The week in housing 28/04/21
The PRS is broken
This week two major new reports were published. The first is Padraic Kenna's report for the Irish Council for Social Housing, entitled Supporting the Irish housing system to Address Housing Market Failure: Cost Rental Housing and Services of General Economic Interest. The second is Clúid Housing's new report Towards a Sustainable Rental Sector in Ireland Understanding the Key Challenges and Opportunities. I focus on the latter here, but will try to return to Kenna's research next week. The sustainability of the rental sector is of course a matter very close to my heart and something I have done a good bit of research on. For anyone interested in the sector, the Clúid report is a must-read and an important addition to the research base.
The report was commissioned by Clúid Housing and Irish Institutional Property and conducted by KPMG Future Analytics. It includes a review of the literature, profiles of Ireland's main urban areas, and new data based on surveys and qualitative interviews. It's a big report but what I found most interesting is what it tells us about the views of tenants and landlords in the PRS.
From the tenant perspective, the report adds to what we already know about tenant preferences. For example, it finds that over the next 5-10 years, 34% of survey respondents want to become homeowners and the same percentage said they would like to remain in social housing. Only 1.5% said they would like to stay in the PRS (I should note here that social housing tenants, especially in the AHB sector, were overrepresented in the research, as the authors note). Among renters, 77% said the main reason for renting was that they couldn't afford to buy. This is in line with the findings of research published by the Dept. of Housing in 2019. This is a particularly significant figure when we consider the over-representation of migrants within the Irish PRS. Only around 12% of Irish-born households are renters (Census 2016 figures), but this is figure is over 60% for EU and non-EU born households. This might lead us to think that the growth of the PRS in Ireland is driven by migrants who may have a preference for PRS housing, for example if they do not intend to stay in Ireland long term. Although that may be a factor, the data suggests that the main driver is in fact affordability issues in the homeowner sector.
The report also looked at the factors that, according to respondents, make renting unattractive. These include high and uncertain rents, the price of rents when compared with mortgage repayments, and insecurity. The research also finds that renters believe greater affordability, better quality properties and enhanced security are required to make the sector attractive and sustainable. Building on this, the authors note that "in some cases homeownership is not necessarily a preferred tenure, but one that is viewed as necessary due to the perceived difficulties around remaining in the private rental sector".
There is some really interesting data here on landlords as well. The majority of landlord survey respondents were small scale landlords. This is a cohort we hear a lot about, including their oft-bemoaned 'mass exodus' from the PRS, but we seldom see any concrete data about. The report finds that the main reasons for investing in rental property is ‘as a long-term investment to supplement annual income’ and as ‘retirement income’. The report also looks at the factors that discourage investment. The main ones identified (perhaps unsurprisingly) are the tax treatment of rental income, legislation skewed in favour of renters (!) and in general the (alleged!)excessive regulation of the sector. The report claims that small-scale landlords are an important part of the provision of rental housing. This is true; but I think we really need to have conversation about the potential of this sector to provide affordable, high quality and secure homes. The evidence we do have certainly suggests there are strong reasons to be not concerned about the decline in investment from so called ‘mom and pop’ landlords.
All of this supports the idea that the rental sector is broken, something which was in fact acknowledged within the Rebuilding Ireland strategy. Padraic Kenna's report for the ICSH adds some really interesting analysis on this point. The report is focused in particular on the role and status of cost rental housing in the context of the EU regulatory environment, including state aid rules. Given this interest, Kenna focuses on establishing 'market failure' in relation to Irish housing and the Irish rental sector in particular. He approaches this through the lens of affordability. The report has an interesting discussion of how housing affordability can be conceptualized and measured (see also this report from the ESRI and this book for a detailed discussion of this issue). Kenna opts for the legal definition found in the Housing (Miscellaneous Provisions) Act2009 where affordability is understood as housing costs not exceeding 35% of net household income. Using this metric he finds that "[d]ata on private sector rents show that those in Income Deciles 1–8 cannot afford average rents in Dublin". This is a truly shocking finding. Renting in Dublin is only affordable for the richest households. Kenna also cites Central Bank data that shows that average incomes first time buyers who received a mortgage in 2019 was €75,132 p.a. So home purchase too is the preserve of the well-heeled.
All of this builds a very compelling case that the market is, in fact, failing. Both reports discussed here come out very strongly in favour of cost rental as ideally placed to respond to the systemic challenges of the Irish housing system, particularly for those households who find themselves trapped in renting but don't qualify for housing supports. But there remain big questions around cost rental which I hope to look at soon. These include:
How will profit and costs be regulated, especially given the Minister has indicated cost rental will be open to private investors;
Who will eligible? A true cost rental model is universal, but the signs are that the Irish model will be targeted, possibly based on income but also in terms of excluding households in receipt of HAP;
What form of security of tenure? Early signals are that cost rental will fall under the Residential Tenancies Act with its Part IV protections. These DO NOT PROVIDE SECUIRTY OF TENURE and should not form the basis of cost rental in Ireland.
What I'm reading
Apart from the above reports, there was a fantastic new series of articles published by the Dublin Inquirer this week looking at 'corporate landlords' (something we will return to next week I hope). These were part of a wider European journalism project which I am really looking forward to digging into.
Constitutional rights are never far from discussion of Irish property, as seen recently in the somewhat shambolic set of changes associated with the eviction ban over the last year. Rachael Walsh (from TCD) has been doing great work in this area and has just published a book called Property Rights and Social Justice. It looks like a fascinating read and I'm always a fan of books that have oxymorons for titles!
Lastly, I attended the very interesting launch of this new report on High Rise Housing earlier in the week. Well worth a read especially in relation to the impact of financialization on investor demand for high rise.
Events
The Conference of Irish Geographers is coming up in May (I registered today). Also a reminder that the recording from my recent seminar Covid-19 and the private rental sector: an international qualitative research seminar is now available to watch online.