Cliff Taylor: Is Ireland really committed to private rental - or is it all about home ownership?

Do we actually know what we want from the rental market in Ireland? In all the debate over the eviction ban and rent freezes, there is an unspoken question lurking : what kind of rental market do we want?

The answer to this may seem obvious – we want rental properties that people can afford. And plenty of choice. Most people would also agree to some kind of public subsidy to help those who can’t afford market rents.

However, scratch the surface a bit harder, and more questions start appearing. Do we want a rental market that is essentially a transitory phase on the way to home ownership? Or a viable long-term option? If the latter, is that just for people who can never afford to buy, or do we see Ireland moving close to a model in many EU countries where renting is a normal choice throughout people’s lives?

And how do we fit this into our climate targets? This is not the columnist’s statutory mention of environmental issues (a kind of journalistic greenwashing). It’s very relevant. Our climate plans are based on getting people out of their cars, and in turn this envisages a move to much “denser” living: smaller homes closer to city centres, doing away with the need for long, polluting commutes.

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We have never had a national debate on this, and nobody has asked the younger generation to sign up to this new way of living

Many of the last generation of Dublin youngsters were pushed into the commuter counties of Wicklow, Meath and Kildare to find an affordable three-bed semi. The concept in national spatial planning is that the next generation will live in smaller properties – apartments or some kind of duplexes/townhouses closer to wherever they work, which for many remains somewhere inside the M50 cordon.

The presumption, along with more smaller households, is that this will involve more longer-term renting. It is just that we have never had a national debate on this, and nobody has asked the younger generation to sign up to this new way of living.

There are other big questions, too. One of the most significant is the future role for private landlords, now leaving the sector in droves, due to a mix of higher regulation, difficulty (for some) in making a return, despite high rents and uncertainty caused by changes in policy. And, of course, decent property prices for sellers.

Studies by the Residential Tenancies Board (RTB) have shown that small landlords – typically with one or two properties – are responsible for around half of all tenancies. Many tend to be older and the continued drift away is also a factor of age. There are a smaller number of medium-sized landlords –(typically family-owned businesses) but most are not expanding. And with international investors now pulling back too, due to higher interest rates and rising costs, larger landlords are trimming their plans too.

[ Wave of small landlords exit as buy-to-lets make up 40% of property sales in Q4 ]

So it looks like private supply into the market will continue to fall. State-financed home building is rising - including in areas like cost rental – and local authorities are to be given more money to purchase houses from landlords leaving the market and elsewhere.

But supply from private landlords remains vital. And the Government has done little to incentivise the smaller players as the drift away accelerated in recent years, relying on big funds to build homes, which has increased supply, but only in the higher end of the market. Sinn Féin policy focuses on local authority building to generate supply, but they would face the same barriers as the current Coalition does in seeking to accelerate supply.

Seeing no support politically and with rent levels controlled and evictions impossible, the drift of private landlords away from the market has accelerated. The Government has failed to send them a consistent message - and they are unsure what a Sinn Féin government would bring.

These are the impossible trade-offs caused by a chronic lack of rental supply, with obvious cross-overs to the home ownership market

Meanwhile, policies to protect existing tenants and hold down rent increases have created a two-tier market: the rent of longer-term sitting tenants could typically be €500 to €600 below new rental levels. Those already in leases are paying high prices, but have got some protection. However, the costs for new renters are punitive.

These are the impossible trade-offs caused by a chronic lack of rental supply, with obvious crossovers to the home ownership market. It led to the ending of the eviction ban, before plans appear to be in place to deal with the consequences.

Taoiseach Leo Varadkar has identified a shortage of 250,000 houses across the country. This is a legacy of years of under-investment by the private and public sectors and a failure to recognise how quickly the economy and the population would grow.

The danger now is disappearing further down the rabbit hole of short and reactive decisions, of putting in place new “schemes” which answer one immediate problem, but create others down the road. Talk of giving tenants first rights to buy if a landlord is selling will protect that tenant, but it takes a house out of the rental stock. And will it interfere with the property owner’s right to seek the best price?

These ideas are all worth looking at, but unless underlying supply is actually increasing, houses are just being shuffled between two under-supplied markets: rental and home ownership.

As a society, we need to decide first where we want to go. Do we see rental as just a transitory phase or as a longer-term way to live? Is there a commitment to develop a long-term private rental market - or is policy all about home ownership? And whatever decisions are made - we need to accept that it is going to take quite some time to get there.

Talk of “turning the corner” this year has about as much chance of coming true as did the late Brian Lenihan jr’s famous exhortation in the Dáil in his budget speech in December 2009, 11 months before the country had to be bailed out. There is cause for hope, too, in the massive resources now available to the State. It’s just that we need to decide first where we want to end up, before we look at how to get there.