Rethinking housing

The recovery in the housing market is one sign of a reviving domestic economy following a deep and prolonged recession. However, the 5.6 per cent national increase in residential property prices in the year to November, is far from uniform and has become a cause for increasing concern. Rising house prices in Dublin reflect a combination of strong demand in parts of the city and overall weak supply. In the capital there is a shortage of houses for sale, while little new construction is taking place to boost supply.

Outside Dublin, the picture is not an encouraging one. House prices have in some places continued to fall, while the gap between prices in Dublin and the rest of the country has widened. In 2006, close to 100,000 new houses were built in the State. Last year, less than one tenth of that number was constructed.

With little new housebuilding under way, one consequence is a developing crisis in the rental sector. With limited new housing supply, private rents have increased and – for many – have become less affordable. A study carried out by Threshold, the housing charity, and shortly due for publication, will indicate that over half those receiving a rent supplement allowance also need to top up the State contribution in order to meet their rental payments. Many people could now be at risk of losing their homes.

Minister of State for Housing Jan O'Sullivan has suggested State regulation of the rental market, with rent increases linked to rises in the consumer price index, as happens in some other European countries. In Ireland, where people have strongly favoured home ownership over rented accommodation, the rented sector remains a small part of the housing market. But with private rents now increasing far faster than inflation – rising in Dublin by almost 8 per cent year-on-year – renting has become less affordable, just as home ownership has become less and less attainable. A reassessment of our national housing priorities is clearly needed.