Are rents increases the solution?

The Week in Housing 06/03/2026

My mid-term assignments come in today so I’ll be grading for the next couple of weeks and there will be no newsletter.

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The partial deregulation of rent controls came into effect at the beginning of this week, in a context of a heated political debate. Tenants could be forgiven for experiencing a profound sense of cognitive dissonance upon hearing the arguments put forward by Government, institutional landlords and lobbyists. Without wishing to be overly cynical, their arguments seems to be that increasing rents are the solution to increasing rents.

I posted on LinkedIn earlier in the week to highlight the seeming absurdity of this argument. In response, Ronan Lyons and Sean Keyes (of Progress Ireland) pointed out that if we focus solely on what’s happening with rents (the symptom) we draw attention away from what should be the focus of debate, supply (the cause). From this perspective, creating more supply friendly conditions is the only way to address the issues of availability and affordability at the heart of the rental crisis, and if this requires rents to return to market rates then so be it. T

his is a reasonable and carefully thought through argument that is grounded in empirical evidence. However, I argue that the Government’s partial deregulation of rents only makes sense within a very limited perspective. But first, some clarifications.

Affordability

This term is being used in two senses within the debate which is confusing matters. To say rents will become more affordable involves a comparison. When economists (at least as I understand it) say the PRS will ‘become more affordable’ if supply increases, they are comparing a future scenario in which rents are partially deregulated (scenario A) to a future scenario in which the 2% RPZ caps remain (scenario B). This seems to be the understanding of the Minister, too.

When housing policy scholars (as well as the opposition and the public) think about greater affordability, they are comparing a future scenario to the present scenario. Specifically, they understand greater affordability as tenants paying a lower proportion of their income on housing costs. Crucially, under the economistic understanding of greater affordability tenants might spend more of their income on rent in the future, but the PRS can be still considered to me affordable than it might otherwise have been (i.e. absent the partial deregulation of rent).

Supply skepticism and what the evidence tells us

Another issue worth clarifying is what the evidence actually tells us, particularly about increased supply in the institutional sector which is what as at stake in the present debate. As I’ve discussed elsewhere, there are a number of arguments put forward by ‘supply skeptics’.

First, it is sometimes argued that even if rents increase supply won’t necessarily increase. This, it is argued, is basically because of rentier type behavior on the part of developers, who will hoard land, ration increases in supply etc. to boost prices. This view seems to have gained quite a bit of traction in Ireland, but, at least for the time being, it appears to be a minority view within the literature. However, it certainly seems true that ‘developers would never knowingly build enough housing to drive investment returns below market rates’. Thus the cost of housing implies a ‘floor’ keeping rents above a certain point, and as costs are high in Ireland we can expect that ‘floor’ to be reflected in high rents for new properties.

Second, it is argued that the type of supply matters (see also this paper on housing submarkets). In particular, there is now quite a bit of research showing that (a) institutional landlords set higher rents and (b) increased institutional investment can drive average rents up, largely because of renoviction practices and gentrification effects.

Third, it is argued the ‘effect size’ of increased supply on affordability is too small to make a meaningful difference, even in the long term. A recent study in the US context argues that ‘no realistic [supply] shock could be large or quick enough to provide significant relief to today's cost-burdened households in major U.S. cities’. Buchholz et al. argue that:

“Even a major positive shock to housing supply – sustained year after year – would take decades to meaningfully ameliorate residents’ affordability challenges. In the San Francisco Bay Area… even under the highly optimistic… scenario it would take about 20 years for house prices to become widely affordable… [I]nterventions focused on market-rate supply alone are unlikely to generate widespread affordability in any meaningful timeframe.”

On the other hand, there is also strong evidence (also mainly from the US) that increased supply, even of ‘high end’ units, leads to rents being lower than they otherwise would be. This literature puts a lot of emphasis on ‘filtering’ to argue that ‘every body gains’ from new supply, even of luxury units.

I don’t pretend to be able to resolve this debate, but the conflicting evidence might be explained by different scales of analysis, i.e. increased institutional supply in a given neighbourhood can lead to (or be associated with) higher average rents in that neighbourhood (and possibly adjacent neighbourhoods), and at the same time rents may fall in some other location as better off tenants move to the new institutional landlord properties.

It’s the politics, stupid

Beyond these debates, I believe that solutions based on rent increases driving supply ignore some of the most important considerations. For the purposes of this argument, let’s assume that increased rents incentivize further supply, and this helps to reduce the rate of rent inflation relative to a scenario in which that supply increase does not occur. Also, I’m going to think from the perspective of what we might call ‘the propertyless’ or the ‘housing have nots’, including renters, those living at home with parents, the homeless and those who have been driven to live in a house or location which is very unsatisfactory (e.g. because of a very long commute).

1. Affordability: If the propertyless already consider rents to be too high, as a proportion of their income, a scenario in which they pay more of their income on rent cannot be presented as a ‘solution’. Moreover, it will take many years for new supply to have an impact. The argument is essentially: pay more rent now so that ten years down the line your rent will be even higher, but if all goes well it will not be as a high as it otherwise might be. In what sense is this a solution? It would be better described as a kind of disaster management. From the point of view of the propertyless, it is entirely rationale to conclude that the cure is indistinguishable from the disease.

2. Displacement and dislocation: even if overall rent inflation is reduced by increased supply, this can happen in tandem with substantial dislocation. Specifically, it can happen in a context in which higher income professionals are able to live in central areas while the working class are consigned to more peripheral areas. Overall greater affordability in the future does not mean that properties in more desirable areas become easier to access for all. In other words, geography matters. No doubt some will say that is why we need to have a certain proportion of social housing, to ensure lower income households can live in the city and avoid undue income segregation. Typical of a more economistic perspective, this ignores that fact that many working class people do not actually want to live in social housing, partially because they want to ‘stand on their own two feet’, i.e. not be in what some consider the humiliating position of relying on the generosity of higher income households and corporations (who make up most of the tax base) in order to house themselves. Many working class Dubliners, for example, will have the perfectly reasonable view that they should be able to afford housing in their own city based on their wages. From the point of view of the propertyless, the choice between joining the que for centrally located social housing and being pushed out to the peripheries or commuter counties can hardly be presented as a solution.

3. Homeownership: higher rents generally correlate with higher house prices. Moreover, institutional investment is associated with lower levels of homeownership. Therefore, form the perspective of the propertyless, a future in which Dublin, and possibly other cities, becomes less accessible for homeowners means two bad choices: either stay in Dublin renting or move to the commuter counties, or even further afield.

The era of technocratic policy making is over

In short, resolving the housing crisis by rental growth-driven increases in supply is likely to be opposed by what I have been calling the propertyless. Ronan Lyons, in response to the LinkedIn post I mentioned earlier, argued that while increasing rents might be a ‘pain point’ for many, those of us with a public platform must nevertheless advocate for the measures most likely to bring about a lasting solution, i.e. more supply.

This is a valid argument, without doubt. And, to be clear, it can be argued that partially deregulating rents to incentivize supply is the policy approach with the strongest evidence currently.

I have two main issues with such an approach, however.

First, I think trying to make the case for a solution to the housing crisis based on economic models simply won’t work. The era in which economists and other experts could convince the public to embrace policies that appeared (and often were) contrary to their interests is over. As George Osborne famously said, ‘we’ve all heard enough from experts’. All across the advanced economies, those who cling to the idea that politics can be sidestepped via ‘evidenced based policy’ are losing relevance. Instead, if rents do indeed increase significantly, the public will either force Fianna Fail and Fine Gael into some new form of rent control, or elect a Government that will.

Second, the evidence that supports partial deregulation of rents looks narrowly at the variables of interest to economists. Therefore, it doesn’t take into account the potential costs of policies which are (correctly in my view) perceived as harmful by their intended beneficiaries. Consequently, the trade offs are not fully appreciated.

I have in mind here two particular downstream consequences of the new rent rules:

1. The propertyless will become more disillusioned with Government and the ability of public institutions to resolve their housing issues. This undermines the legitimacy of institutions, experts and, ultimately, democracy (if this seems like hyperbole, recall that this processes of disillusionment is already well under way in the US and much of Europe).

2. The propertyless lose faith in supply side responses and instead focus on the demand side, i.e. immigration. If politicians and experts tell them that the best solution on offer is one which, arguably, further compounds their marginalization, then it is perfectly logical to focus instead on reducing housing demand.

So, where does that leave us? What should we be advocating? Sorry to disappoint, but I’m afraid I am not entirely sure (although elsewhere I’ve argued that deregulating only new supply was probably the way to go). I do believe, however, that collectively we need to offer an alternative that (a) does not involve ever increasing housing costs and (b) takes into account both the economic and political realities that housing policy must confront.

If we cannot do that, we can hardly complain when the public lose faith in experts and evidence.

Events & news

A new film takes a critical look at Dublin’s transformation, focusing on the destruction and displacement of the city’s cultural and social life. Relatedly, the London Renters Union have done this very interesting video project, in which renters document their own housing stories. The latest Social Justice Ireland Podcast features Simon Community’s Ber Grogan on older adult homelessness.

What I’m reading

The London Renters Union has produced a pamphlet making the case for rent controls.