Warning housing supports could become big part of public expenditure

A majority of pensioners could be dependent on State supports for their housing in 30 years’ time as a majority of those now in their 30s may remain stuck in the private rented sector, a leading economist has warned.

If this happened the likelihood of housing supports like the Housing Assistance Payment (HAP) "to balloon into a major element of public expenditure becomes very real", Prof Tony Fahey of the School of Social Policy said on Tuesday.

Speaking at the annual conference of the equality think-tank Social Justice Ireland, Prof Fahey said while the average household renting privately in the 1990s was headed by someone aged 25, it was now by someone in their mid-30s.

He said there had been an almost four-fold increase in the number of households in the sector since the 1990s, from 81,600 to 320,000 today, and Government policy was to foster further growth.

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And while in the 1990s these households spent about 13 per cent of their net income on rent, they were now spending 26 per cent.

One of the “great achievements of social policy in late 20th century” was to increase home ownership among low-income households, said Prof Fahey. It increased equality of wealth-holding, and provided housing security to poorer families.

“This is what we are moving away from. The growth in private renting is going to dismantle this, and will exacerbate inequalities because low-income households – the bottom 30 per cent of the income distributions – are now facing into a lifetime of substantial rents.”

Home ownership

He said 60 per cent of households headed by those aged 25 to 34 were now in the private rented sector, most of whom would prefer to either be in social housing or own their home. They were less likely than their counterparts a generation ago to make the transition to home ownership, and their age profile was “ageing”.

“They may be the first generation since the mid-20th century unless things change that will be entering middle age with possibly a majority in private renting. They will be worse off than their parents [in their housing situation].”

He said the implications for pension policy and the cost of housing supports were stark.

“The social welfare pension system in Ireland is based on the assumption that pensioners don’t have rent to pay and don’t have significant mortgage payments. As it stands at the moment almost 90 per cent of pensioners are home-owners, and the other 10 per cent are in social housing. That will change over time.”

If rents remained volatile and most older people were reliant on the State pension, a majority would need housing supports.

“If we had a substantial proportion of the pensioner population dependent on HAP, the [HAP] budget could grow and grow and grow. Once that happens the potential for the HAP to balloon into a major element of public expenditure becomes very real.

“What we should be doing is anticipating this, and saying ‘let’s spend it now in the capital front’.”

Complete change

It was “striking” how favourably Government policy viewed the dramatic growth in the private rented sector – which was a complete change since the 1990s – and “puzzling” how little “kick-back” there had been from the electorate.

“Prior to the end of the 1980s we accepted landlordism was a bad thing. It was exploitative, it drove people into poverty, it gave people very poor security, and suddenly we have gone 100 per cent in the other direction to say that landlordism is a good thing and we should cultivate it.

“The political issues of fair rent and fixity of tenure are looming again 100 years after the land wars.”