Renters on housing crisis: ‘We’re f**ked basically’

The Housing Fix is an Irish Times series exploring solutions to Ireland’s housing crisis – arguably the biggest social and economic issue facing the country and its next government – in the run-up to the general election.

For Louise Hyland, the worst part is the queue. Waiting in line outside another house or apartment, while prospective neighbours stare out. "As you're standing there, you're also watching the estate agent judging you and all the other people going in as well."

The long waits are followed by rushed visits, trying to figure out whether a house is big enough for her and her three children, whether there’s mould, damp or other hidden problems. Then, more times than she can count, comes the rejection. They mount up, each one taking a toll. “Is there something wrong with me that these people don’t accept me?,” she asks herself.

Hyland has lived in three separate rentals over the past 10 years. All the houses were cold, damp, or both, and each time she moved, the rent – which was subsidised by social welfare – became more expensive. Each time her lease was eventually terminated by a refurbishment or the landlord’s need for the home themselves.

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After being declared homeless and living with members of her family for six months, she was given a home by the Iveagh Trust. Were it not for support from Focus Ireland, local politician Anne Graves and homeless campaigners Martin McMahon and Tony Groves, Hyland is unsure how she would have navigated the past months, when she also needed major surgery and struggled with her mental health.

Her story is more complex than the average renter, but hundreds of thousands of people are now facing different versions of the same problem. In the middle of 2019, there were more than 360,000 private tenancies. This is a huge increase on recent historical norms; in 1991, just 8 per cent of the population rented. In the year 2000, there were 131,000 tenancies.

Ireland's rental sector has undergone a profound change, complicated and accelerated by the financial crisis and then the housing crisis. "The rental system is in no way meeting the underlying need," says Ronan Lyons, assistant professor of economics at Trinity College Dublin. "People who do have housing are paying too much . . . and they're the lucky ones," he says.

What are the political, social and economic consequences of this change? Can it be managed, and what are the costs of failing?

Pipe dream

Last week, Leo Varadkar recalled how he was able to turn the key in his own door and settle down in a property he owned aged 24. Funded by a 100 per cent, 40-year tracker mortgage, his entry into the property-owning classes was too easy. Today, many renters face the opposite problem.

Laura Forsythe (27) has been in the rental market for more than three years. She has experienced a lot, including a financial dispute with a flatmate and being forced back to her parental home, which she shared for a time with her parents, her brother and his fiancée.

For Forsythe, getting enough money together for a deposit is a pipe dream. “All the beans on toast and tap water in the world isn’t going to get you there.”

As the rental market has expanded, it has also become more expensive. Rents rose by 40 per cent between 2007 and 2019, according to figures released last week, almost double the EU average. An analysis by Goodbody Stockbrokers last year also showed a small gap between the most expensive and least expensive rental units on offer in Dublin, suggesting that affordability is stretched and that lower-income households will struggle to access housing when paying a market rent.

Strict new rules on mortgage lending have successfully arrested rapid house price growth, but have left mortgages out of the reach of many

Strict new rules on mortgage lending have successfully arrested rapid house price growth, but have left mortgages out of the reach of many. Forsythe says her peers understand why there are constraints on credit growth. “We’re aware of why it’s 3.5, she says, referring to the mortgage rules that limit borrowing to 3.5 times household income. However, the peculiar nature of the Irish relationship with property leads her and friends to one conclusion. “We kind of almost joke that we’re all f**ked, basically,” she says.

Obessions vs reality

Why does it matter so much to Irish people to own property? It is tempting to reach for pop-psychological explanations; something to do with colonialism or the Famine or both. But its roots, according to Lorcan Sirr, are much more recent than that.

“One of the central planks of our welfare system is home ownership; it’s called asset-based welfare. The State helps you to buy a home and after that, you’re more or less on your own,” he says.

Especially in the second half of the 20th century, the State sponsored a range of grants, low-cost loans and tax reliefs to encourage home ownership, including the purchase of local authority housing.

“It’s not a cultural obsession, it’s a practical reality. Everyone knows you need to have your home bought and paid for by the time you retire,” Sirr says.

The problem is the rental system has never been asked to produce similar outcomes for tenants. Renters now face the prospect of paying leases which make it more difficult to invest or save, meaning they will struggle to assemble a nest egg to fund their retirement.

Everyone knows you need to have your home bought and paid for by the time you retire

“It would involve a sea change in our approach to macroeconomic planning if we were to cater for 25 per cent of the population renting when they retire,” says Sirr. “We have no clue how to prepare or pay for that.”

Overseas funds

In a politically charged atmosphere, what some say are solutions to the shortage of rental properties have become controversial. Take, for example, investment in Irish housing schemes by “institutional” players – large overseas funds that have spent billions acquiring Irish property.

A combination of regulatory reforms and high rents attracted the interest of these investors. Negative or ultra-low interest rates simultaneously make it extremely cheap for them to borrow.

"In a world that is awash with debt, where we have an endless amount of debt capacity but a search for yield, one of the natural homes for that is into alternative investments," says Karl Deeter, a mortgage broker and financial adviser. Institutional investment has been the financial engine behind many of the new – and controversial – forms of housing that have emerged in recent years, such as student housing, or co-living, which has proved to be particularly contentious, with housing units smaller than a car parking space.

However, no other form has proved quite as successful as Build to Rent (BTR). Spurred on by changes in building codes, many hundreds of millions have been spent on schemes that are never designed to be owned by anyone other than an institutional landlord – or as they have been dubbed, a cuckoo fund.

Goodbody Stockbrokers estimates that 30 per cent of all investment spend in Ireland last year was institutional spend on rental. Many of these investors are structured as one of a confusing alphabet soup of special investment vehicles – Reits, Qiaifs, Icavs – all of which have generous tax treatment including exemptions from capital gains and income tax, if certain conditions are met.

For Ronan Lyons, concerns about institutional landlords are misplaced. “We need tens of thousands of new rental homes, let’s bend capital to our will,” he says. “We’re actually getting these people to do what we want, rather than falling into the trap of thinking we’re doing what they want”.

Winners and losers

Supporters say that terms offered by institutional investors – aside from rent – are better than those offered by small landlords; they are less likely to evict tenants, and more open to long-term leases, which Deeter says are a vital part of improving the rental market. “Longer term means better protection, better planning, better everything.”

However, institutional investment, allied to concerns over affordability and the long-term suitability of renting, has raised fundamental questions about the winners and losers in the Irish rental market.

Gavin Daly, an urban planning researcher with the European Spatial Planning Observatory, says Ireland has badly misjudged its dalliance with institutional investment. By adjusting planning and building regulations to encourage investment, he says building is encouraged that “maximises profit but also circumvents the building standards we put in place in terms of creating sustainable communities and long-term residential districts”.

Gentrified enclaves are being developed which don't have a connection to the community

“It’s a build ’em up, stack ’em high equation to maximise yield in this market,” he says. “Gentrified enclaves are being developed which don’t have a connection to the community.”

Lorcan Sirr argues that there is nothing essentially wrong with co-living, student housing or build-to-rent investment, so long as it is secure and affordable.

“We’ve brought in the right product, but at the wrong price points,” he says. “It has to be the right supply in the right location at the right time and the right cost. Build to rent is in the right location, but it’s not designed for families in the long term, and it’s expensive.”

Dr Dáithí Downey, head of housing policy and research with Dublin City Council, agrees that build to rent can help, and indeed is necessary, for delivery of long-term, stable investment for housing but only "if it's part of a broader, more plural overall portfolio in new housing provision".

Political consequences

Dislocation in the rental market can also have political consequences, says Aidan Regan, an assistant politics professor at UCD. There is, he says "a disgruntled, younger voter that is in the rental sector, and they feel pretty pissed off about that to be honest".

This group of millennial, educated, middle-class voters could have a similar electoral effect as the older, less educated rustbelt voters in Britain and the US – by punishing politicians not seen to be interested in their problems, or capable of solving them.

“There’s a lot of research showing they’re a lot more economically dissatisfied, and they want more public investment. Some research suggests they report lower levels of subjective wellbeing, partially because of their dissatisfaction with their lifestyle and housing situations.”

These voters, Regan says, have supported explicitly left/liberal coalitions that govern Barcelona, Amsterdam and Berlin – where rents were recently frozen.

Michele Connolly is one such voter. A spokesperson for Dublin Central Housing Action, a non-aligned activist group that has been active since 2015, she says she has lost faith in the current political system to solve her problems. Connolly describes renting as living in "a general climate of fear". "The electoral system is really failing people in many ways; a lot of have a really terrible quality of life due to housing issues".

The electoral system is failing people in many ways; a lot of have a really terrible quality of life due to housing issues

Dublin City Council’s Dáithí Downey predicts that more political groupings may emerge around tenant and renter rights, “and rebalancing what’s perceived to be the imbalance between landlords and tenants. Arguably key reforms on security of tenure, deposit retention schemes and effective and speedy redress mechanisms for dispute resolution are well overdue,” he says.

‘Financialisation of housing’

Meanwhile, political parties seem focused on converting renters into purchasers, rather than improving the lot of renters. Last week Fine Gael declared itself to be the party of homeowners; Fianna Fáil's housing strategy was titled "Owning your own home", and includes an "SSIA-style" top-up scheme for first-time buyers and the expansion of the Help to Buy scheme.

However, Rosalind Carroll of the Residential Tenancies Board argues that it is too late to reverse trends towards rental. "The financialisation of housing, changes in employment patterns, divorce or separation, longer education periods – all of that leads to an expanded rental sector," she says.

She estimates there are about one million people living in rented accommodation, split across some 360,000 tenancies.

“People need to be aware that even if we support people going back into home ownership, there is – unless there’s major societal change – going to be a larger rental sector than there was previously.”

Carroll’s office fields between 600 and 1,000 calls a day from renters, landlords and others trying to navigate the rental market – up 52 per cent on when she joined. The answer to the rental market conundrum, she argues, is not in a single policy measure or ideology.

“What would really be nice is some consensus on policy so we can get there, regardless of the changes in government. We really need to think about what we want that (housing) stock to perform like over a period of time. That is a key challenge. Chopping and changing isn’t going to help us here.”

Big questions like how renters can be protected, how landlords can be encouraged to stay in the market, the proportion of the population that will be renting, and under what conditions, require political bravery to address.

The way to grade the rental market that emerges in coming years will be its sustainability, according to Dáithí Downey. “Is it truly sustainable – socially, environmentally and economically? Is it accessible? Does it deliver the participation rates you want to see in society – so people can work and live across different stages in life and employment without their housing costs becoming too much of a burden?”

That, he says, is the measure of success in the rental market.