Housing crisis and the rental market

 

Sir, – I have no evidence beyond anecdotal to question the survey results reported by the Residential Tenancies Board and cited by Des Gilroy in these pages (Letters, July 20th). I do have reason, however, to question Mr Gilroy’s conclusions therefrom.

Mr Gilroy says it is a bad thing that small landlords are “being forced out” of the residential tenancy market, because this will lower the supply of residential properties, particularly those at affordable rents. This is an argument one often hears against State interventions in the rental market.

What matters is not the supply of landlords, but the supply of housing. When a small landlord “leaves the market”, they do not tear down the houses they thus far have rented out – they sell them, either to an owner-occupier or to another landlord. Thus, they are extremely well-compensated for “leaving” the rental market.

Likewise, it seems unlikely that a landlord with fewer than five properties is responsible for the construction of any new housing supply. More likely, these are investors competing with would-be owner occupiers for existing housing stock, or refusing to sell on property they have inherited or purchased for themselves in circumstances that no longer suit them to live in the property (the so-called “accidental landlord”). It is not clear that more people getting “in on the act” of extracting rents from our broken market increases housing supply. If anything, it probably makes it harder to regulate the rental market, because there is a larger constituency of actors to deal with.

As for whether a small landlord is more likely to accept a lower return on their investment than a corporate landlord, this might be true – or the economies of scale and distribution of risk associated with large rental portfolios might militate the other way. If there is evidence that smaller landlords systematically charge lower rents (controlling for factors like size, quality and location of the property), that would be very welcome, and Mr Gilroy should present it.

But the mere fact that 72 per cent of rental properties are currently owned by landlords with fewer than five properties does not mean that if those landlords did not exist, neither would the houses. Given the extraordinary demand for housing, it is more likely they would be owner-occupied, or owned by a larger landlord.

It is by no means obvious that in such circumstances they would be less expensive to rent. There might be other reasons to dislike large landlords (related to the concentration of power and wealth in society), but these are not relied on by Mr Gilroy.

Mr Gilroy is correct that the country faces a supply problem (although given the number of vacant housing units, this might be overstated). But that is a shortage of housing, not of landlords. If the small landlords whose interests he champions are going to build more housing and charge lower rents, then by all means we should encourage them to do so. But more “suppliers” does not necessarily equal more “supply” unless those small landlords are going to build, or finance the building of, housing that would not otherwise exist.

There might be more effective ways for the State to secure more supply at lower rents, like rent control and large-scale public housing development. These interventions may well make it less attractive to be a small (and indeed large) landlord – but much better to be a tenant. – Yours, etc,

ALAN EUSTACE,

Marino,

Dublin 9.