Rory Hearne: Government policy has turned Generation Rent into a revenue-generating asset for cuckoo funds

Investment funds are not delivering housing as a home, Rory Hearne writes as part of the Irish Examiner's series on youth unemployment
Rory Hearne: Government policy has turned Generation Rent into a revenue-generating asset for cuckoo funds

To provide homes for Generation Rent and to ensure living, thriving, integrated and diverse, communities for the Ireland of the future, the Government’s Housing for All plan needs to provide a large supply of genuinely affordable homes to buy and rent,

Renters should have a right to an affordable, secure, decent standard home.

Instead, Government policy has turned Generation Rent into a revenue-generating asset for institutional property investors, otherwise known as cuckoo funds.

There are thousands of build-to-rent units being developed, which are at lower standards, such as smaller units. The average floor area of apartments has fallen by almost a third since 2015. The average size of apartments receiving planning permission in 2015 was 95sq m, but just 75sq m in 2020.

The build-to-rent, institutional property investor fund rental model is a very dangerous road.

These investment funds are not delivering housing as a home but it is an income-generating asset for their shareholders.

Their business model is based on maximising profits by lowering standards, constantly rising rents, at the highest rent possible, and the displacement and turnover of tenants.

US investor fund Kennedy Wilson, for example is advertising properties in Cork City for €3,300 for a three-bed apartment.

US fund Greystar is advertising a property in Dublin North Quays a one-bed apartment for €2,400.

How are renters supposed to live, to pay the basic costs of living, especially with children and childcare, to save for the future, and to save for a deposit?

Housing expert Rory Hearne: "To provide homes for Generation Rent and to ensure living, thriving, integrated and diverse, communities for the Ireland of the future, the Government’s Housing for All plan needs to provide a large supply of genuinely affordable homes to buy and rent.". File photo: Niall Carson/PA
Housing expert Rory Hearne: "To provide homes for Generation Rent and to ensure living, thriving, integrated and diverse, communities for the Ireland of the future, the Government’s Housing for All plan needs to provide a large supply of genuinely affordable homes to buy and rent.". File photo: Niall Carson/PA

Another US real estate investor fund, Hines, is applying for planning for an entire ‘build-to-rent’ development of 1,614 apartments in Drumcondra, Dublin. Of those apartments, 1,043 (70%) will be either a one-bedroom or studio unit.

There is no opportunity for people to buy any of these units. These developments represent a housing dystopia, devoid of stable community. They will become the tenements of the 21st century.

Is this the future for Generation Rent? Hines is also developing thousands more of these in Cherrywood and Dublin 8.

Government policy is also turning social housing into an attractive asset for these investment funds, which worsens the housing supply crisis.

Firstly, through its shift to providing social housing via the Housing Assistance Payment (HAP), a payment to private landlords to house social housing tenants, a third of private rental tenancies are now State-subsidised.

This is not real social housing, These tenants are living in insecure housing and many are paying ‘top-ups’ above the differential rent paid to the local authority.

But investor funds are using the HAP scheme as investment strategy — they know if they develop build-to-rent apartments, they will have the State as a potential tenant.

It is similar with the social housing leasing schemes. Investors are building to rent and lease to local authorities. But this is hugely more expensive to the State than regular building of social housing, and turns social housing into a profit-generating asset for institutional investors.

The Housing For All plan, if it is to represent a real change for renters, must set out how it will halt the devouring of Irish housing by institutional investment funds, the plan must provide a clear shift away from the current policy which entices and subsidises institutional investors through favourable planning, tax, and social housing leasing measures.

The Government’s policy has turned Generation Rent into a revenue-generating asset for cuckoo funds.
The Government’s policy has turned Generation Rent into a revenue-generating asset for cuckoo funds.

Investor funds have a war chest of billions targeted at Irish housing, and they will continue to buy up thousands of homes, and build unaffordable, unliveable, rental units, unless the Government reverses its policies.

The build-to-rent legislation should be amended to include 50% units available for purchase, an increase to standard apartment and unit sizes. The stamp duty measures should include apartments, and the real estate funds should be served a hefty tax on their rent and profits. 

The fundamental question must be asked — who is the Housing for All plan being made for? Is it institutional investors and developers or for Generation Rent?

We need to challenge the idea that property should be a place for making huge returns on investment. Housing, a fundamental, social right must no longer be treated as a profit-making commodity.

To provide homes for Generation Rent and to ensure living, thriving, integrated and diverse, communities for the Ireland of the future, the Government’s Housing for All plan needs to provide a large supply of genuinely affordable homes to buy and rent, and be clear, insititutional property funds will not provide this.

It is through a massive building programme of traditional local authority social housing, not insecure HAP tenancies, that tens of thousands of State-provided, affordable, secure, cost-rental homes will become available to low- and middle-income earners — who are above social housing eligibility thresholds, and genuinely affordable homes for purchase that will solve the crisis.

  • Rory Hearne is assistant professor in social policy at the Department of Applied Social Studies, Maynooth University

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