Ireland’s housing system has three main sectors: Owner-occupiers, social housing, and private renting.
Almost all the policies promoted and introduced are aimed at owner-occupiers and social housing. We need more of both of those, but renters — current and prospective — deserve somewhere to live too.
Last year there were 25,000 mortgages drawn down by first-time buyers, while around 8,000 units were added to those available for social housing tenants.
Our housing difficulties are most acute in the private rental sector. That is why there are legitimate concerns about the ending of the eviction ban. But there are almost no proposals dealing with what is needed in the private rental sector: homes to rent and an updating of the rights and responsibilities of all participants.
The shortage of rental units is a result of a number of factors.
One factor is the exit of landlords. In part, this is a natural process based on landlords’ life cycle. We know that many people took out mortgages on investment properties in the 10 years leading up to 2008. In some cases, that is now 25 years ago, and they will have reached the stage where selling the property ties in with where they are in life, that is close to retirement. The current price levels are also an incentive to sell.
There are very few new entrants to replace these exiting landlords. Twenty years ago, in 2003, there were around 22,000 mortgages drawn down for buy-to-let properties. Last year it was 800.
There will be some cash buyers and there has been some rental supply from institutional investors, but we have seen various measures introduced in recent years to curb rental supply from institutional investors such as “owner-occupier guarantees” and limits on investor purchases.
There is strong support for policies that help owner-occupiers or expand the social housing stock. There is very limited support for policies that provide more homes for private renters.
We like an insider/outsider dilemma in Ireland, and will do lots to help the insider while ignoring the problems faced by the outsider. In the rental sector, insiders are those in rental properties now. They have had rent controls, the eviction ban, and now have various proposals to have the homes they are in bought either by themselves or by local authorities.
These purchases will take units out of the private rental sector when it is more units that we need, and it is adding to the social housing stock in a disorganised and random fashion, which is not efficient.
Outsiders are those in the queues of the hundreds we see at any open viewings for rental properties. There is close to nothing in recent proposals for them.
To benefit renters, we need more available units in the private rental sector. A tax change cannot be targeted at those landlords who are intending to sell. Indeed, there should be caution about some of the calls for tax cuts for landlords, as they may be coming from sections of the market who have no intention of selling. They would benefit from a tax cut while renters would still be queuing trying to find somewhere to live.
Ireland is unique in EU terms in that the majority of the spending on social housing comes directly from Government. In other EU countries, housing non-profits can raise their finance independently and receive much higher rents from their tenants, whose incomes will be supported by state transfers. In Ireland, almost all the funding for social housing is centrally controlled and the rents collected by local authorities do not match the expenses they incur.
Other countries spend lots of money on housing too, but it is channelled to providers via their tenants. Social housing providers are incentivised to provide more social housing as they can collect more rent from doing so. In Ireland, local authorities can only provide more housing if central funding is provided to them.
We could move to a system where the rents paid by social housing tenants better matched the cost of providing their housing.
This would reduce direct spending on housing, but would be offset by a necessary increase in social welfare spending so people could pay the rents.
But we really aren’t doing long-term thinking about what we want our housing system to look like.
