Failure to solve rental crisis will ‘disable’ economy, warns property expert

Failure to solve the rental crisis for lower-income households will “disable” the economy “very, very quickly”, a leading property economist has warned.

Marian Finnegan, chief economist with Sherry Fitzgerald, said the private sector would not provide the volume of affordable rental needed, and so far there had not been detailed efforts to address it.

Speaking at the annual Housing Agency conference on Wednesday, Ms Finnegan said where during the last boom people had queued to buy houses, the "massive queues" now were for people trying to rent a home.

“If we don’t get this right and get it right very, very quickly we will disable our economy. We will make it uncompetitive, unattractive. We rapidly need...long-term sustainable solutions. We haven’t dealt in any detail with the rental side.

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“We are already seeing 30,000 to 40,000 people a year coming into the country. The first thing they need is somewhere to live and that is somewhere to rent. The rental statistics are showing a really, really tight supply...with a little over 1,000 properties to rent in Dublin or 3,000 in the country. It is simply not enough.”

Ms Finnegan said rents were rising more than 7 per cent annually nationwide, and more than 8 per cent in Dublin. “Critically, rents are 20 per cent higher than the last peak...It points to unaffordability. I think rents will continue to rise next year and the year after by more than 4 per cent.” She said rent inflation had to be controlled to stabilise the market.

Political spectrum

John O’Connor, chief executive of the Housing Agency, said the need for affordable rental housing was not fully appreciated across the political spectrum.

“Low-income groups have always been much more impacted by rental costs. Policy-makers and all of us must also understand the need for [affordable rental]. We need to do something very dramatic in terms of providing more.

“The obvious thing immediately is public lands and local authorities working with the housing bodies in delivering that. We need it on a huge scale, and the sooner the better. If we don’t we will have huge difficulties.”

Sinn Féin spokesman on housing Eoin Ó Broin TD said the solution was not going to come from private investors.

“State policy has to be much more focussed on the speedy delivery of genuinely affordable rental accommodation, which isn’t on the cards.”

He said the Government's "flagship project" – the Land Development Agency (LDA) – was going to "entrench all the problems of lack of affordable housing" if it continued to insist on only 10 per cent social and 30 per cent affordable housing, with 60 per cent private, on State-owned lands.

“We are making major housing policy decisions based not on what experts are telling us is needed but in terms of a set of market criteria.

“The LDA has the potential to be a game-changer but not if it sticks to the 10, 30 and 60. I would urge a rethink at Government level. Only 40 per cent of public housing on public land is not a good way to go.”

Insecurity

Xavier Jogen, managing director of Catella residential investment management in Berlin, warned of the political consequences of failing to address growing housing insecurity among the middle class. He said in France and the US people living in areas with greatest housing insecurity voted for Marine Le Pen and Donald Trump.

Housing policy could become a “major political theme” where political failure could shift voters towards populism, he said.