The rental market is part of the dysfunctional Irish property scene. After some easing of pressure during the Covid-19 restrictions, rents are now again on the rise, increasing by 5.6 per cent in the last year, with a particularly large rise outside Dublin. As employees return to Dublin with the likely – albeit gradual – reopening of offices in the months ahead, rents look set to rise here, too. A chronic shortage of rental properties on offer to tenants, with supply at its lowest level since data started to be collected 15 years ago, lies behind this.
Institutional landlords are key suppliers of rental property, though often at a price too high for many potential tenants
The Irish rental market – like the wider property market – is really a series of smaller markets, though all are linked by the chronic shortage of supply. Smaller private landlords remain a key player in the market, but there is a steady drift away as many sell out. At the far end of the market are the institutional landlords, keen to expand but, according to a recent survey by the Rental Tenancies Board, willing to leave a property vacant during the pandemic rather than lock in a lower rent level.
Increasing supply, then, involves a series of policy challenges. In the short-term it is important to keep smaller private landlords in the market, though of course in some cases they are selling to people looking to buy a home. Institutional landlords are key suppliers of rental property, though often at a price too high for many potential tenants – hence the vacant apartments. Underlying this is the cost of supplying new apartments in Ireland, which – according to a range of expert reports – involves a cost of €450,000 or more in city areas. In turn this drives the selling price and the cost to renters.
The longer-term answer is, of course, to increase supply and find ways to do so at a more affordable price. The high cost of building here, particularly apartments, remains puzzling, and is a key factor. Public subsidy via routes such as cost rental tenancies will also be important and provide better solutions than ongoing housing supports, though these too will inevitably remain important.
There is a particular need for smaller homes as household size is shrinking
As the Government publishes its housing strategy, another question remains in the background. To what extent is policy to move to a Continental European style model with more people in long-term rentals? This would appear to be one of the implications of the Government’s approach to more people living closer to city centres in so-called denser accommodation, though of course much of this could be owner-occupied too. There is a particular need for smaller homes as household size is shrinking.
There is a need for a detailed public discussion on all this, in the context of how people wish to live and, of course, the climate targets that have to underlie all key policy decisions. It is a debate which we have yet to have.