Paul Hosford: Skewed playing field between regular homebuyers and cash-rich funds

The public outcry over the purchase of 135 of the 170 houses in a Maynooth development by an institutional investor has forced the Government to promise action, but any changes to legislation will not be felt for years
Paul Hosford: Skewed playing field between regular homebuyers and cash-rich funds

Mullen Park estate in Maynooth, Co Kildare. The 170-home estate has controversially had 135 homes bought by Round Hill Capital, a global property investment firm which will be putting the houses on the rental market, making them unavailable to first-time buyers in Ireland. Picture: Eamonn Farrell / RollingNews.ie

The Government is being forced to examine its own laws on housing in a week when it was supposed to take a major step forward in its housing plans.

The announcement that the Government will examine how to level the playing field between huge institutional investors and regular people comes just 24 hours after the Affordable Housing Bill was signed off by Cabinet.

On Sunday, the Business Post revealed that one of those investors – Round Hill Capital – had purchased 135 of 170 homes at the Mullen Park estate in the Kildare town of Maynooth at a projected cost of about €54m. The purchase has caused widespread anger among many who feel that home ownership is becoming harder to achieve.

At the heart of the issue is a lack of perceived fairness. The homes in Maynooth were available for upwards of €400,000, already outside many people's budget. 

But when Round Hill, with a war chest of over €1bn, enters the market, the playing field becomes substantially slanted. 

Round Hill is what is commonly called a REIT – a Real Estate Investment Trust – which were made legal in Ireland in 2013 under legislation brought by then finance minister Michael Noonan. 

Close loopholes

Though his successor Paschal Donohoe has moved to close certain loopholes, and undertook major moves in Budget 2020, they still retain advantages when it comes to the purchase of new-build property, specifically tax breaks and their massive resources.

While Housing Minister Darragh O'Brien says  investment is needed and welcome in the overall housing market, he has questioned the "proportion" of that investment, with the opposition saying Maynooth is just the tip of the iceberg. 

Round Hill also recently acquired 297 apartments in Northwood in North Dublin and 112 family homes in Hollystown, Dublin 15. 

Indeed, in 2019, 95% of new-build apartments in Ireland were sold to institutional investors.

Given the public outcry about this case, the Government has pledged action, with the Taoiseach and Housing Minister saying the steps available to the Government will be examined. A spokesperson for Mr Donohoe said the issue has been discussed and that the system around IREFs and REITs has changed over the years.

"Minister O’Brien and Minister Donohoe have discussed this issue. Significant changes in the taxation of IREFs and REITs have already occurred. The minister and his officials are examining this issue further. It is critical that measures continue to be followed that increase the supply of housing."

But many of these purchases are made well in advance, so the full impact of any changes made through legislation, likely in the Planning and Development Bill later this year, will not be felt for two to three years.

The introduction into the Irish marketplace in 2013 of REITs was supposed to stimulate housing supply by ensuring developers had wealthy customers who were guaranteed to purchase homes they built. 

But many of these REITs charge rents well in excess of mortgages for similar properties and no steps have been taken to make long-term rentals more viable, meaning Irish people still prefer to buy their homes for the most part.

In a week when the Government praised and asserted that goal as noble, it now has to ensure that it is not one only available if you've got a spare billion.

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