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'Even the bouncy castle industry in Ireland has representation: Generation Rent needs a voice'

One in five households rent nationally – and that could well remain the situation.

Michael Byrne Lecturer in Social Justice

THE LATEST DAFT.IE rent report made for more grim reading for tenants. The last 12 months saw another year of double-digit rent increases and Dublin rents have now, incredible, surged 34% past their previous peak.

What makes the never ending spiral of rent increases so concerning is the huge number of people who now live in the rental sector. The sector has doubled in size since 2006. Nationally, 20% of households rent while in Dublin it is almost one in four.

The pace of change and general volatility in the Irish housing system has been dizzying. But is this a ‘flash in the pan’ before our housing system returns to normal? Or is ‘generation rent’ here to stay?

A lot of the available evidence points towards the second of these two possibilities. Levels of housing supply are extremely low and house prices are rising fast. They have jumped by 50% in the last five years and some analysts have predicted double-digit annual house price increase at least until 2020. Wages and income are not increasing at anything like that rate. Additionally, the Central Bank’s mortgage rules means that high deposit requirements will continue to push access to mortgage credit beyond the reach of many would be first-time-buyers.

In terms of investment in the rental sector, many people feel that landlords are exiting the sector en masse. This is no doubt true to some extent, especially for those who bought at the height of the last property bubble and who may have been in negative equity until house price began to surge once again. But there is also plenty to suggest landlords’ appetite for rental properties will continue, especially in terms of the new institutional investors and ‘vulture funds’.

Replicating the UK and Spain

We can also look to the experience of other countries to get a sense of what future might lie ahead for ‘generation rent’. The UK and Spain have very similar housing systems to Ireland. Both countries had pro-homeownership policies for the last few decades and both had property bubbles much like our own. And both these countries have seen a significant decline in home ownership.

In the UK, homeownership has declined from 71% of households in 2003 and to just 63% today. And like Ireland the private rental sector has almost doubled over the same period and now stands at 18%.

In Spain, the number of rented dwellings increased by 51.1 per cent between 2001 and 2011. Meanwhile the homeownership rate collapsed from 87% in 2007 to 77.8% today.

The causes are very much like those we face in Ireland. Banks and regulators have tightened up lending rules, making it difficult to access a mortgage, and income and wages have been stagnant.

Vulture funds

The UK has seen a resurgence of small-time buy to let investors, cashing in on the demand for rental housing created by those locked out of homeownership. While in Spain ‘vulture funds’, like private equity firms and REITs, have snapped up properties from failing banks and state agencies (exactly like the NAMA experience here).

The international evidence and the factors on the ground in Ireland all point to one direction: a systematic, long term decline in homeownership. Given that social housing has also been in decline for several decades, this can only mean that ‘generation rent’; will be with us for the long term.

In a way this should not be surprising. As argued by Professor Michelle Norris, homeownership became the norm in Ireland because of massive government intervention, mainly in the 1950s, 1960s and 1970s. The government built houses, they allowed social housing residents to buy their houses (thus becoming homeowners) and they handed out mortgages to those who otherwise couldn’t get them.

My parents’ generation

My own parents wandered down to Dublin City Council (or Dublin Corporation as it was at the time) and got a mortgage to buy their first house at the tender age of 21 with virtually no deposit, job security or much in the way of income. That was in the 1970s.

Today you would need a deposit of at least €40,000 and an income of around €100,000 to buy that same house.

Most of these homeowner supports were phased out in the late 1980s and early 1990s. We didn’t notice the impact at first because a wave of cheap credit and irresponsible lending decision in the late 1990s and early-2000s meant it was easy to get a mortgage, even without the help of a government. Once that bubble burst, however, we have had to confront the long term impact of this change of policy.

If generation rent is here to stay, we need to rethink our approach to housing in this country. So what should our new vision be?

We have two options. The first is to return to the pro-homeownership policies of the past. This would include government mortgages, tax reliefs and grants for homeowners and weakening the Central Bank mortgage lending rules. This, however, would be expensive (in terms of government expenditure) and carries a very real risk of producing a dangerous housing bubble and a financial crisis.

Real security of tenure

The second, is to make rental housing much, much better for tenants. This means real security of tenure (ie, no evictions as long as you pay your rent), tightly-regulated and affordable rents, and high quality property management. The market is not going to deliver this, so this will also require government intervention, in the form of social housing or the much discussed ‘cost rental’ model that is the hallmark of the world-leading housing systems of countries like Denmark, Austria and the Netherlands.

This approach has the benefit of being more financially sustainable in terms of government spending, but it would mean many of those who dream of homeownership would have to kiss that dream goodbye.

But do get any change at all, we need political will. This is not going to come from government, so forget them. The most likely place it will come from is of course those people who have a direct interest in things changing – generation rent. Until this generation gets organised and develops a collective political voice, it’s hard to see any real change coming.

Up until now tenants have not had a national organisation capable of leveraging their numbers to pressure the government for real change. I recently learned that even the Bouncy Castle industry in Ireland has a representative body. Seriously. Surely it’s time the 740,000 people who make up ‘generation rent’ had a voice on the national stage?

Michael Byrne is a researcher at the School of Social Policy, Social Work and Social Justice, UCD. He also participates in the Dublin Tenants Association.

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About the author:

Michael Byrne  / Lecturer in Social Justice

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