Small firms could come under pressure from soaring rents – Isme

Business group says many employers cannot afford to increase wages to cover higher costs

The rising cost of housing in Ireland could pile pressure on small employers, amid an ongoing cost-of-living crisis, representatives of small and medium-sized companies have warned.

The Irish SME Association (Isme) said it was gravely concerned at the rent price growth highlighted by the latest research, which found annual rent inflation rose to a five-year high of 11.7 per cent in first quarter of 2022 as supply of properties slumped to a new low.

It has called for the immediate introduction of fiscal incentives to provide rental accommodation.

In Dublin, the average rent of €2,102 per month outstripped the annualised national minimum wage by almost €4,000, with the average house price in the State of €299,093 more than six times the average industrial wage.


Isme said the cost of accommodation had been the biggest driver of wage inflation for more than two years, but when taken alongside significant increases in food and fuel prices and an ongoing refugee crisis, it was a “perfect storm” for workers.

However, the organisation has cautioned against increasing wages, saying the majority of employers could not afford to pay wages being sought to cover the costs.

It said the reduction in rental properties and exit of landlords was down to interventions in the rental sector that had reduced rather than increased the supply of accommodation, such as the ending of Section 23 incentives, the reduction of deductibles for private landlords, the application of social charges to rental income and rent pressure zones that have frozen rents below market rates for some landlords.


“The only entities willing to provide accommodation in the current market are reits [real estate investment trusts], which are building large build-to-rent developments. Their financial firepower means they can sit on vacant properties for a long time. While we acknowledge that reits have a place in the provision of rental accommodation, they should not have a monopoly in doing so,” said Isme’s chief executive Neil McDonnell.

“We are watching the natural outworking of policies which have driven private landlords out of the market for more than a decade. It is time to acknowledge that this process has failed. It is time that the tax system acknowledged the importance of providing adequate levels of rental accommodation in the economy. The political system and especially those politicians who identify themselves as of the left must have the courage to recognise policy failure when it becomes so painfully self-evident.”

On May 1st, there were only 851 homes available to rent in Ireland on Daft’s website, down from an average of nearly 9,200 over the 15-year period between 2006 and 2021.

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist