EAMON QUINN: Economic and Social Research Institute not enthused by rent plans

The Economic and Social Research Institute is not “particularly enthusiastic” about the Government’s proposed rent controls. 

The ESRI says that it favours boosting housing supply, via an “aggressive” site tax to discourage landowners from sitting on land and to encourage them to build homes.

Unveiling its latest quarterly outlook, research professor, Kieran McQuinn, said the think tank has long been sceptical of incentives which the property bust had shown can be hard to remove.

The hidden consequences of ‘rent certainty’ measures include restricting small landlords, many of whom were squeezed out during the crisis.

Their absence from the market in recent years might have contributed to the homelessness crisis, the ESRI said.

“The large-scale institutional investors will probably not be affected. The smaller landlords may be affected and we need the smaller landlords,” Mr McQuinn said.

“But, ultimately, the problem in the housing market is more supply, and we need more supply in residential,” he said.

“The danger is that bringing in measures such as ‘rent certainty’ can have an impact on rental supply.

"We need all sorts of rental supply and there has been a tendency to say we need the big institutional investor coming into the market supplying large-scale investment. That is undoubtedly the case. But we also need the traditional, smaller-scale investor in the market, as well.”

Rents have surged, so the Government has proposed limiting rent increases to 4% in parts of Cork and Dublin.

Mr McQuinn said the ESRI complies with the rents index for the Residential Tenancies Board, but it was hard to identify whether there had been a spike in rents before the Government brought in other rent certainty measures in the past.

On a site tax, the ESRR’s research had shown that it worked in other jurisdictions. “We would fast track it its implementation and, in certain instances, price it aggressively,” Mr McQuinn, said, adding that it was an attractive option in the Irish context.

This would help boost “a lot” of supply and take out of the “equation” another bubble in land prices.

In the quarterly outlook, the ESRI forecasts that, boosted by consumer spending, the economy will grow strongly this year and in 2017, though many threats, from Brexit to a potential slowdown in the Chinese economy, persist. GDP will grow 4.2% and 3.5% in 2016 and 2017, it projects.

Employment will continue to grow, despite some concerns, earlier this year, that the rate of expansion was slowing.

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