HAP led to increase in rental market competition – report

Many forced to rent as they can no longer afford to buy, finds KPMG report

Houses and apartments are being built at a very slow rate in Dublin city and county, leading to a lack of supply and rising rents. Photograph: iStock

Houses and apartments are being built at a very slow rate in Dublin city and county, leading to a lack of supply and rising rents. Photograph: iStock

 

The Housing Assistance Payment (HAP) has led to an increase in competition in the rental market, a new KPMG report has said.

The report also stated that houses and apartments are being built at a very slow rate in Dublin city and county, leading to a lack of supply and rising rents.

The report, which was first covered by the Sunday Business Post, also said people were being forced into the rental sector as they could not afford to buy a home.

The report included modelling exercises from both the ESRI and KPMG, which indicated that Dublin city will require more than 42,000 additional housing units over the next 10 years.

KPMG warned that the current housing targets for Dublin may not be met. “The consented pipeline of 22,009 units in Dublin City still leaves a large gap in achieving the minimum target of 42,000 units by 2030,” it said.

The report added that this “chronic” lack of new housing stock over the past decade has driven the cost of buying and renting to “severely unaffordable levels”.

“This has resulted in a greater proportion of households on some form of income support from the State, or pushing families into living in sub-optimal housing, or preventing new households from graduating from the private rental market to owner occupancy,” the report warned.

The Dublin housing market has been most affected by this.

Average rent

The number of households in the private rental sector here has increased by 109 per cent between 2002-2016, with almost one in five households now renting their home.

Last year, the average rent in Dublin was €2,023. This is 43 per cent higher than the previous peak in 2008 at the height of the Celtic Tiger, and double the rate of 2012 rent, when it was at its lowest.

HAP has also resulted in a greater level of competition among renters, as councils are placing those eligible for social housing in the private rental sector.

Under HAP, local authorities make a monthly payment to a landlord. HAP tenants pay a weekly contribution towards the rent to their local authority.

“This level of competition has steepened since 2016 with the introduction of the government Housing Assistance Payment scheme which has sought to deliver up to 40 per cent of its social housing requirement through the PRS,” the KPMG report said.

The report predicted that foreign investment funds engaging in “Build to Rent” schemes will play an “important role” in addressing the supply shortages of rental accommodation.

The number of people per household has also shrunk in recent years due to the declining population rate, and KPMG estimated that 73 per cent of new housing demand will be for one and two person units.

The report also said more purpose-built student accommodation will alleviate pressure on the wider market, and more consideration of elder care housing is needed due to the ageing population.

The report was prepared by KPMG on behalf of Hines, a US development firm which plans to build 1,614 build-to-rent apartments on the Clonliffe Road in Dublin 3.

The report analysed the Holy Cross College site where the apartments are due to be built, and said the development’s scale and unit mix would align with Dublin city’s housing needs: “There is a clear need for apartment and smaller unit types across the city.”