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Dublin: 15 °C Wednesday 26 June, 2019
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What on earth is the solution to the rental crisis?

Irish rents have broken the €1,000 monthly average for the first time since pre-crash 2008. Where will it all end?

shutterstock_313368140 Source: Shutterstock/littleny

THIS MORNING BRINGS with it the news that the average rent in Ireland has passed the €1000-monthly mark for the first time since the Tiger-heights of early 2008.

It’s an inauspicious claim to fame. For most tenants in the country, particularly in Dublin, the Irish rental situation is a source of dread. People live in fear of a rent increase and of quite literally being unable to afford to live somewhere.

The issue of housing and homelessness dogged the last government almost from its inception. Yet for all the endless talk and political grandstanding the situation just seems to be getting worse and worse.

This morning’s news feels like a watershed. If the country is paying pre-crash rents but isn’t in a pre-crash state of affluence (at least not yet) then something doesn’t add up. So what can be done?

Supply and demand

“Look, the only way a landlord can turn away business is if the demand is there,” says economist with Daft Ronan Lyons.

He argues that while spiralling rents are a huge problem for current renters, a bigger picture needs to be looked at.

ronan lyons Ronan Lyons Source: Twitter

“The high level of prices is a sign that the system isn’t functioning properly,” he says.

We know at present that in the region of 30,000 or 40,000 new houses are needed each year to cope with our growing population. At present we’re getting about 15,000.
We need more building and we need it now. The solution isn’t to ban rents from moving up, the solution is to fix the market.

Easier said than done.

Various measures have been introduced. Two years ago legislation was introduced to prevent landlords from discriminating against people on rent supplements.

Last November, after months of speculation, a two-year rent freeze was brought to the table. On top of this, property owners are required to give longer notice to tenants of rental increases or eviction, while any such increase would have to be justified by the landlord in question. However, it should be pointed out that the two-year timescale was simply an extension of the one-year rule that had already been in place. So, not that revolutionary then.

The rental freeze could be misconstrued as a blanket moratorium on raising rents. That isn’t the case (if it were, average rents couldn’t increase) – it simply means that rents can only be raised once every two years, while new leases are capped at ‘market value’.

16/6/2015 Generation Rent Conferences Alan Kelly in attendance at a Threshold conference on the rental sector, June 2015 Source: Mark Stedman

As it often does, politics took a hand in the situation. Former environment minister Alan Kelly had long touted the fact that he wanted to link rental increases to inflation, a form of rent certainty. That was eventually nipped in the bud in favour of the rental freeze by finance minister Michael Noonan.

New government

But there’s a new government in town now. One built on not-entirely stable foundations with a major onus on it to do something about the problem.

A new rent certainty bill is to be brought before the Dáil today by Sinn Féin. Rent certainty is also something that household charity Threshold have been pushing for for a long time. This is understandable given it routinely deals with tenants who have been quite literally priced out of their homes by rent increases of 20% to 40%.

“The rent increases we’ve been seeing are not justifiable,” says Stephen Large of Threshold.

Fair enough, a landlord has to cover his costs and make a profit, but this is a situation that we’re seeing across the board, and not just in low-income households. And it’s spreading around the country.

The end result will be a society that for the vast majority of its citizens buying a house is simply not an option, and never will be, according to Large.

“That is not necessarily a bad thing – for too long renting has been denigrated as paying dead money, with home ownership seen as the only thing worth aspiring to at the expense of all other options,” he says. “Rethinking what it means to be a renter in Ireland should be first on the agenda.”

6/4/2016. Cabinet Meetings New housing minister Simon Coveney Source: Sam Boal

Lyons and Large disagree as to what immediate actions are warranted and effective, understandably given Daft looks at the market from a long-term viewpoint, while Threshold have to deal with the here and now of people in crisis.

“Freezing rent is appealing but it isn’t the answer. Neither is rent certainty,” says Lyons.

The problem isn’t rising rents – they’re a symptom. The problem is that we aren’t getting the solutions that we need.

“We need a coherent national strategy, a structured government-led response on the private rental sector,” says Large.

We have them for construction and home ownership, now we need a strategy for what part rentals are to play in the housing market. For too long private rentals have been the forgotten sector.

Both men are in agreement that immediate supply is the most pressing concern.

“At the same time we need to understand who the landlords are, who becomes a landlord, what can be done to make becoming one an attractive option,” says Large.

Most landlords own one property or are renting a property almost by accident – via inheritance for example.

“Becoming a landlord isn’t easy – there are plenty of requirements. Understanding the landlord’s role is vital in the overall context of a national strategy. What will attract people to providing that service?”

Kickstarter

“I hope that the new government and a new minister [Simon Coveney taking over from Alan Kelly] will kickstart this,” says Lyons.

The first thing we need is consensus and evidence, a new study commissioned that people actually agree on. Until you do that and compare to best practice in other countries you can’t get clarity on where the problem is.

The alternative is far from appetising – people being priced out of their own homes, living at home with their parents, commuting longer distances, and poorer households simply being priced out of the market completely.

“If things continue as they are I would fear for foreign investment into Ireland,” says Lyons. “What company will come here if their employees can’t afford the rent?”

“At the moment a landlord can increase the rent because they can,” adds Large.

There is no alternative. And as things stand rents will continue to increase and other things will have to give. And that’s not sustainable.

Read: Taxi drivers work an average of five hours a day, new study finds

Read: Poll: Who should be the next leader of the Labour party?

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