From top: The Nevin Institute paper on the housing emergency; Dr Michael Byrne
Further to calls yesterday by The Nevin Economic Research Institute (NERI) for the creation of a semi-State company to become the main supplier of rental housing
Dr Michael Byrne writes:
Sometimes as a tenant it can feel like the problems are coming from all angles. Rents have increased 60% since 2010 while wages have been more or less stagnant. Evictions – or ‘terminations of tenancy’ – are very common.
Landlords can boot tenants out if they decide to sell or if they would like the property for family use. But many landlords are also forced to sell by their bank, due to arrears, or have receivers firms appointed to their properties who invariably put them straight on the market.
In both cases tenants lose their home to facilitate the sale of the property.
Meanwhile when you do lose your rented home it is extremely difficult to find a new one. And finally, bad property management and low standards are the norm across the sector.
These are all issues which can and should be tackled. But in a path-breaking research paper published yesterday, the Nevin Institute have made a startling point; if there are so many problems in the system maybe it’s because the system itself is broken.
They argue that nothing short of a revolution in rental accommodation is required. T
Their proposal is radical, but simple. It works like this. The government should establish a new semi-state company (which the Nevin Institute have dubbed the Housing Company of Ireland).
This company would borrow from a variety of sources (everywhere from Credit Unions to pension funds) and use the money to build rental accommodation.
Crucially, rents for this accommodation would be based on a ‘cost rental’ model. This is the magic ingredient to all the best rental sectors in Europe; Denmark, Austria and the Netherlands have all used them for decades.
Cost rents are pretty much what they sound like. Rent is set at a level that covers the cost of providing the accommodation (usually calculated over a 30 year period). Essentially, you take the total costs (construction, design, land, property management) of a development divide by the number of houses and spread it out over 30 years.
This means that as a tenant you pay a rent which covers the cost of providing your home, but nobody makes a profit from you. Cost rents ensure that the Housing Company of Ireland would have plenty of revenue to pay back its loans.
To get this system set up would take a significant initial investment. But once it is up and running it will be virtually self-financing.
But the system has many more advantages. Firstly, by setting non-market rents it frees tenants from the blackmail we are currently subjected to.
Today we hear that if we want more supply of housing we need to accept sky rocketing rents (in reality rents go up but the supply never seems to quite materialise).
By taking control of the supply of rental accommodation out of the hands of landlords we would no longer face a trade-off between affordability and supply. Secondly, tenants would enjoy the efficiency and effectiveness of a large, professional landlord.
Many of us are familiar with landlords who treat fixing a washing machine like a major logistical operation. Imagine renting from a company which managed thousands of units and hired dedicated property managers and maintenance professionals.
Finally, and perhaps most importantly, this system can deliver something tenants can currently only dream of: full security of tenure. You pay your rent, you don’t get kicked out.
No moving every year or so; no rearranging your life every time your landlord feels like it; no constantly feeling that the place you live can never really be your home.
Luckily, we don’t have to speculate about whether such a system can work in practice. The evidence from European countries is overwhelming.
In Austria, for example, the cost rental system has delivered between 14,000 and 19,000 units every year since 1994, making up 1/3 of all housing output over the period. And this is high quality, energy efficient and environmentally sustainable housing.
This is a crucial part of the overall stability of the Austrian housing system and one of the reasons they saw neither out of control house prices during the boom nor a disastrous housing crisis afterwards.
Check out this graph (above), which shows percentage changes in house prices in Ireland and Austria between 2000 and 2014. As you can see Irish house prices are all over the place while Austria’s are perfectly stable (for more on this have a look at this paper co-authored with Professor Michelle Norris).
The obstacles to the Nevin Institute’s model are political ignorance and political will.
Politicians, for the most part, are incapable of understanding what life is like for renters. They still live in a fantasy land where home ownership is the norm and all renters are students.
In terms of political will – and this is the big difficulty – our current government are opposed to any major intervention in the private housing market. They view the tiny minority of people who make money from property in this country as an important part of their political base.
To challenge both political ignorance and political will we need to build a tenants’ movement that can change the political climate.
The Nevin Institute’s proposal provides a powerful tool for that movement.
Dr. Michael Byrne is a lecturer in the School of Social Policy, Social Work and Social Justice and participates in the Dublin Tenants Association. Follow Michael on Twitter: @mickbyrne101
— Eoin O Broin (@EOBroin) March 24, 2017
There you go now.