Steps to solve Ireland’s deep housing crisis still to be made

As the festive season draws to a close, I am reminded of a recent interview on Morning Ireland with Mike Allen, director of advocacy at Focus Ireland.

Steps to solve Ireland’s deep housing crisis still to be made

It was not so much his restatement of the continued escalation in homelessness among families in 2015, but his declaration that more than 1,000 children under eight years of age are currently homeless across the country.

Moreover, his assertion that “there was nothing on the horizon which would lead you to believe that they won’t be homeless next Christmas” has to be the ultimate indication of a housing policy which has failed to deliver on its commitment to “enable all households access good quality housing appropriate to household circumstances and in their particular community of choice”.

Aside from the very serious escalation in homelessness, many returning emigrants are also experiencing difficulties sourcing accommodation.

Progress in the restoration of a properly functioning housing market has been slow, and perhaps nowhere more so in the private rented sector.

The reality is that the private rented sector has taken the full impact of the economic recession, having to provide housing for a wide range of households, many of whom previously would have had their accommodation needs met by the owner occupied or social housing sectors.

Almost one in five households were in the private rented sector at the time of the 2011 Census; the numbers may well have risen further since.

This is a positive trend, assuming households are in the private rented sector by choice.

As a result, rents in Dublin in autumn 2015 were just 2.3% below their peak levels in 2007, having risen by almost one-third since they bottomed out in early 2011.

Nationally, rents were 11% below their peak, up almost 20% since 2012.

Following a comprehensive assessment of the private rented sector for the Private Residential Tenancies Board by DKM Economic Consultants, the ESRI and Ronan Daly Jermyn, supported by surveys of tenants, estate agents and landlords by Red C, two reports were published in October 2014.

They examined options to address the escalation in rents and to ensure the future sustainability of the private rented sector.

Both reports contained a comprehensive set of recommendations with respect to rent stability and affordability, regulation, improving the quality and protecting the existing stock of rented accommodation and promoting investment and increased supply.

The authors felt strongly that all of the recommendations should be taken on board to make the private rented sector a stable and attractive housing option for all who wished to rent in the short and long terms.

A small number of the 34 recommendations were subsequently introduced one year later by the minister for the environment, community and local government, in his package of measures to deliver rent certainty and boost housing supply.

One exception, and perhaps the most contested, was the rent regulation measure, which the DKM report and others did not favour.

However, the minister extended the rent review period for all tenancies to 24 months from 12 months as was previously the case.

The report by DKM and other experts concluded that the case for rent regulation was relatively weak, not least because it can act as a disincentive to supply and discourages the entry of new investors.

Further, the report concluded that the impacts could fall hardest on the very people that the measure was trying to assist.

These include those in receipt of State support, those on lower incomes, and those most at risk of homelessness.

The impact of freezing rents today may eventually drive rents higher than they would otherwise be, assuming the cap is removed after two years.

What happens in the run up to implementation is also important.

The research suggests that landlords can overcompensate by front-loading rent increases in advance of a rent freeze being put in place.

It may not be a coincidence that Daft.ie reported the highest three monthly increase in rents in the third quarter of 2015 since early 2007.

But during the period of the rent freeze, will landlords invest in the existing stock in an environment where they cannot increase rents for two years?

Will new investors enter the market and increase supply in a market where rental income is lower than it would otherwise be?

The Red C survey reported that close to a third of landlords — before the regulation — intended to sell their properties as soon as they could.

There may also be an expectation among landlords or investors that the cap might be reinstated after two years, unless there emerges a substantial increase in supply in the meantime.

Among the recommendations taken on board by Minister Alan Kelly were longer notice periods for changes to rent and justification of any rent increase by reference to three comparable dwellings in the area, as well as longer notice periods for tenancy terminations.

These greater protections for tenants are very welcome but require tenants to be aware of their rights. Survey data indicated this was a serious issue.

Other recommendations taken on board included the quicker enforcement of PRTB determination orders and 100% interest deduction for landlords who commit to providing accommodation for those in receipt of social housing supports.

The minister’s package also included measures to stimulate new residential construction, including the recently announced changes to planning guidelines on apartment standards, support from the Irish Strategic Investment Fund (ISIF) for the delivery of housing-enabling infrastructure and measures to maximise the potential of Strategic Development Zones, which have seriously underperformed to date.

Our growing population indicates a requirement for around 25,000 new homes per annum, and more initially, to meet the backlog.

However, with just 7,000 new dwellings commenced in the first 10 months of 2015 and less than 11,000 granted planning permission in the year to September 2015, we are seriously under-building.

Indeed many of these may now have to be resubmitted to meet the new design standards, which will delay building further.

It is widely acknowledged that the lack of supply is the key issue preventing restoration of a fully functioning market.

In the public sector, we need to see upfront construction of new units under the social housing strategy. Acquisitions and leasing of existing units do nothing to increase supply.

In the private market, the necessary finance to progress planning permissions needs to be urgently sourced.

But one quick solution, recommended in the report by DKM and others, and not included in the minister’s package, was an extension of the Living City Initiative to landlords.

This initiative, currently only available to owner occupiers, encourages residential occupancy in the upper floors of non-residential buildings which are currently uninhabited in our cities.

Perhaps the one projection we can make with certainty is that housing and homelessness will remain at the top of the political agenda in 2016.

We urgently need to restore a properly functioning housing market to ensure the 1,000 homeless children under eight years old can celebrate Christmas at home next year.

The PRTB reports on Rent Stability in the Private Rented Sector and The Future of the Private Rented Sector, are available at www.dkm.ie. Annette Hughes is a director at DKM Economic Consultants

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