No quick fix to growing housing and rental crisis
A high proportion of development land around Dublin is controlled by a small number of companies holding off on activity in anticipation of larger profits
When foreign investment funds acquired large commercial property and housing portfolios at bargain prices in recent years, the development was presented in a positive light, as evidence of international confidence in a recovering Irish economy.
Now that those funds are moving to take advantage of a supply/demand imbalance in the housing market and realise their profits through sales and rent increases, the mood has changed and the Government is coming under pressure to intervene.
Separately, the Economic and Social Research Institute estimated the supply of new homes, particularly in Dublin, would fail to meet demand for at least two years. It suggested the Central Bank might modify its mortgage lending rules on a temporary basis to encourage home purchases.
In some cases, the cost of renting a home now exceeds the cost of mortgage repayments. Such a measure would do nothing to increase supply, but the ESRI estimated that rising house prices could lift the remaining 100,000 homeowners out of negative equity in three years.
This proposal is superficially attractive and would assist first-time buyers and those in negative equity. But, having relaxed the lending rules, removing the punchbowl could prove difficult when the party got going. The Central Bank’s intervention was designed to prevent a boom-and-bust cycle and cool an overheating housing market and it largely succeeded. Supply-side intervention may be more appropriate.
Anecdotal evidence exists that a high proportion of development land around Dublin is controlled by a small number of companies. These may have postponed activity in anticipation of larger profits. The Government considered the hoarding of land in the last budget and imposed a three per cent levy on unused sites. But that charge will not take effect until 2019, by which time supply and demand are expected to reach equilibrium. Earlier commencement could speed building activity.
The job of Government is to ensure that, insofar as possible, homes and apartments will remain affordable to families and to individuals within the context of existing pay norms. That linkage is already at breaking point. Legislation to limit rent increases to a two-year cycle was passed last year and efforts to circumvent it should be firmly resisted.
New rules for buy-to-let properties, where they face repossession or are in receivership, are being devised to provide protection for tenants but have met some opposition.
That work should continue. Tenant rights remained undeveloped in this State and were only legislated for 12 years ago through the establishment of a Private Residential Tenancies Board. There is no quick or easy solution to the current housing shortage but, at a minimum, tenants must be made aware of the legal protections available to them and the obligations of landlords.