Cliff Taylor: A generation is stuck living at home due to the long-term housing shortage

Sometimes a lot of history can lurk behind one statistic. This week, the Central Statistics Office said that the average age at which people bought a home in Ireland has risen to 39, from 36 in 2016. You pull at the threads of this one figure and a much bigger and longer-term story appears. And it sends the clear message that the housing crisis has been many years in the making. Quick fixes and emergency interventions have their place – once they don’t make things worse. But long-term problems require long-term solutions.

Let’s start with that one figure – the 39-year-old average age for a house purchaser. This includes new and second-hand purchasers – separate banking sector figures estimate that the average age for a first-time buyer is a bit younger, at around 34, while the average for a mover-purchaser is now 43. This means that household formation in Ireland starts significantly later than most other better-off EU countries.

This is one consequence of high house prices and – particularly relevant to the typical first move from home – stratospheric rental costs. It means third-level students staying at home during their studies and people typically living with their families through the early years of their working lives. It means a household size here that is above the average – because people are staying at home longer, or when they do move out are living in rented accommodation that is shared with other adults.

The high age of mover-purchasers also suggests that many find it hard to move on from their first home, perhaps to move in with a partner or cater for an expanding family.

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For every seven jobs created between 2011 and 2014, only one house was built. With the building sector decimated, only 5,500 houses were built on average annually in those four years

It is a story of normal lives put on hold, or lived in cramped conditions, and of a shortage of houses to buy or rent which has built up over many years. Now, with interest rates rising, building is threatened, supply in the second-hand market is tight and the rental market is near-impossible. Many 35-year-old “kids” will be living at home for a few more years.

This emergency has been years in the making. Looking at the past decade, house building collapsed after the financial crash. For every seven jobs created between 2011 and 2014, only one house was built. With the building sector decimated, only 5,500 houses were built on average annually in those four years. Since then, house-building has picked up – aside from a Covid interruption – but so has jobs growth. In the subsequent eight years – 2015 to 2022 – there has been one house built for every four jobs created.

Lowest in Europe

Historically, Ireland has always had a relatively low number of houses compared with the size of the population. Across most of Europe, the birth rate started to fall in the mid-1960s, but this did not happen here until the 1980s. Meanwhile, in recent years, with the exception of the financial crash and Covid, there has been strong inward migration attracted by strong jobs growth here – and more recently, of course, due to the war in Ukraine. The result of increasing demand for houses and insufficient supply is that the number of houses per thousand population here – 415 – is among the lowest in Europe.

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So the late – and rising – age at which people can afford to move out of home is a problem that has built up over many years. Economist Peter O’Connor, a public servant presenting on a personal basis, looked at some of the implications in a paper delivered last year to the Dublin Economic Workshop.

To get all the way down to an average household size of two would mean 650,000-plus more dwellings. We are many years behind in terms of providing an adequate housing stock

Based on official data, he calculated that some 62 per cent of those aged 18 to 34 live with their parents in Ireland, compared – at the other end of the European spectrum – with 16 per cent in Denmark. The average age at which an Irish person moves out of home is around 28, which is nine years after the average Swede. Ireland has a tiny proportion of young people living alone because of the expense of renting, whereas in other, richer EU countries it is relatively easy for young people to find affordable rental accommodation.

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A lot of the impact is captured in another statistic – the typical household size. On average, there are 2.7 people per household in Ireland, compared with a European average of around 2.2/2.3 and a figure of two or close to it typical of more advanced countries such as Denmark, the Netherlands, France and Germany. Across the industrialised world, the average size of households has shrunk over many years, O’Connor’s paper pointed out. Ireland’s average is where Scandinavia was in 1971 or the UK was in 1981.

Even to get down towards the EU average would require 250,000 to 300,000 more homes. To get all the way down to an average household size of two would mean 650,000-plus more dwellings. We are many years behind in terms of providing an adequate housing stock, due to insufficient building over a long period of years.

A coincidence of factors has turned this long-term trend into a short-term crisis of sky-high rents and homelessness. But as well as tackling the crisis as best we can, Ireland needs to consider where it is going in the long-term. Are we, for example, committed to developing a longer-term, European-style rental market, or is the “Irish solution” still home-ownership? And are we heading towards the kind of denser living space that is written in as part of our climate goals, but never spelt out in policy pronouncements? And can the next generation of homeowners have a say here, or is the older, house-owning generation dictating the game?

We know a massive building programme in all parts of the market is needed – but the what and where still has to be settled. And most important, of course, the “how”. Then we need a realistic timeframe for a new plan – of at least a decade. This is not to suggest we can waste time in making progress. But pretending we can fix this with short-term “solutions” risks adding to the problem.