private rental tenancies are social housing tenants subsidised by a variety of Government schemes.
While the new Government’s housing plan does not contain targets for new HAP tenancies to 2025, its low social housing targets make an increase in HAP tenancies inevitable.
Meanwhile the number of available properties in the private market has been falling. Since 2017 there has been a net loss of about 20,000 rental properties.
Much of this stock is at the lower and middle end of the market. As positive equity returned to house prices from 2016, many accidental and semi-professional landlords have been selling up.
Despite repeated calls from the Opposition, neither the last minister for housing nor his successor have put in place any measures to slow down this disorderly exit of properties from the market.
As single property landlords are leaving, new rental stock is being supplied by large institutional investors. Supported by excessive tax reliefs and retrograde changes to apartment design standards, much of the new stock is high-end, high-price and Dublin city centric.
The speculative nature of much of these schemes has pushed up land and development costs, hardwiring viability and affordability problems into our private rental sector for years to come.
Strangely, despite large volumes of planning permissions for such schemes being granted by the controversial Strategic Housing Development fast-track process, only a fraction has commenced construction.
In response to these dynamics successive government ministers have, since 2014, promised direct State investment in affordable cost rental accommodation.
The first cost rental homes were tenanted late this year, but October’s budget allocated only €70 million for next year. This means that cost rental output will be in the hundreds rather than the thousands of homes that are needed to meet demand.
Fundamental change
Fixing our dysfunctional private rental market will require each of these four issues to be resolved.
Government must end its over-reliance of the private rental sector to meet social housing demand. It must increase real social housing output and annually reduce the numbers reliant on HAP, RAS and Leasing. This is turn will return much-needed stock to the private market.
They must also put in place a plan to slow down the exit of single property landlords from the market.
Direct State investment in affordable cost rental homes must be increased drastically to deliver up to 4,000 such units a year.
The use of fiscal policy to activate speculative private sector supply must be replaced by new measures focused on reducing risk and thus reducing cost.
In the meantime, renters cannot continue to shoulder the burden of failed government policy. We need an emergency three-year ban on rent increases and a refundable tax credit to put a month’s rent back in every private tenant’s pocket.
Developer-led speculative build-to-rent schemes are not the solution to our broken rental sector. Only a fundamental change of housing policy can deliver good quality affordable homes for renters.
- Eoin Ó Broin TD is Sinn Féin's spokesperson on housing
