As someone who's a fan of your work, I'm disappointed by this post, for two main reasons.
Firstly, you call out the piece by Dermot, Michael and me in the Irish Times. The ad hominem that apparently Michael can only write things in his direct interest reflects poorly on you, particularly given the incredible amount of time that Michael gave, freely, to the Commission over the last number of years, to try to improve the housing system here. Being perfectly honest, I didn't think you'd stoop to such an argument - I had always thought of you as engaging with the substance, rather than the person. But reading this piece, you seem to link throughout particular messages with particular economic interests, which seems a cheap way of trying to 'win' an argument. I'm not arguing that we should ignore the source of the information (far from it) but you are trying to create a narrative here that would allow people with particular priors to ignore evidence that they don't like.
More substantively, you write that it is "quite remarkable that three members of the Housing Commission embarked on this solo run" to undermine its findings. Before this post, if you had asked me to name people who had actually read the Housing Commission report, yours would have been one of the first names on that list. As I would have said you knew, Recommendation #33, on rent controls, was the only one of the 83 recommendations that the Commission could not agree on fully. The op-ed by the three Commissioners unable to agree to the recommendation as it stood outlined that thinking in full, in particular in the context of a Sunday Independent front page story on rent controls a few days earlier, featuring the former chair of the Commission, that made no mention of it being the single recommendation where the Commission was unable to by unanimous. The op-ed that you disparage is, therefore, fully consistent with the published report of the Commission. This leaves us with two possibilities: either you read the report and are aware of this, but chose to misrepresent it above to strengthen your narrative, or else you have not read the Commission report in full.
My second main concern relates to the substance of your piece, as there are a number of problematic areas. In relation to how the PRS sector works, you would be far better served looking not at interest rates but instead at yields (gross or net) and how they have changed over time. There will of course be a link between the two, and of course both went up in the early 2020s, but one does not equal the other.
In relation to the analysis you have presented, it is somewhat haphazard and any instances of a fall in any one of investment, construction or starts are presented as evidence in favour of the conclusion that Ireland is not out of line. You note at the very start that "detailed posts like the below take a fair bit of work" but what I can't understand is why you didn't complete the work you started and develop a fuller understanding of the topic. If you had continued to assemble, say, CBRE data on residential investment, then you would have seen a very different conclusion to the one that you present.
For example, if you look at the volume of residential investment into the UK in 2018-2020 and compare it to 2023-2024, you'll see that the UK *increased* not decreased, and increased by 16%. The same is true of Spain. Investment has fallen in France, Germany and the Netherlands (and quite sharply in the latter two) but in none of those countries has the fall-off in investment been as sharp as in Ireland, where investment in residential real estate is down three quarters comparing 2023-24 with 2018-2020.
Surely academic curiosity would mean that you, as I, would be interested in what factors peculiar to Ireland might have driven that. What might Ireland have done differently than other countries? And it is here where qualitative and quantitative data combine. During this period, Ireland tightened its rent controls so that they are now certainly among the five strictest (and arguably among the three strictest) in the high-income world. I would recommend that you talk to those (without any connection to Ireland) that are still investing in residential real estate and who make the decisions about where to invest and ask them what has made them turn away.
In summary, we are in agreement that there a number of factors that have contributed to the decline in investment in rental housing, including the changed macroeconomic environment. And I fully agree with some of your final paragraph, in particular that "what bothers me most about all this is how high the stakes are, especially for tenants - the quality of our debate really matters".
But, you are not immune to that and it was "not at all difficult for me to find holes in the arguments" you have made against the hypothesis that tightened RPZs have impacted on the volume of investment in rental housing here. The single biggest determinant of rental affordability is rental supply and the single biggest barrier to rental supply at the moment is the poor state of our rent controls. This is a lever that, unlike the global macroeconomic environment, is in the control of policymakers here. Therefore, moving our rent controls to better align with those of peers makes sense.
Hi Ronan, thanks for the thoughtful response. I think you make some good points there and certainly I will reflect on them. This piece is more polemical than my usual approach. Maybe I should avoid such an approach in the future because there is already too much of it to be honest. But I do feel strongly about this issue and to be honest am quite angry about it. Overall, the intention of the piece is not to say RPZs have no impact. I also believe they need to be reformed. The intention is to make a compelling argument that their impact on apartment supply needs to be looked at in a wider context. The Taoiseach, many politicians and IIP etc. have made strong, public statements that make a direct causal claim about the impact of RPZs on supply. My fear is that their analysis will shape the public debate around RPZs, given their enormous public platform and substantial resources. The aim of this post is to challenge that view, i.e. the direct causal claim. I should perhaps note that I do not make a contrary causal claim, i.e. I don't claim to know the extent of the impact of the various factors impacting supply.
A few quick responses on more specific points. These are not meant to refute your perspective but to clarify where I'm coming from:
1. I don't consider my comments about Michael to be ad hominem. In my view, the nature of Michael's direct economic interest in the recommendations of the report meant he was not the best person for the Housing Commission. That's just my own view, and I can't comment in how valuable his participation was.
2. You are quite right to draw attention to the fact that the Commission's report didn't reach a consensus on the rent regulation issue. To be quite honest, I forgot that detail as it's been a while since I read it. I should have double checked that. Nevertheless, I do feel that I raise a valid point in that the authority of the report would be undermined if every member were to criticize it's recommendations in the public sphere. Maybe I need to reconsider my view in light of your comment, so it's something I'll have to think about further. I'm happy to add your comment into the original post if you like or of course readers can read your above comment in full.
3. Some of the points you make about the somewhat scattershot nature of the evidence I draw on are valid and I would encourage readers to take them into consideration when forming a view. Some further comments. First, this is a blog post. It's not academic research or even a media publication. I also try to keep these reasonably short. Having said that, there is actually more evidence in this post than in most of the other such interventions on the topic. Your own opinion piece is also quite selective, and as you know it is in the nature of these short pieces that they must be so. Second, I wasn't sure how to interpret your points on the experience in the UK and elsewhere. You refer to 'residential investment' increasing in the UK. I wasn't focused on residential investment in general, or even PRS investment. I was trying to look specifically (within the context of a short blog post) at the supply of BTR apartments. So I'm not sure if you are arguing that BTR apartment supply has increased in the UK? I did try and look at some other countries but couldn't get good data. As Spain is similar in some respects to Ireland (the post-crash experience etc.) and I speak Spanish, I looked into it in some detail but couldn't get clear data on BTR supply (as opposed to apartment supply in general). They also have a number of BTR typologies we don't have (e.g. 'flex living'). Three, (on a similar point) you note that residential investment is down by three quarters in Ireland. But again I'm not too sure what you mean. Normally I would interpret that as referring to all transactions, i.e. including of existing assets. My interest was in supply, rather than investment. Hence why I looked at apartment starts/completions. But perhaps you meant something different. Four, I would be very happy to engage more with people in industry but I don't have many opportunities to do so and as you know the institutional sector in Ireland rarely publish data on their activities. I have put a call out in the newsletter before for private sector actors to submit guest posts, and hopefully that might happen in the future to get their perspective. I will keep an eye on the issue and of course happy to revise my analysis.
not mentioned above, but to state an obvious fact:
a developer can set whatever rent they like, to get whatever yield they want on a new apartment, ~after~ they finish building it & when they know all their development & construction costs.. so RPZ isn’t even in the development economics equation
Michael I disagree with the implication and sentiment underlying your comment that “ The Taoiseach, many politicians and IIP etc. have made strong, public statements that make a direct causal claim about the impact of RPZs on supply. My fear is that their analysis will shape the public debate around RPZs, given their enormous public platform and substantial resources”
It is only in recent times that the perspective that seeks reform of RPZ has had even a modest representation in the public discourse. Any objective assessment will show that the media generally and consistently offers very generous space to so called housing experts and politicians (with the word expert being almost exclusively associated with not having any direct experience of residential development or working directly in the sector) who are strong proponents of current RPZ and or seeking to make it even more restrictive than currently …ie a rent freeze. I invite you to review media output on the topic of housing and it’s funding over the last few years and demonstrate otherwise. As regards IIP I am its only employee working from a home office, and if the assumption is that I preside over a vast organisation with limitless resources, then nothing could be further from the truth. The reason IIP was established was to belatedly give a modest voice to the perspective of our sector which deserves to be heard but which hitherto had no voice whatsoever with the debate on housing and its funding often dominated by voices utterly hostile to institutional investors usually relying in the main on polemic, prejudice, nasty name calling, mislabelling and dog whistling as a substitute for any real analysis or hard data to back up their argument. So why would you be “worried” that our voice might shape the debate? Are we not entitled to our point of view? Or is it a case of, to paraphrase a famous quote “ let every voice be heard, provided it reflects my point of view”
Thanks Pat. I agree with much of that and you are right that until recently the pro-RPZ position dominated the debate, largely because both Government parties and opposition supported them (I presume). Indeed I have written before about Ireland's housing politics consensus which is quite left leaning. https://theweekinhousing.substack.com/p/irelands-housing-politics-hidden
Nevertheless in the Private Rental Sector it has been difficult to move towards a more reasoned and evidence-based debate (in my opinion). Politicians continuously use terms like 'landlord exodus' and 'landlords fleeing the market', as do estate agents and landlord representatives (I'm referring to small scale landlords here), and rely on an interpretation of RTB data which everyone knows is flawed and even the RTB's Director has rubbished. I've acted as an expert witness at the Oireachtas Committee on Housing and my impression was that many members of that committee were extremely sympathetic to landlords, but more importantly did not have a good understanding of the issues tenants face. It has also been very difficult to start a serious conversation about security of tenure reform, despite the fact that it is obviously a pre-requisite of a large PRS.
In terms of this specific post and the debate about reform of the RPZ, I'm worried for two reasons. The first is simply that whatever reform does happen may rely on partial or problematic evidence, like assuming that because supply has declined since 2021 RPZs must be the cause. A classic case of confusing causation and correlation. RPZs may well have played a role, even a very important one, but we don't have clear evidence on it. Similarly, one of the core objectives of RPZs, and rent regulation in general, is to provide stability and security to tenants, i.e. to enhance their experience of 'home' in the PRS. No evidence has ever been collected on whether the RPZs have been effective here, and I would not be at all surprised if there is no mention of this in the forthcoming review.
My second concern relates more directly to industry. This is probably where we disagree. I take a perspective known as political economy, rather than an economics perspective. Based on this, my analysis tends to assume that the production and distribution of resources (in this case housing) is political because it will involve winners and lowers, competing interests and different levels of power. Given that there is no representative body for tenants and that they vote in far fewer numbers than other cohorts, like homeowners, in my view if industry dominates the debate then this will lead to a policy which is sub-optimum. This does not mean that industry does not have a role to play or that we cannot learn anything from industry. Relatedly, as you mentioned some of the most prominent voices in the debate on the more 'pro-tenant' side are advocating a rent freeze. In my view this is not a good alternative at all and probably the last thing we need, as I argued publicly in the run up to the election.
I have a piece on 'policy certainty' and the need for a policy approach in the PRS that reflects all stakeholders, especially tenants, coming out on Tuesday. Thanks again for your comment.
Good lot of common ground Michael. To be clear IIP are not arguing for abolition of RPZ, rather reform such that tenants have certainty about rate of future increases within a well regulated sector while enabling investors to make a reasonable return. To the point you make about advocacy for the tenant voice they do have a number of very powerful advocacy platforms such as Threshold to name but one.
Great read!! Interesting to see the similarity trends across very different markets.
Thanks! I would have liked to cover more markets but it was hard to get detailed data from some of the other European countries I looked into
Hi Michael,
As someone who's a fan of your work, I'm disappointed by this post, for two main reasons.
Firstly, you call out the piece by Dermot, Michael and me in the Irish Times. The ad hominem that apparently Michael can only write things in his direct interest reflects poorly on you, particularly given the incredible amount of time that Michael gave, freely, to the Commission over the last number of years, to try to improve the housing system here. Being perfectly honest, I didn't think you'd stoop to such an argument - I had always thought of you as engaging with the substance, rather than the person. But reading this piece, you seem to link throughout particular messages with particular economic interests, which seems a cheap way of trying to 'win' an argument. I'm not arguing that we should ignore the source of the information (far from it) but you are trying to create a narrative here that would allow people with particular priors to ignore evidence that they don't like.
More substantively, you write that it is "quite remarkable that three members of the Housing Commission embarked on this solo run" to undermine its findings. Before this post, if you had asked me to name people who had actually read the Housing Commission report, yours would have been one of the first names on that list. As I would have said you knew, Recommendation #33, on rent controls, was the only one of the 83 recommendations that the Commission could not agree on fully. The op-ed by the three Commissioners unable to agree to the recommendation as it stood outlined that thinking in full, in particular in the context of a Sunday Independent front page story on rent controls a few days earlier, featuring the former chair of the Commission, that made no mention of it being the single recommendation where the Commission was unable to by unanimous. The op-ed that you disparage is, therefore, fully consistent with the published report of the Commission. This leaves us with two possibilities: either you read the report and are aware of this, but chose to misrepresent it above to strengthen your narrative, or else you have not read the Commission report in full.
My second main concern relates to the substance of your piece, as there are a number of problematic areas. In relation to how the PRS sector works, you would be far better served looking not at interest rates but instead at yields (gross or net) and how they have changed over time. There will of course be a link between the two, and of course both went up in the early 2020s, but one does not equal the other.
In relation to the analysis you have presented, it is somewhat haphazard and any instances of a fall in any one of investment, construction or starts are presented as evidence in favour of the conclusion that Ireland is not out of line. You note at the very start that "detailed posts like the below take a fair bit of work" but what I can't understand is why you didn't complete the work you started and develop a fuller understanding of the topic. If you had continued to assemble, say, CBRE data on residential investment, then you would have seen a very different conclusion to the one that you present.
For example, if you look at the volume of residential investment into the UK in 2018-2020 and compare it to 2023-2024, you'll see that the UK *increased* not decreased, and increased by 16%. The same is true of Spain. Investment has fallen in France, Germany and the Netherlands (and quite sharply in the latter two) but in none of those countries has the fall-off in investment been as sharp as in Ireland, where investment in residential real estate is down three quarters comparing 2023-24 with 2018-2020.
Surely academic curiosity would mean that you, as I, would be interested in what factors peculiar to Ireland might have driven that. What might Ireland have done differently than other countries? And it is here where qualitative and quantitative data combine. During this period, Ireland tightened its rent controls so that they are now certainly among the five strictest (and arguably among the three strictest) in the high-income world. I would recommend that you talk to those (without any connection to Ireland) that are still investing in residential real estate and who make the decisions about where to invest and ask them what has made them turn away.
In summary, we are in agreement that there a number of factors that have contributed to the decline in investment in rental housing, including the changed macroeconomic environment. And I fully agree with some of your final paragraph, in particular that "what bothers me most about all this is how high the stakes are, especially for tenants - the quality of our debate really matters".
But, you are not immune to that and it was "not at all difficult for me to find holes in the arguments" you have made against the hypothesis that tightened RPZs have impacted on the volume of investment in rental housing here. The single biggest determinant of rental affordability is rental supply and the single biggest barrier to rental supply at the moment is the poor state of our rent controls. This is a lever that, unlike the global macroeconomic environment, is in the control of policymakers here. Therefore, moving our rent controls to better align with those of peers makes sense.
Still a fan, just a disappointed one!
Hi Ronan, thanks for the thoughtful response. I think you make some good points there and certainly I will reflect on them. This piece is more polemical than my usual approach. Maybe I should avoid such an approach in the future because there is already too much of it to be honest. But I do feel strongly about this issue and to be honest am quite angry about it. Overall, the intention of the piece is not to say RPZs have no impact. I also believe they need to be reformed. The intention is to make a compelling argument that their impact on apartment supply needs to be looked at in a wider context. The Taoiseach, many politicians and IIP etc. have made strong, public statements that make a direct causal claim about the impact of RPZs on supply. My fear is that their analysis will shape the public debate around RPZs, given their enormous public platform and substantial resources. The aim of this post is to challenge that view, i.e. the direct causal claim. I should perhaps note that I do not make a contrary causal claim, i.e. I don't claim to know the extent of the impact of the various factors impacting supply.
A few quick responses on more specific points. These are not meant to refute your perspective but to clarify where I'm coming from:
1. I don't consider my comments about Michael to be ad hominem. In my view, the nature of Michael's direct economic interest in the recommendations of the report meant he was not the best person for the Housing Commission. That's just my own view, and I can't comment in how valuable his participation was.
2. You are quite right to draw attention to the fact that the Commission's report didn't reach a consensus on the rent regulation issue. To be quite honest, I forgot that detail as it's been a while since I read it. I should have double checked that. Nevertheless, I do feel that I raise a valid point in that the authority of the report would be undermined if every member were to criticize it's recommendations in the public sphere. Maybe I need to reconsider my view in light of your comment, so it's something I'll have to think about further. I'm happy to add your comment into the original post if you like or of course readers can read your above comment in full.
3. Some of the points you make about the somewhat scattershot nature of the evidence I draw on are valid and I would encourage readers to take them into consideration when forming a view. Some further comments. First, this is a blog post. It's not academic research or even a media publication. I also try to keep these reasonably short. Having said that, there is actually more evidence in this post than in most of the other such interventions on the topic. Your own opinion piece is also quite selective, and as you know it is in the nature of these short pieces that they must be so. Second, I wasn't sure how to interpret your points on the experience in the UK and elsewhere. You refer to 'residential investment' increasing in the UK. I wasn't focused on residential investment in general, or even PRS investment. I was trying to look specifically (within the context of a short blog post) at the supply of BTR apartments. So I'm not sure if you are arguing that BTR apartment supply has increased in the UK? I did try and look at some other countries but couldn't get good data. As Spain is similar in some respects to Ireland (the post-crash experience etc.) and I speak Spanish, I looked into it in some detail but couldn't get clear data on BTR supply (as opposed to apartment supply in general). They also have a number of BTR typologies we don't have (e.g. 'flex living'). Three, (on a similar point) you note that residential investment is down by three quarters in Ireland. But again I'm not too sure what you mean. Normally I would interpret that as referring to all transactions, i.e. including of existing assets. My interest was in supply, rather than investment. Hence why I looked at apartment starts/completions. But perhaps you meant something different. Four, I would be very happy to engage more with people in industry but I don't have many opportunities to do so and as you know the institutional sector in Ireland rarely publish data on their activities. I have put a call out in the newsletter before for private sector actors to submit guest posts, and hopefully that might happen in the future to get their perspective. I will keep an eye on the issue and of course happy to revise my analysis.
not mentioned above, but to state an obvious fact:
a developer can set whatever rent they like, to get whatever yield they want on a new apartment, ~after~ they finish building it & when they know all their development & construction costs.. so RPZ isn’t even in the development economics equation
Even a moment's consideration should reveal why this is not in the slightest bit true! (Hint: housing is a long-lived asset.)
Maybe read my comment again
Michael I disagree with the implication and sentiment underlying your comment that “ The Taoiseach, many politicians and IIP etc. have made strong, public statements that make a direct causal claim about the impact of RPZs on supply. My fear is that their analysis will shape the public debate around RPZs, given their enormous public platform and substantial resources”
It is only in recent times that the perspective that seeks reform of RPZ has had even a modest representation in the public discourse. Any objective assessment will show that the media generally and consistently offers very generous space to so called housing experts and politicians (with the word expert being almost exclusively associated with not having any direct experience of residential development or working directly in the sector) who are strong proponents of current RPZ and or seeking to make it even more restrictive than currently …ie a rent freeze. I invite you to review media output on the topic of housing and it’s funding over the last few years and demonstrate otherwise. As regards IIP I am its only employee working from a home office, and if the assumption is that I preside over a vast organisation with limitless resources, then nothing could be further from the truth. The reason IIP was established was to belatedly give a modest voice to the perspective of our sector which deserves to be heard but which hitherto had no voice whatsoever with the debate on housing and its funding often dominated by voices utterly hostile to institutional investors usually relying in the main on polemic, prejudice, nasty name calling, mislabelling and dog whistling as a substitute for any real analysis or hard data to back up their argument. So why would you be “worried” that our voice might shape the debate? Are we not entitled to our point of view? Or is it a case of, to paraphrase a famous quote “ let every voice be heard, provided it reflects my point of view”
Thanks Pat. I agree with much of that and you are right that until recently the pro-RPZ position dominated the debate, largely because both Government parties and opposition supported them (I presume). Indeed I have written before about Ireland's housing politics consensus which is quite left leaning. https://theweekinhousing.substack.com/p/irelands-housing-politics-hidden
Nevertheless in the Private Rental Sector it has been difficult to move towards a more reasoned and evidence-based debate (in my opinion). Politicians continuously use terms like 'landlord exodus' and 'landlords fleeing the market', as do estate agents and landlord representatives (I'm referring to small scale landlords here), and rely on an interpretation of RTB data which everyone knows is flawed and even the RTB's Director has rubbished. I've acted as an expert witness at the Oireachtas Committee on Housing and my impression was that many members of that committee were extremely sympathetic to landlords, but more importantly did not have a good understanding of the issues tenants face. It has also been very difficult to start a serious conversation about security of tenure reform, despite the fact that it is obviously a pre-requisite of a large PRS.
In terms of this specific post and the debate about reform of the RPZ, I'm worried for two reasons. The first is simply that whatever reform does happen may rely on partial or problematic evidence, like assuming that because supply has declined since 2021 RPZs must be the cause. A classic case of confusing causation and correlation. RPZs may well have played a role, even a very important one, but we don't have clear evidence on it. Similarly, one of the core objectives of RPZs, and rent regulation in general, is to provide stability and security to tenants, i.e. to enhance their experience of 'home' in the PRS. No evidence has ever been collected on whether the RPZs have been effective here, and I would not be at all surprised if there is no mention of this in the forthcoming review.
My second concern relates more directly to industry. This is probably where we disagree. I take a perspective known as political economy, rather than an economics perspective. Based on this, my analysis tends to assume that the production and distribution of resources (in this case housing) is political because it will involve winners and lowers, competing interests and different levels of power. Given that there is no representative body for tenants and that they vote in far fewer numbers than other cohorts, like homeowners, in my view if industry dominates the debate then this will lead to a policy which is sub-optimum. This does not mean that industry does not have a role to play or that we cannot learn anything from industry. Relatedly, as you mentioned some of the most prominent voices in the debate on the more 'pro-tenant' side are advocating a rent freeze. In my view this is not a good alternative at all and probably the last thing we need, as I argued publicly in the run up to the election.
I have a piece on 'policy certainty' and the need for a policy approach in the PRS that reflects all stakeholders, especially tenants, coming out on Tuesday. Thanks again for your comment.
Good lot of common ground Michael. To be clear IIP are not arguing for abolition of RPZ, rather reform such that tenants have certainty about rate of future increases within a well regulated sector while enabling investors to make a reasonable return. To the point you make about advocacy for the tenant voice they do have a number of very powerful advocacy platforms such as Threshold to name but one.