Certainty In A World Gone Daft

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From top: Dublin Tenants’ Association campaign;  Dr. Michael Byrne

The Dublin Tenants’ Associatio this week starts a campaign for rent certainty,

Dr. Michael Byrne writes:

If ever there was a timely campaign, this is it.

As is well known, rents have increased nationally by 40% since 2011. In urban areas, especially Dublin, rent increases have been far in excess of this. The sector itself has expanded by 65% since just 2011 and up to 1/3rd of households will be life long renters.

This is nothing short of a radical transformation of our housing system. Renting, including long term renting, will now be the norm for a large and growing section of Irish households.

Following the crisis in 2008 mortgage lending in Ireland collapsed by around 90%. In subsequent austerity budgets, capital funding for social housing fell by 80%, as did output in the sector.

With both of the other housing tenures in free fall, it was perfectly clear that only one thing could happen: a massive increase in the rented sector and a consequent increase in rents.

After years of chaos and the emergence of a full blown homelessness crisis the government has decided it might be a good idea to do something about the rental sector; the National Strategy for the Rental Sector will be published this December.

The Secure Rents campaign is thus perfectly timed to pile on the pressure and force Minister Simon Coveney to take seriously the task of regulating rents, providing security of tenure for tenants and making the rental sector one fit for life-long living.

One of the biggest obstacles, however, is the chorus of actors arguing that since rent increases are driven by a supply shortage we should not be focusing on regulating rents but instead on increasing supply.

This argument has permeated public debate to the extent that at Coveney’s recent stakeholder consultation for the National Strategy, in which I participated, the two words heard most frequently were ‘landlord’ and ‘incentive’.

There is a real danger that the pseudo-economics of ‘supply’ will eclipse the pressing need to introduce root and branch reform and finally give tenants something approaching equality with home owners and social housing residents.

So let’s pick apart the argument here. There is not enough supply of housing, especially in urban areas. This is a fact. We therefore need to increase the supply of housing and we need to do it quick. This is also a fact.

But this where we need to watch out for a sleight of hand. It goes like this: if rent increases are driven by supply shortages then an increase in supply will drive rents down. This is where the pseudo-economic comes in.

What shapes the cost of rent is not supply in and of itself, but the relationship between supply and demand. For increased supply to bring down rent prices it would have to increase to such an extent that it would overtake the chasm which has opened up between supply and demand in recent years.

But more importantly, supply would also have to increase faster, significantly faster, than demand is increasing. This is where we have to look at the ‘demand side’ factors which are seldom discussed.

The concentration of economic activity in Dublin and other urban areas has intensified over recent years and will continue to intensify – this means more rural to urban migration and more demand for housing in our cities. People are living longer, piling further pressure on housing demand.

And finally, but importantly, household formation patterns are changing – people are living in smaller and smaller households. In short more people concentrated in cities, living longer and in smaller households.

We also have to take in the labour market aspects of all this. On the one hand wages and employment are likely to grow somewhat (as seen in the spate of recent strikes) adding to housing demand.

At the same time, however, secure employment contracts (and thus mortgages) are harder to come by in our ‘gig economy’ and the labour force is more mobile (moving from job to job and place to place much more frequently than in the past). This more mobile work force will become home owners much later, if they can afford to do so at all.

There is simply no way that enough private rented housing is going to come on stream in the next five to ten years to catch up with and overtake the demand side factors discussed above, and therefor rents will continue to increase.

This is why regulating rents is vital – it is the only way to halt the crisis of unaffordability in the rental sector and the tidal wave of homelessness it has unleashed.

To argue that regulating rents won’t sort out the supply problem is to miss the point entirely. It’s a bit like saying umbrellas are useless because they don’t stop it raining. While it’s true that they don’t, they do stop you getting soaked. Likewise, rent certainty won’t increase supply on its own, but it will protect tenants from the worst consequences of the supply problem.

There are many options to increase housing supply which don’t involve trampling all over tenants’ rights.Let’s hope the National Rental Strategy includes some.

But please don’t tell me these measures will mean I won’t have a rent increase of between 10% and 50% over the next few years. Because that is pseudo-economics – it’s an argument based on market ideology, not market logic.

The only way we can guarantee small and predictable rent increases is to regulate them.

Dr. Michael Byrne is a lecturer at the School of Social Policy, Social Work and Social Justice in UCD and participates in the Dublin Tenants Association Follow Michael on Twitter: @mickbyrne101

Previously: Michael Byrne: You Might Want to Sit Down For This

54 thoughts on “Certainty In A World Gone Daft

  1. Crud

    “There is simply no way that enough private rented housing is going to come on stream in the next five to ten years to catch up with and overtake the demand side ”
    So if we apply rent controls what happens to all the people that don’t have accommodation( because of lack of supply) ? Do we go on the government rent control housing list and wait ?

    1. Sheik Yahbouti

      Ever heard of Local Authorities building housing estates, on land that they own, using contracters directly employed?? Yes, chillun, that is how things were done in the olden days (and very successful it was, too).

      1. Clampers Outside

        But then the local authorities allowed people buy their homes and the stock was lost, just like in the UK, which makes the eventual shift to having private companies run social housing more acceptable or palatable, because a return to govt provision is almost too far gone to recoup…. that’s my ‘conspiracy’ bit anyway :) I hope I’m wrong… but I doubt it

        1. Sheik Yahbouti

          There’s nothing to prevent Local Authorities from building MORE stock – or do you know of some bizzarre provision that says social housing can only be provided once?

  2. Jimmee

    “There is simply no way that enough private rented housing is going to come on stream in the next five to ten years to catch up with and overtake the demand side.”

    That’s exactly what they said before the crash. Once construction starts you’d be surprised how quickly supply can catch up with demand.

    1. Junkface

      You are talking absolute c rap there. We are talking about Ireland. This is not a normal country with regards to housing/home owning. It doesn’t take much for Irish people to get hysterical about buying homes when they become available. Have you ever seen too many houses available in Dublin in the last 20 or 30 years? Never!! Have rents ever gone down or stabilized excluding just after a financial crisis and an IMF rescue? No.

      Rent controls are needed to save Irish people from themselves, and stop the housing market from bubbling up. What we currently have in Ireland is an unsustainable economy. We’re constantly looking for businesses to set up here, but where are the employees going to live? How will they be able to obtain any reasonable quality of life? If they cannot save because of crippling rent the rest of their future plans crumble.

      1. ALisonT

        “Rents have increased nationally by 40% since 2011”
        Yes, but they have decreased by about 10% in real terms since 2007.
        The recent increases were almost exclusively driven by the calls for rent control which forced landlords that were happy to rent below market rent to increase their rent for sitting tenants.

        1. Steve

          There’s probably a kernel of truth in that Alison .

          “Better whack up the rent by 300 or I’ll be stuck on this for the next 2 years”

        2. Junkface

          I don’t believe that at all. Sorry, but you’ll need proof for those kind of statements. Rents were increasing 10 to 20% from 2011 to 2014, way before the rent control 2 year freeze was announced.
          The real reason for the huge jumps in rent was the lack of new homes or any homes on the market from 2011 to Now. Again a FAILURE of the Irish Govt in planning for the future, the building industry collapsed and Irish building trade emmigrated to Australia, Canada, USA.
          With regard to the Housing Market in Ireland, the free market goes out of control pretty quickly because of the Home owning culture here, in contrast to Germany lets say. The Irish Housing market needs boundaries.

  3. dav

    Heard Simon Coveney on Morning Ireland this morning, Usually he is coherent, not this morning, he tied himself up in knots to avoid admitting that none of his “fast track” houses would be completed by 31st Dec 2016, but then again his approach is typical of fg’s towards the homeless – hey hate them because they are homeless.

    1. Junkface

      Exactly, we need more high rise buildings. The reality is the worlds population is exploding, Irelands has increased a lot over the last 30 years. Time to get a grip on reality, we’re actually wasting space in Dublin building housing estates when we should be building (Proper) 2 and 3 bed apartment buildings. We could get 10 times more out of the land zoned if we build up. These concepts are not new in the rest of the world. How can we drag Irish politicans into the 20th century nevermind the 21st century?

    2. Kieran NYC

      I’ve been saying this for years.

      Apparently anything higher than five stories will spread darkness across the land, and the childer will never see sunlight and all have rickets or something.

  4. Steve

    Mad statistics this month on department website . 70% of homeless are in Dublin . There is one homeless person in Monaghan. 0 in Leitrim. Cheaper rent presumably.

    We all wanna live in Dublin.

    1. ReproBertie

      That’s a symptom of the bigger problem which is the centralisation of everything. We’re a small country but everything is in Dublin and that’s ridiculous. We should be looking at, for example, building a second IFSC in Limerick and working to lure Brexit hit companies to it.

      1. Junkface

        I agree with that but maybe we should expand outwards from Dublin methodically. If they send an IFSC off to Limerick it might be too far to succeed, or too many workers will be put off by being so far west. New businesses should go to Kildare, Meath, Wicklow first or expand along the motorway routes for quicker connections between businesses, eventually building up a strong line heading West.

        1. ReproBertie

          I get what you’re saying but is travel time from somewhere like Portlaoise to Limerick really that different than it is to Dublin? During the boom the commuter belt was pushing out over 50 miles from Dublin. That’s almost half the distance between Dublin and Limerick. There’s also a much cheaper cost of living if you head West.

          It’s pie in the sky anyway. Establishment Ireland can’t see beyond Dublin.

          1. ALisonT

            From our markets perspective, Dublin is a medium city on the edge of Europe, not a large city dominating a country. If we reduce the synergies in Dublin it will not necessarily be good for the country.

      2. whut

        bertie ahern tried to do that .. (while he was secretly helping destroy the country) .. he tried to decentralise by giving better tax incentives and stuff like that, to businesses willing to start up outside dublin. but when it comes down to it .. people wanna be in the best city. companies, employees. but it should be done again, but properly. theres ample room around the country for everyone. but its all here in dublin. ive even noticed walking to work in the morning, theres way too many people just on the footpaths even.. often you end up walking on the actual road.

        1. Kieran NYC

          Charlie McCreevey screwed decentralisation by trying to move chunks of government departments by diktat. Mad stuff.

      3. ahjayzis

        Why? If we managed our one smallish city like an actual city instead of a regional town we could concentrate development and get more for less – better parks and public places, public services, world-class public transport. The state Dublin is in is testament to a decentralising approach, endless housing estates, diffused population, no economies of scale. All the problems of a city and none of the benefits.

        We have 4 million people, that’s enough to sustain one world class city – or we can do what we always do and try in vain to spread it around like butter over too much bread.

        1. ReproBertie

          Why? Because we don’t manage our city at all and because centralising everything in one part of a small country means people are struggling to afford to live in that small part of the country with the result that we have over 1,000 families homeless in Dublin.

          I’d love to think that we could manage Dublin better but in my experience the only more for less we get on public projects is more money for less return.

          1. ahjayzis

            Your solution to us not managing our one city better is to make it two cities we can’t run?

            Ireland is a small country – how on earth does that translate to us needing more than one large city? Let’s get a government for Dublin, a mayor, a centralised planning and strategy department accountable not to the citizens of Castlebar, but of Dublin. Our one major city exists under the same governance arrangements as County Leitrim, the national parliament bogs itself down in things like bin charges -that’s the problem.

            If we can’t entice foreign firms into Dublin why on earth would they fancy moving to a ‘city’ that in reality is medium sized town on the far side of the country?

          2. ReproBertie

            No, my solution is to not pretend that we’ll suddenly start to manage Dublin correctly (or at all) and instead take some of the pressure off by enticing firms looking to escape post-Brexit London to another location within Ireland. (Galway or Cork would work just as well.)

            As you say, Limerick is not a city. It’s a medium sized town on the far side of the country with easy access to an international airport, affordable and available housing, a cheaper cost of living and it still comes with that low corporation tax. Moving a few financial houses won’t turn it into a 2nd Dublin overnight and nor should that be the aim.

      4. nellyb

        We need proper railway system connecting all major and not so hubs. But having stilted railtracks erected over your field… I don’t think people are up for it yet.
        I’ve had an interesting job opportunity in Cork some years back, but couldn’t move there full time. If only there was a reliable and affordable bullet train service….
        I sympathize with people outside of Dublin re: lack of jobs, but it’s not possible to have white cottages on virgin landscapes (which ARE gorgeous) and abundance of jobs. Some intelligent compromise needed.

        1. Kieran NYC

          + “I want superfast broadband NOW!” but “I’d rather die than let you put up a pylon!”

  5. well, tat's that

    Just did the maths, 26% of my net wages goes on rent, so 30% isn’t a million miles away. What’s meant to be the reasonable precentage? Cause I’m doing OK as I stand…

  6. Rob

    The government should stop listening to their own bullpoo. Dublin infrastructure cant take any more businesses or employees. The roads are a mess, and business premises are hard to come by. They should start charging a levy on companies over a certain size, located between the two canals, and another levy between the canals and the M50. This would force companies to set up outside of Dublin. Possibly provide subsidies for companies to set up around the commuter belt.
    It would ease pressure on housing within Dublin.

    1. DubLoony

      Well, they are belting up office blocks in docklands area. Problem is that there are not the high rise apartments to go along with them.

      There’s derelict land / buildings in the city that should be CPO’d /confiscated or taxed into do something with if left longer than x years. Place near me is finally being developed after 40 years dereliction.

      The national spatial plan needs to be implemented to build up Athlone, Cork, Galway, Sligo, Limerick as regional hubs.
      Smaller towns and villages also need better planning so they can be viable. Most are just a main street full of pubs and clogged with cars.

  7. Deli

    Tenants don’t know their landlords financial situations. My mortgage repayments are €1900 pm I get €1400 pm in rent. At the end of the tax year I have a tax bill on the income that I am receiving there is no way I have of off setting the lower rent against the higher mortgage that I am paying. The only thing I can do is put the rent up to a level that I can keep a tenant or get a new one in. Do tenants expect landlords to keep rents low to accommodate them? Rents are going higher there are still lots of landlords underwater out there. I didn’t choose to be a landlord the crash in the market made me one. Who is looking after landlords like me? no one. We get on with life and suck up the pain of the additional costs until we can sell the properties and pay back the banks.

    1. Bonkers

      No-one is expecting landhlords to take a hit for tenants. The blame lies at the governments door for allowing housing, a basic human need, spiral out of control and inflict homelessness while those in power shrug and say “its the market, nothing we can do”

      That bastion of western capitalism Manhattan Island has rent controls, I dont see why Ireland cant, even for just a few years until this long promised supply catches up. Its not a big ask when young people are getting buried in rent bills of 40 or 50% of their income. Depleting peoples income like this has effects for the wider economy too as theres less disposable income sloshing about.

      1. ALisonT

        Rents dropped by these percentages during the crash and no one was worried. We are only getting back to 2006 levels in real terms.

        1. Bonkers

          You say that as if getting back to 2006 levels is something that is desirable. Perhaps for landlords but housing is a basic social need

    2. SOQ

      When you took out the mortgage, nobody held a gun to your head. You knew then you would be paying €1900 pm for the duration but also at the end, you would have a valuable asset.

      This is the classic privatisation of profit and socialisation of debt argument.

      Your personal finances are of no concern to a tenant and if the market decided that you receive €700 instead of €1400 pm then it would happen. If people are so wreckless and greedy as to take out such loans in the first place then I have no sympathy for them.

      1. ReproBertie

        The landlord knew they would be paying €1900 per month in a mortgage but they didn’t expect their job to disdappear or their spouse to vanish or any of a number of things to happen that left them unable to afford the mortgage but screw them because their landlords and nobody held a gun to their head. So when landlords suffer it’s market forces and suck it up but when tenants suffer it’s greedy landlords and we want rent control.

    1. DubLoony

      zero hour contracts, short term contracts, gig economy, portfolio career – all adds up to insecure jobs, variable income.

      Do try to keep up with the multi-level crises affecting young adults.

      1. Junkface

        This is so true. Modern capitalism has failed the general populations across the western world.

        Rent controls in Ireland would calm the housing market and eventually bring the house prices down, therefore lessening the chances of future accidental landlords who only own one property.

        Multiple home owning landlords (TD’s, shifty Developers) should get much MUCH higher taxes, to the point of them selling their muliple homes off, refilling the market.

        Vulture funds should be taxed at 50% or 60% if they want to buy homes in Ireland, like what they did recently in Vancouver to calm down their housing bubble.

  8. Antoin

    The problem is that he that if you introduce rent control, you make it more and more difficult and less and less attractive to develop and redevelop properties. That said, there are very very serious issues here. There are basically two words in Dublin now – people who own more than 40 percent equity in their homes and everybody else. Their perspectives are completely different depending what side of the divide they are on. If you have that, Dublin is a reasonable enough place to live. If you don’t, it’s damned difficult.

    1. nellyb

      Rent control would immediately create a vast ‘black’ market where capped amount will be paid along with cash ‘top-up to market rate’ to landlord.

      1. b

        One way to prevent that would be to make it a criminal (rather than a civil) offence for a landlord to take payment of more than the rent amount stated on the lease. And impose swingeing penalties (10 years in prison kinda thing). You’d of course get some landlords willing to take the chance of asking their tenants to slip them an extra three hundred a month in cash, but the vast majority wouldn’t.

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