The Irish rental market is in crisis, with available properties estimated at just 716, owners leaving the market in droves and experts saying it could be a cautionary tale for New Zealand.
New Zealand is widely believed to have a shortage of rental accommodation, but it pales in comparison to Ireland, which has a similar sized population – and a complex rent control system.
There were just 716 homes advertised for rent nationwide in Ireland on August 1, according to the latest rental report from Daft, a property website equivalent to Trade Me. In Dublin, there were 292.
A check of Daft this week showed there were now 776 rentals available on the site. On the same day, Trade Me announced 9772 houses for rent in New Zealand.
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Some commentators say the overall figure is misleading, as there are also unadvertised rental properties available, and new blocks of multi-unit rentals do not appear in individual listings.
But Ronan Lyons, an economics professor at Trinity College, says multi-unit housing is small relative to the overall market size and not growing fast enough to offset the decline in traditional rental supply. .
After the bursting of the Irish property bubble during the global financial crisis, the country found itself with oversupply. In August 2009, there were more than 23,400 homes available for rent nationwide, he said.
While the market then had too much supply and too little demand, things since 2015 have been going in one direction, and it’s towards a scarcity of rental housing, he says.
Reduced supply is driving up rents, with early August rents rising 12.6% from the same period last year, according to the Daft report. This is the largest annual increase since 2005.
Despite this, the owners are leaving the market. Figures from the Residential Tenancies Commission show a 48% drop in the number of newly registered properties in the latter part of 2021 and a 32% drop in the first part of this year.
A recent study by the Institute of Professional Auctioneers & Valuers and the Irish Property Owners’ Association found that the difficult regulatory and tax environment was responsible for the exodus of owners.
The mounting pressure means the government is considering tax breaks for homeowners. Even the chief executive of a national housing charity, John McCafferty of Threshold, says the government’s strategy must focus on how small landlords can be enticed to stay in the market.
In New Zealand, the Green Party has long called for rent control and last week the Human Rights Commission called for an immediate rent freeze to give tenants a break during the cost of living crisis. .
But landlords and property managers say if rent controls were introduced, New Zealand could end up with problems similar to those in Ireland.
Property Investors Federation chairman Andrew King said research from around the world clearly shows that rent controls reduce supply, distort the market and lead to housing shortages for tenants.
“Ireland has a tough rent control regime, but if rent controls, or even a rent freeze, and more restrictions on landlords were introduced, New Zealand could end up with a massive rent deficit. offer because the owners would exit the market,” King said.
Propertyscouts chief executive Ryan Weir said hurdles, such as the removal of interest deductibility, ring-fencing of tax losses and the ending of unjust dismissals, have piled up for landlords.
“If rent controls are introduced that will work like the lead beam that crushes the camel’s back, and landlords leave the market in droves, the stock of rental properties will drop dramatically and rents will rise.”
Recently, rents have started to fall in many parts of the country due to increased supply, so the government needs to do more on supply if it wants housing to be more affordable, says- he.
“Almost everywhere in the world where rent controls have been attempted, they have failed miserably due to unintended consequences, such as higher rents on uncontrolled housing and long waiting times. Ireland is a prime example of why they are a poisoned gift.
Housing Minister Megan Woods said the Government’s position had not changed and that it did not want to introduce rent controls.
“What we are seeing is that the supply has kept rent increases under control. In high-growth markets, like Auckland, rent increases have been consistently lower than in markets with less supply, for example,” says Woods.
Rent control requires significant market intervention, and focusing on one sector of the housing market in particular can lead to unintended consequences and have a destabilizing effect, she says.
“Evidence overseas indicates that while keeping rents below market levels can lead to short-term affordability benefits, it can have long-term negative impacts.”
These include a decline in housing affordability and quality over time, reduced mobility and mismatch between tenants and rental units, and higher rents in the uncontrolled part of the market.
Woods says the government prefers a ‘full spectrum’ approach, and that’s why it has focused on increasing housing supply and measures to improve the lives of tenants, such as reforms tenancy law.
But Renters United spokesman Ashok Jacobs said while Ireland’s model of rent control is complex, unnecessarily bureaucratic and he would not advocate, some form of rent control should not be ruled out in New -Zealand.
There should be a stronger, more regulated approach to rents, and when and why landlords can raise them, he says.
“We believe there should be limits on rent increases except where a property has been demonstrably improved, and that does not include bringing it up to minimum standards.”
In the past, the idea of tying rent increases to the rate of inflation has been floated, but inflation outpaces wage growth, which doesn’t seem like the right approach to take, he says.
“We are rethinking the best approach, but we would advocate for more universal and simpler controls than those in place in Ireland.”