The deteriorating state of Ireland’s housing market reflects a growing shortage of supply which, with ever increasing demand for houses, is pushing up the cost of renting a home throughout the State. In Dublin in the year to last March, rents rose by 8.8 per cent, surpassing the peak figure reached in the city in 2008.
Overall, the quarterly rental survey by property website daft. ie reveals a worrying picture: a rental market in freefall as supply contracts. Fewer than 3,100 properties were available to rent across the State this month – the lowest number since the survey began in 2006 – and a mere 13 per cent of the 23,000 homes available in 2009. A housing crisis, far from abating, is intensifying.
The appointment of Simon Coveney as a designated Minister for Housing is belated recognition of the scale of the challenge facing the new Government. The problem, however, is not just one of availability but – for an increasing number in the rental sector – has also become one of affordability.
Recent years have seen close to zero inflation, minimal pay increases and after-tax incomes depressed. In parallel, rental costs have soared and taken a larger share of household budgets. Economist Ronan Lyons, author of the daft.ie report, estimates that for many households renting at current prices has become unaffordable.
There is widespread recognition that there is no simple and quick solution to the housing crisis and to the problem of homelessness. But delay by Government in confronting the issue has compounded the problem. Last year the Fine Gael/Labour coalition took two initiatives: one to impose a two year rent freeze and the second to impose a three per cent levy on unused sites.
How effective the rent freeze is remains to be seen. But will gains for existing tenants, in the form of temporary rent certainty and security of tenure, be offset by more landlords quitting a shrinking rental market and putting further upward pressure on prices?
The levy is designed to penalise land hoarding. And in the capital, Dublin City Council last year identified 282 vacant sites that could be developed for homes or commercial buildings. However, just half of these would be affected by the levy which is only payable by site owners from 2019.
The shortage in the supply of housing, given the high level of demand, boosts property prices. That supply shortage also benefits the owners of development land. Land appreciates as property prices rise and they may gain more by hoarding their asset.
A levy that applies in 2019 will do little to increase supply when it is most needed and when it will have some effect. By 2019 it may have little or none. A revised (earlier) date for the introduction of the levy would be one way for the new Government to show its seriousness and resolve in tackling the housing question.