The latest rent report from Daft.ie once again confirms the crisis in our private rental market. The rents are too high. The supply is too low. And the government rent regulation is not working.
Much of the public debate has focused on short-term issues. Brexit and Covid have disrupted supply chains, blocked construction and increased costs.
Public health councils for working from home have pushed demand away from city centers. The result is double-digit rent increases in counties outside of areas of rental pressure.
The solution, according to some, is to encourage new supply of all kinds and at all costs. The build-to-rent model financed by institutional investors is presented as the key solution to increase supply and reduce rents.
Such arguments are fundamentally wrong. They are based on a superficial understanding of the causes of the crisis. It is time for us to take a deeper look at the underlying factors behind our dysfunctional private rental sector.
The remarkable figure in the Daft report was the fact that rents rose for 36 consecutive quarters.
Nine years of rising rents undoubtedly demonstrate that the causes of the crisis in the private rental market are structural. Four key factors explain this trend.
For many years, government social housing policy relied too much on the private rental sector to meet social housing needs. The introduction of the Housing Assistance Payment (PAH) in 2014 marked an important milestone.
Rebuilding Ireland has set a target of 91,510 PAH housing units to be created between 2016 and 2021. Each year, the annual target has been exceeded.
When you add to that the targets for new RAS rentals and the Long Term Leasing Scheme, the number of private rental units to be used for social housing under the plan is 106,146.
This compares to an actual target for social housing, built and purchased by local authorities and accredited housing organizations, of 41,040 over the same period.
Seventy-two percent of the last government’s social housing targets were to come from the private rental sector.
This absorbed a huge volume of private rental supply. Almost a third of all private rentals are tenants of social housing subsidized by various government programs.
While the government’s new housing plan does not contain targets for new HAP rentals through 2025, its low social housing targets make an increase in HAP rentals inevitable.
Meanwhile, the number of properties available on the private market has decreased. Since 2017, there has been a net loss of approximately 20,000 rental properties.
A lot of these stocks are in the lower and middle of the market. While positive equity returned to house prices from 2016, many accidental and semi-professional landlords sold their properties.
Despite repeated calls from the opposition, neither the last Minister of Housing nor his successor has implemented measures to slow down this disorderly exit of goods from the market.
As individual homeowners move on, new rental stock is supplied by large institutional investors. Backed by excessive tax breaks and backward changes to apartment design standards, much of the new stock is upscale, high-priced, and Dublin City-centric.
The speculative nature of most of these programs has driven up land and development costs, the viability of cabling, and affordability issues in our private rental sector for years to come.
Oddly enough, despite large volumes of building permits for such projects granted by the controversial fast-track process of strategic housing development, only a fraction have started construction.
In response to this dynamic, ministers of successive governments have since 2014 pledged direct state investments in affordable rental housing.
The first cost-priced rental units were let at the end of this year, but the October budget allocated just â¬ 70 million for next year. This means that rental production will cost hundreds rather than thousands of units needed to meet demand.
Solving our dysfunctional private rental market will require addressing each of these four issues.
The government must end its over-reliance on the private rental sector to meet the demand for social housing. It must increase the real production of social housing and annually reduce the number of people dependent on HAP, RAS and Leasing. It is in turn the return of essential actions on the private market.
They also need to have a plan in place to slow the exit from the sole proprietorship market.
Direct government investment in affordable rental housing needs to be dramatically increased to deliver up to 4,000 such units per year.
The use of fiscal policy to activate the speculative supply of the private sector must be replaced by new measures aimed at reducing risks and therefore costs.
In the meantime, tenants cannot continue to bear the burden of government policy failure. We need a three-year emergency ban on rent increases and a refundable tax credit to put a month’s rent back into the pockets of every private tenant.
Developer-led speculative rental construction programs are not the solution to our failed rental industry. Only a fundamental change in housing policy can provide tenants with good quality affordable housing.
- Eoin Ã Broin TD is Sinn FÃ©in’s housing spokesperson
Get the latest business news and commentaryREGISTER HERE