Lack of supply pushes rents higher than during the boom

On May 1st there were just 1,074 properties for rent in Dublin on Daft.ie, report finds

Economist Ronan Lyons, author of Daft.ie report

Economist Ronan Lyons, author of Daft.ie report

 

A person looking to rent in the Republic can expect to spend €2,700 more keeping a roof over their heads for the next 12 months than they would have shelled out in a year at the height of the boom.

And that average, highlighted in the latest Daft.ie rental report, is before tax so they must earn at least €5,000 more than someone in a similar position a decade ago just to cover the increase. But higher rents are not the only problem. They are only the starting point and are exacerbated by a dramatic decline in supply across the State, most notably in Dublin.

On May 1st there were just 1,074 properties for rent in Dublin on the Daft.ie website and just over 3,000 nationwide. In a properly functioning market that number would be three times higher.

Acutely aware housing is becoming its Achilles’ heel, the Government has repeatedly tried to intervene to fix the market. So far it has come up short.

Leases have been lengthened from one year to two, and key areas have been designated Rent Pressure Zones (RPZ) with allowable annual rent increases frozen at 4 per cent. For such designation, year-on-year rent increases must top 7 per cent for the majority of the past 18 months and the aim of the scheme has been to protect sitting tenants from significant rent increases.

Housing

But at what cost? Is it helping those searching for a new home? Apparently not. For its report Daft surveyed thousands of tenants asking them about rents paid in recent years and clear differences have emerged between sitting tenants and new tenants.

In the period from 2013, market rents nationally climbed by just over 50 per cent while rents paid by sitting tenants increased by 27 per cent.

“In other words, those who have stayed in the same lease have enjoyed a discount relative to market rents, with their rents increasing by just half the increase seen in the market,” the author of the report Ronan Lyons said.

He suggested this could mean the “RPZ system makes things worse, rather than better, by amplifying the insider-outside nature of the rented sector”. And given the paucity of supply, few renters who find a home that suits their needs are likely to push a prospective landlord too hard on legally-mandated 4 per cent increases in case they lose their home before crossing its threshold.

Dysfunctional

“The market is completely dysfunctional,” said Angela Keegan of The Irish Times-owned property website myhome.ie. “People actively looking for a home might be so relieved to find one that they won’t question prospective landlords about rents once they can afford it. That alone can push prices higher for new entrants in the future.”

Homeless organisations this morning called for more Government intervention. Landlords called for less.

The chief executive of the Peter McVerry Trust Pat Doyle said the new report “paints a deeply worrying picture and shows the current situation is unsustainable” and he expressed concern that rapidly rising rents “will lead to more tenants becoming homeless” .

He called “for affordable rental and cost rental schemes to be provided” and accused the Government of moving too slowly and not fulfilling its housing commitments.

Stephen Faughnan of the Irish Property Owners’ Association had a different take: “Government interference in the market including unfair tax treatment, closing bedsits, two-year rent freeze, 4 per cent rent control, and complex legislative compliance all have a long-term effect, increasing costs and damaging the market. Listen to the practitioners, stop playing politics,” he said.