Financial experts recommend that a person should limit their housing costs to one third of their net income.
This is because when housing costs go above these limits it impacts on the person’s ability to save and cover other essential costs.
The figures of net incomes in Ireland need a greater degree of understanding.
So, for example, a person on €25,000 annual earnings has a net income of roughly €1,819 per month (this is after deductions for tax and PRSI).
This means that they can afford a mortgage or rent of €546 per month at 2018 tax rates.
If the person is earning €45,000, their net disposable income is €2,832 per month and their housing costs should be no more than €935 per month.
Dual earners with no dependents can afford to pay considerably more because they can sell their skills in the labour markets unimpeded.
People with dependents don’t have that ability and are therefore poorer as a result.
The Government’s simplistic solution that supply alone is the answer to the housing crisis is resulting in tents being pitched at the Kingsley Hotel in Cork in December 2018.
Rising rents because of undersupply is causing a vicious cycle because the Government is also wedded to the idea that the market should dictate the price.
The inadequate attempts by the Government to limit rising housing costs because of the shortage of housing for rent or purchase will unfortunately see a continuation of this situation.
Ironically, because of our rising levels of employment but at declining wage rates relative to other eras, the Government, through the local authorities, will have to become a significant provider of housing into the future if this problem is to be solved.