Tag Archives: Dr Michael Byrne

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From top: Minister for Housing, planning and Local Government, Eoghan Murphy and Taoiseach Leo Varadkar at the launch of the establishment of the Land Development Agency last week; Dr Michael Byrne

With Sinn Féin submitting a motion of no confidence and widespread revulsion at the eviction of the Take Back the City occupation in Dublin 1, Minister for Housing Eoghan Murphy finds himself once again scrambling to defend the Government’s response to the homelessness crisis.

Under these circumstances one would assume the government would take every opportunity to stem the tide of homelessness.

One such opportunity is to address the danger posed by the huge number of Buy-to-Let properties in arrears. But as has been the case with each aspect of this housing crisis, the government seems bent on ignoring the issue until it is too late.

The eviction of tenants from the private rental sector is central to the homelessness crisis.

In response to last week’s news that the numbers in emergency accommodation had reached almost 10,000, Focus CEO Pat Dennigan pointed out that the main reason families are becoming homeless is because they are evicted from the private rental sector when the homes they are living in are sold or repossessed.

And if the summer is anything to go by, this problem is going to get considerably worse as Irish banks offload their non-performing Buy-to-Let mortgage books.

In May, AIB sold a €1.1 bn loan portfolio, which included Buy-to-Let mortgages. In July, Permanent TSB agreed the sale of 10,700 mortgages, of which approximately 3,300 were reported to be Buy-to-Let loans, to an affiliate of Lone Star Funds.

This summer also saw Ulster Bank announce the disposal of 2,900 Buy-to-Let mortgages, while KBC offloaded €1.9bn, including Buy-to-Let loans, to Goldman Sachs.

The push to off load non-performing Buy-to-Let loans is in part a response to direction from the Single Supervisory Mechanism, an ECB institution responsible for ensuring the ‘safeness and soundness of the European Banking System’.

The SSM want Irish banks to bring the proportion of NPLS down to approximately 5% (at the end of 2017 the NPL ratios was just under 14%). This is an important goal as high levels of NPLs make the Irish financial system vulnerable to future shocks.

However, with Irish lenders aiming to hit the 5% target over the next few years, it is clear that thousands of tenants will find the properties they call home in the hands of vulture funds.

This can only mean eviction, and the risk of homelessness.

When it comes to vulture funds, politicians have focused their attention for the most part on so called family homes being sold to international funds. This an important issue.

But Buy-to-Let properties are family homes too – it’s just that in this case the families in question are renters.

Moreover, the impact of homeowner mortgages being off loaded remains somewhat unclear. In the Buy-to-Let sector, however, repossession always means eviction.

What makes this a scandal, rather than simply cause for concern, is that many of these lenders are in part state owned and have received massive government support in recent years. PSTB is 75% state owned and AIB is 71%.

The state, in a sense, is creating the very problem it is struggling to contain.

The good news is that there are immediate solutions, although they require careful consideration.

In 2015 (even then it was obvious this was a disaster waiting to happen) I proposed a NAMA-type intervention focused on non-performing Buy-to-Let loans. This would acquire loans and use rental income to cover the costs, keeping tenants in their home.

Similarly, the Oireachtas Committee on Housing and Homelessness final report, published in 2016, recommended a ‘rent switch programme’ which would allow Housing Associations or Local Authorities to purchase rental properties from receivers or investors.

The same Committee also recommended the removal of ‘sale of property’ as grounds for terminating a tenancy, i.e. an eviction. Properties could still be sold, but without effecting the tenant.

Finally, a temporary moratorium on any evictions in the private rental sector could be introduced.

Some might say we should simply let the logic of the market play out, even if this means thousands of evictions, and that state intervention on this scale is unwarranted.

The reality, however, is that this is not the law of the market. Most of the institutions who are selling Buy-to-Let mortgages simply would not exist where it not for the largesse of the tax payer.

Bailing out lenders may have been justified to address the financial crisis. But on that basis, surely emergency measures are justified to address the current housing crisis?

Central Bank data for the first quarter of 2018 tells us that there are currently 22,545 Buy-to-Let mortgages in arrears (19% of the total). During this period, 314 such properties had receivers appointed to them – that’s more than three every single day.

This scale of this problem should be of clear concern. But whatever your view on how this issue should be tackled, what is most damning of all is the fact that there is no plan whatsoever.

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

Rollingnews

 

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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.

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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

Ireland’s Housing Emergency – Time For A Game Changer? (NERI)

Meanwhile…

There you go now.

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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

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From top: Daft ad: Dr Michael Byrne

Tenants have more rights when buying a chicken sandwich from a deli than when renting a home.

Dr Michael Byrne writes:

Budget 2017 was another slap in the face for tenants in the private rented sector.

The main housing initiative was the so-called ‘help to buy’ scheme which will make it possible for people spending €600,000 on a three bedroom semi-detached home get €20,000 for the state (although this will ultimately be absorbed by the developer via increased house prices).

Landlords got some nice additional tax breaks. But tenants, who have seen average rent increases of 40% in the last three years, got nothing.

Many of us were already left speechless when the government’s Rebuilding Ireland housing plan failed to include a single measure for the private rented sector. This leaves all hope resting on Minister for Housing Simon Coveney’s forthcoming National Strategy for the private rental sector.

For this strategy to have any impact, however, it must get beyond the narrow lens of ‘supply’ which has dominated the debate so far.

This approach is based on a straightforward idea: if we have more supply of rental accommodation, rent increases will stabilize and everyone will be able to find a place to live.

Let’s set aside for a moment the obvious problem that in the real world of the Irish housing system there is no direct correlation between supply and rent levels.

Perhaps more importantly, what is forgotten here is that private rental housing in this country is inherently dysfunctional and a contravention of the right of tenants to a home. Once we appreciate this the absurdity of focusing solely on supply becomes clear.

Let’s take a brief look at what passes for normal in the private rental sector. To take one example, during the first six months of a tenancy any landlord can evict any tenant for no reason whatsoever.

Imagine you’ve moved house. You’ve just got your routine together, the kids settled in their new bedrooms, the school run and morning commute figured out. Then you get a letter from your landlord saying you have 28 days (that’s right 28 days) to get out.

Why? Maybe he just doesn’t feel like it anymore. Maybe he thinks he can get more money from someone else.

In the end it doesn’t matter, because your landlord is perfectly entitled to do this.

If banks had a similar ‘grace period’ during which they could pull out of mortgage contracts or local authorities had similar eviction powers for social housing tenants it would be a national scandal. But tenants in the private rented sector don’t seem to matter so much.

Even after this ‘grace period’ of six months there are ample opportunities for landlords to evict. They may have a child, cousin, niece, nephew, aunty (etc.) who want to use the property.They may wish to sell. Maybe they want to refurbish.

All of these are, under current regulations, valid reasons to terminate a tenancy. It’s not hard to imagine abuse of these regulations by, for example, simply pretending the house is required for family use. At the Dublin Tenants Association, in which I participate, we see this every week.

In short, there is no security of tenure in the private rented sector.

Meanwhile, it is impossible to know how much you will be paying for rent this time next year. Rent increases of as much as €600 per month are not uncommon.

With average rents for a one bedroom apartment in Dublin currently around €1,200, if you are working full time on the minimum wage your rent will take up 80% of your take home pay.

The only ‘regulation’ is that landlords cannot increase the rent above the level of ‘market rent’. This is simply absurd since landlords define what the market rent is.

The key point is that in today’s world it is simply not possible to live like this. Apart from the very real risk of homelessness, how are we supposed to save, take out pensions or plan for our future on any level if the only thing we know about our housing costs is that they will go up?

The condition of accommodation in the rental sector is similarly dismaying. The reality is that today you have more rights when buying a chicken sandwich from a deli than when renting a home.

If you buy a chicken sandwich with mold on it you’ll get all of your money returned in full. If the deli keeps selling moldy produce it will be shut down. Try getting a landlord to deal with mold and the weakness of the regulations will become all too clear.

It is perfectly obvious that no one can feel secure and safe in their home in these conditions. Is this the kind of housing we want to increase the supply of? Do we want even more households to have no idea where they’ll be living next year or even next month and even less of an idea how much they’ll be paying for it?

Currently one third of all households in Dublin are in the private rental sector. Do we want 40% of even 50% of households in the capital to be subjected to the chaos, instability and woeful standards of this sector?

The answer is an emphatic no. The debate needs to change and it needs to change immediately.

Let me be very clear, housing supply needs to increase, there can be no debate about that. But we need to move away from a narrow focus on supply and recognize the necessity for radically transforming the private rental sector. This means placing security of tenure at the centre of policy reform and it means regulating the affordability of rents.

If you happen to be part of the very small minority that are developers, bankers and landlords by all means continue to focus solely on supply. After all that makes it more likely you’ll get tax incentives and other handouts from the government.

For tenants and for anyone who cares about the right to housing, however, we need to recognize that it’s time we saw a systematic change of the private rental sector for once and for all.

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