Problem of high rents won't be solved by raising wages, say ISME

Problem of high rents won't be solved by raising wages, say ISME

High rents are making it so difficult for employers to get staff that some companies are renting properties themselves and then letting them in turn at sub-market process to employees according to the chief executive of the Irish Society for Small and Medium Enterprises (ISME).

Neil McDonald told RTÉ radio’s Today with Sean O’Rourke show “that's a dirty little secret in the employment world.

“Rents going up so quickly and so high in some parts of the country that employers are actually investing in property or they are renting property themselves and letting those properties at sub-market rents to employees.

"I have had to warn them that they are putting themselves at odds with the Revenue, that this is potentially a BIC liability. This is a really serious problem.”

He warned that the problem of high rents cannot be met by raising wages.

“Looking at Eurostat figures on rents in Europe, Ireland, and Dublin, in particular, is the second most expensive city in the whole of the EU for a one bed (after London), second most expensive in the EU for a two bed (after Stockholm) and joint second most expensive in EU for a three bed (with Paris after London).

“The issue here is the cost of accommodation. To think that they can just chase this cost up with wages.

All that will do is make employment unaffordable for employers, what we actually have to do is tackle those costs of accommodation.

“The issue for small employers, especially in Dublin, is you have rents, the average price for a one bed is €1,650 a month (according to Eurostat), for a one bed. That's average.

“We're one of the fastest price risers in Europe. The annual trend for flats is 9%, it almost seems like nothing is going to control that.

"If you're attempting to match through wages, you're just going to have a massive wage price spiral, you're not going to make employees better off and what you're actually going to be doing is passing more money to landlords via employers paying higher wages, the employee is going to be used simply to pass this money through their account.

We're not saying don't pay people any more, but what we are saying is people shouldn't be paid more simply to meet a cost of spiralling rent, we're just going topsy, and all that will happen is that rent will go up further.

“We have to analyse why root costs of construction are so high, why our rate of construction is low, but we're simply not building enough affordable accommodation for our employees at the rate at which those people need it.

"There has to be active State intervention in the provision of affordable accommodation for people.”

Mr McDonald said that co-living is a solution for a subset - students, young single workers, but that no one was saying it is a solution for young families with children.

“The one size fits all solution is not going to work for everyone.

“The construction industry can't get enough workers, we’re not seeing the influx of labour from Eastern Europe that we saw during the boom, it is difficult to see where we’re going to get that."

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