THE PUBLICATION OF the Daft rental price report today highlights how rent prices in Ireland remain out of control with rent pressure zones clearly not working. But how has this come about? As part of Social Justice Ireland’s book From Here to Where?, published tomorrow as part of their annual policy conference, we look at contextualising these problems so that a new Programme for Government can be developed to address them.
A boom in private rented housing and a corresponding decline in home ownership are remarkable developments currently underway in Ireland. The share of households living in private rented accommodation has doubled in size in the last twenty years from under 10% in the early 1990s to nearly 20% today. In another 20 years this is projected to double again to 40%.
This is an important development for two reasons. One is that it is likely to be bad for many people, particularly the generation of younger adults. Householders aged 25-34 had a high level of home ownership for their age in 1991 (69%), but today that proportion has fallen to just 30%. In the next older age age-group, those aged 35-44, home ownership has fallen from 82% in 1991 to 62% today. If this growth in private rentals continues in its current form, it is likely to cause many young adults to be worse off than their parents as far as housing is concerned.
How renting and owning has changed
Most of the growing population of young private renters today grew up in homes that were owned by their parents and had two essential features of secure long-term housing: it was affordable, and families could stay in it as long as they liked. Today’s private rented housing has neither of these features. Under current legislation, private renters have a right to stay in their homes for six years but there are numerous exemptions which weaken that right. They thus face a constant threat of being asked to leave by the landlord over and above the risk they face of being pressured out by rent increases.
As for affordability, the share of weekly household spending that is consumed by rent has been steadily rising. In 1987, 13% of household expenditure was spent on rent. By 2015 this had reached 27%. To combat these increases the government has sought merely to slow the rate of rent increases in certain urban rent pressure zones to a maximum of 4% per year. That upper limit if effectively implemented would still allow a doubling of rent over 21 years.
However, exemptions have permitted rent increases in the targeted urban areas to far exceed 4% per year, as seen in Dublin where rents were 10.9% higher over the third-quarter of 2018 than the same period in 2017.
The second reason for drawing attention to the growth of private renting is that it raises questions about fundamental aspects of the state’s evolving response to social inequality. Social policy in Ireland has historically relied to an exceptional degree on the distribution of wealth to relieve market pressures and enable households to shape their own destiny.
The inequality of renting
In the 20th century the State instituted supports for owner occupation of housing that, as land reform had done, distributed wealth downwards by enabling lower income households to buy their homes. The two key policy instruments in that regard were tenant purchase of local authority housing and the provision of local authority mortgages to low income households. By the year 2000 even low-income households owned substantial housing wealth and were less disadvantaged by inequalities in housing wealth than they were by inequalities in income.
There is also an emerging inequality between the cost of renting and a mortgage. Some excess of private rents over mortgage payments has been present since the 1970s but this excess widened sharply after 1987 and created a new axis of disadvantage in the housing system, one based on age as well as the usual axes of social difference. By the early 2000s, private rents on average accounted for twice as large a share of household expenditure as mortgage payments and gave rise to housing affordability problems among private sector tenants.
As economic recovery has taken off, the housing market has responded sluggishly to an upsurge in population. An acute housing shortage has ensued; however the stresses found in the private rented sector have their origins not in the recent economic recovery nor even in the economic crash which preceded it. Rather they reflect developments which have been underway for over twenty years. Namely a marketisation of housing amounting not just to a downgrading of the role of social housing in the traditional sense but also a downgrading of owner occupation of housing as a policy option.
Professor Tony Fahey is a professor of social policy in UCD. His chapter on the rental crisis is contained in Social Justice Ireland’s book ‘From Here to Where?’
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