Here are 4 steps which can fix the rental crisis in Ireland

Analysis: the good news is that we now have sufficient research to understand what's going wrong and how to put it right

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By Michael Byrne, UCD

The number of people in emergency accommodation is once again hitting record highs, rent increases are at record levels and the Government has been forced to introduce another temporary eviction ban. If now isn't the time to finally fix the private rental sector, I don't know when will be.

The good news is that after the best part of two decades in which homeownership levels have declined and private renting has ballooned, not just in Ireland but in many countries, we now have sufficient Irish and international research to understand what’s going wrong and how to put it right.

The following ideas can be a game changer for 'Generation Rent’, while also being practically and politically feasible. There is one issue, however, I don’t address and that is the supply of housing. Supply is crucial, but it goes beyond the rental sector and relates to the broader question of how we get shovels in the ground across the housing system. I’ll leave those issues to others, and instead focus on the more specific question of what kind of private rental sector we want and how to get there, in four easy steps.

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From RTÉ Radio 1's Morning Ireland, economist Dr Barra Roantree on ESRI finding average private rent has almost doubled in last decade

Step one: recognise that the concentration of property ownership has failed

Although it is not always recognised, the growth of renting means property ownership is more concentrated. Put simply, when more people rent it means that the stock of housing is in fewer hands. The results have not been good. To begin with, the growth of renting is directly related to the homelessness crisis.

According to Focus Ireland, in recent years almost 70% of families presenting as homeless are former renters. But the impact of insecurity goes beyond homelessness: a recent Threshold survey found that more than 40% of tenants feel insecure, a finding echoed in the dozens of interviews I have conducted with tenants over recent years. The rental sector has not delivered secure housing for the more than 300,000 households who live in it.

Nor has it delivered in terms of affordability. Research shows that renters are twice as likely to face affordability problems, which is unsurprising given that rent increases have been consistently high for the best part of a decade. But tenants don’t just loose out because rental housing is the most insecure and the least affordable type of housing we have, they also miss out on the opportunity to accrue wealth through property ownership.

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From RTÉ Brainstorm, how long-term renting impacts on mental health

ESRI research published last year, shows that the share of aggregate net wealth in the bottom 50% of households fell from 12.2% in 1987 to 6.8% in 2018, and declining homeownership is one of the main drivers of this inequality. It is perhaps unsurprising, then, that most renters want out. Survey evidence tells us that homeownership is the preference of 86.5% of tenants.

Step two: share the (housing) wealth

We need to broaden the ownership of housing to create a more equal housing system with better outcomes. Ownership can be made more equal in two ways, by creating more homeowners (so housing is owned widely) and through more publicly provided social or 'cost rental’ housing (so housing is owned collectively).

Supporting homeownership is hard to get right. One way we did this in the past was through easy access to mortgage credit, but that turned out to be the most costly and damaging approach to providing housing in world history – literally. More research is needed in this area, but the trick is to provide a mixture of private and public mortgages to allow households to purchase a mix of private and non-market, affordable housing.

From RTÉ Radio 1's Morning Ireland, just 35 properties available nationwide for people reliant on HAP (Broadcast October 2022)

Currently one in three private tenants are eligible for social housing and are receiving HAP or rent supplement. This approach is riddled with problems because HAP tenancies are insecure for the tenant and expensive for the Government (we spend more than €1 billion annually subsidising the rental market). By expanding social and cost-rental housing we can move tenants out of the private rental sector and into housing that is affordable, secure, stable and better value for money.

Step three: don’t make the private rental sector big, make it good

One of the benefits of moving people out of private renting is that we can stop spending all our time worrying about increasing the supply of rental housing. When I hear people talk about the need to increase the size of the private rental sector (via increased supply), I’m sometimes reminded of the Woody Allen joke that ‘Life is full of misery, loneliness, and suffering - and it's all over much too soon’. For some commentators, it seems that the rental sector is unaffordable and insecure - and we need much more of it.

The good news is that we know exactly how to make the rental sector work for tenants, we can do so at the stroke of a pen (some minor changes to legislation) and it comes at no cost to the exchequer. The two key aspects here are security and affordability. The Government recently introduced indefinite tenancies, but in practice there are a variety of grounds upon which landlords can terminate tenancies, including for family use, sale or refurbishment of the property. This leads to a systematic lack of security because ultimately the tenant cannot control when they will lose access to their home.

From RTÉ Radio 1's Morning Ireland, new research shows tenancy termination is most prevalent issue facing renters

Without security, tenants cannot advocate for themselves, thus facilitating a culture of non-compliance in the sector. Without security, tenants cannot create a stable home and cannot plan for the future. Without security, the homelessness crisis will persist. This can be sorted by six-year tenancy periods in which tenants can only be evicted for non-payment of rent or a failure to meet their obligations. This will give tenants full security and predictability, and allow them to plan for the future.

Tackling affordability is much more challenging. However, research shows that Rent Pressure Zones have had a significant impact on moderating rent inflation. If we combine this with proper security of tenure, and do more to ensure full compliance with the rules, tenants could enjoy six year, secure tenancies with rent increases capped at 2% per annum.

Step four: Make the rental market a stable but realistic investment

Following on from step three, the deal I would propose to investors is as follows. When you provide a tenancy you are all in for six years. After six years, you have the chance to recover your property for sale, family use or refurbishment, and within the tenancy, rents can be increased by a maximum of 2% per annum. This provides landlords with a stable, medium term investment horizon.

From RTÉ Brainstorm, how did we deal with a housing crisis in the past?

I realise that many landlords will not welcome this. But think again about the reality of the current private rental sector. We have had four iterations of rent control legislation since 2015, continuous attempts to lengthen tenancies, and several significant periods of eviction bans. The reality is that there has been so much chopping and changing that the status quo is chaotic, unpredictable and downright unfair to landlords. A six-year tenancy period would mean continuity and predictability, and in that respect would in fact enhance rental housing for medium to long-term investors.

There is one major weakness in this approach. Not all landlords are ‘investors’. Many people rent out a property because, for a variety of reasons, they cannot use it for a short or undefined period of time, e.g. a homeowner who moves abroad for work for a couple of years. These are landlords for whom a six-year tenancy period will not work, but we don’t want such houses to be left vacant.

To deal with this issue, property owners should have the option of applying for a specific licence if they wish to rent out a property for a period of less than three years. Within these special tenancies, landlords would be allowed to terminate on the grounds of sale of property or family use. The crucial point is that each property owner could apply for this permission just once. This would ensure that housing which is vacant for a short or indeterminate period could be funnelled into the private rental sector, but crucially would limit that to an exceptional ‘once off’ status, rather than making it the norm.

Here are 4 steps which can fix the rental crisis in Ireland

Step one: recognise that the concentration of property ownership has failed

Step two: share the (housing) wealth

Step three: don’t make the private rental sector big, make it good

Step four: Make the rental market a stable but realistic investment

Read more: What's behind the negative perception of landlords in Ireland?

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