Buying and renting in Europe shows grass not always greener elsewhere

Ireland has been in the grip of a housing crisis for several years now and it looks set to be a red line issue as a general election looms next year.

A recent report from Knight Frank found that Dublin is now one of the least affordable places to buy a home in the world. The capital has experienced the third-fastest rate of house price growth in the survey over the last five years, with prices up 61.9 per cent on average. The end of the eviction ban laid bare the parallel crisis in the private rental sector, where renters have had to grapple with skyrocketing rents. Yet the issue of affordability is compounded by one of supply, with a chronic shortage of homes in every sector, whether you are looking to rent or buy.

While we have all heard the reports of young professionals packing up and going to live in Berlin or some other affordable housing idyll, according to Hans Dubois, senior research manager in social policies with Eurofound, we might find that the grass isn’t always greener in other European cities.

“In terms of housing, there are actually many similarities,” he says. “Differences are often more marked between groups, for example, people with low incomes in Germany and Ireland, as compared to people with high incomes in Germany and Ireland, or people living in large cities in Ireland and Sweden, than between countries.”

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Dubois cautions against reading too much into “simplified graphs” showing rent prices across Europe. “These greatly ignore differences in incomes, which are much higher on average in Dublin, and expenditure on other needs/benefits … I would say the situation for low-income groups is similarly bad in many of the European capitals.”

Eurofound has just completed a piece of research into “Unaffordable and inadequate housing in Europe”. The resulting report found that home ownership in Europe has decreased significantly in the last decade. Much has been made of Ireland’s “generation stuck at home” but the report notes that between 2010 and 2019, Spain, Croatia, Italy, Cyprus, Belgium and Greece, as well as Ireland, faced the largest increase in the proportion of people aged 25–34 living with their parents.

Cultural differences come into play here. Ireland is often accused of being fixated on home ownership, whereas long-term renting is almost the norm in some parts of Europe

The Eurofound report also highlighted how private tenants with low incomes need to be better supported, noting that while in several European Union countries, rent controls play an important role in protecting tenants against rent increases, this does not mean it isn’t still a problem. “Private rental market tenants are in a particularly precarious situation,” says Dubois. The report found that 46 per cent feel at risk of needing to leave their accommodation in the next three months because they can no longer afford it.

Housing was relatively affordable in Ireland until the 1990s, says housing Europe research co-ordinator Dara Turnbull. “The average one-income household could easily afford an average home in Dublin in the 1980s.” Now households with two healthy incomes are finding it difficult to buy, he says.

Yet this is no longer a Dublin-specific problem. There is now a growing problem of supply in other regions, exacerbated by the Covid pandemic when remote working became a viable option for a large cohort of the working population, Turnbull says. “People reassessed how and where they wanted to live and we are now seeing a shortage of housing effectively everywhere in the country although it is still more acute in the urban centres of Dublin, Cork and Galway.”

Cultural differences come into play here. Ireland is often accused of being fixated on home ownership, whereas long-term renting is almost the norm in some parts of Europe. For example, according to the Eurofound report, two-thirds of people in Spain live in flats compared with 9 per cent of people in Ireland.

“Ownership with a mortgage is more common in Ireland than elsewhere, and this comes with risks, especially for people with flexible or short-term fixed interest mortgages now that interest rates are on the increase, decreasing people’s resilience against future downturns,” Dubois notes, although he adds that Ireland has “by no means the levels of indebtedness of the Netherlands or Denmark”.

Another factor is that in Ireland, social or affordable housing is restricted to the lowest-earning households, a situation that is not replicated across Europe. Indeed, the Vienna housing model is often cited by politicians and commentators when they discuss housing policy. The Austrian city, where 45 per cent of housing is classified as social or affordable, is invariably held up as the pinnacle of good housing policy, says Turnbull.

“But Vienna is a very, very different city to Dublin, as it is governed locally within the federal system and thus they have a lot of autonomy in terms of housing policy,” he says. “They can make a bespoke housing model that suits that particular region.”

And even if we did adopt the Viennese approach, it’s easier said than done. Turnbull says it would take “30 or 40 years” for Ireland to get to that point. “We can’t replicate overnight what they’ve been doing for years and years.”

There are solutions Ireland could adopt. Turnbull references the successful “Energiesprong” model, currently being rolled out across Europe, including in social housing, which makes renovations cheaper and quicker by using modular builds and with energy savings in homes helping to pay for the initial investment costs of the scheme.

Dubois also highlights some countries that he says are doing at least some of the right things. “Belgium gets the mortgage sector right by letting creditors pay for support for people with problems, almost all fixed interest rates, and not too easy access to large mortgages which drives prices,” he says. “Poland and Germany are right in making housing subsidies gradual, so there is less of a disincentive to increase income, and less of a problem for people earning just above an entitlement threshold. Finland gets the housing-first approach right, with decreasing and low homelessness, and Sweden gets it pretty right in preventing evictions proactively.”

But the normal economics of supply and demand apply everywhere and there are some universal challenges: “A lack of skilled labour was cited by almost every single country in a recent Housing Europe survey as a key challenge when it came to building adequate housing,” Turnbull explains.

The situation is undeniably complex. Turnbull cautions against “comparing apples and oranges – we can’t say that Ireland is one side of the equation and everyone else is on the other side. Within the European context you could argue that you have some regions that are performing relatively well when it comes to housing and others that are not.”