The other day a well-known publican in Dublin 2 who runs a number of thriving places told me the housing crisis is now so acute in the city that staff simply can’t work for the wages he is offering. The same story pertains across all service sectors in town. A lack of housing is stifling growth and opportunity.
The average Dublin renter paid €1,275 a month for a house, or €1,152 for an apartment, in the summer of 2014; they are now paying €1,387 for a house and €1,260 for an apartment. And prices are continuing to rise. Outside Dublin, things are more affordable but only because there are far too many houses built in the wrong places, where no one wants to live.
House rentals outside Dublin increased from €656 to €695 a month in the past year, and for apartments from €623 to €660.
So we have a massive housing problem.
What is wrong with this country? Why can’t we get the housing market right?
The Irish housing market swings violently. Either we are building too many houses in the wrong places or building too few houses in the right places.
It lurches between having too much money thrown at it to having too little. It is characterised by 30pc swings in rents on the up and the downside and mass hysteria, leading to a generation of one-off landlords who were promised riches but were left with negative equity, many still technically bankrupt.
We also have a banking sector salivating over the prospects of renewed hysteria that will drive its profits, but which is so terrified of having “skin in the game” that it lobbies to make sure there is no such thing as ‘non-recourse mortgages’ which might make them think again.
Now we are in a situation where there is an acute accommodation shortage. Here are the facts.
Since 2011, Dublin rents have risen by 35pc, including a 10pc hike in the last 12 months. One in five Irish people now live in rental accommodation, more in urban areas – a doubling of the total between 2006 and 2011. Meanwhile, house completions have collapsed from 93,419 in 2006 to around 8,000.
Put bluntly, more people are paying more to fit into less space. By any standards, Ireland has a housing crisis.
The reality is that the cost of this crisis is being borne not by banks, landlords or developers but by renters and first-time buyers. That’s the truth. Say it loud and say it clear – the cost of the massive housing market failure is being shouldered by renters. That’s it, plain and simple.
Numbers renting are rising rapidly in urban areas, with 25pc of homes in the capital being rented. Interestingly, old habits die hard because the Irish reluctance for long-term renting remains, with three-quarters of people planning to exit the rental market within a year or two and a mere 17pc declaring themselves life-long renters.
Even these people are doing so purely because they are unable to afford a house; even though new housing starts jumped to 8,000 in 2015, which represents a rise of 19pc from 2014 – but we are starting from an extremely low base and indeed the trend slowed into year-end.
While this shortage exists, not surprisingly, evidence of the property price recovery is spreading nationwide.
House price inflation outside Dublin has finally outpaced the capital, but houses are way beyond the pockets of most first-time buyers and, while renting is not secure in the same way as it would be in, say, Germany, it is the only option.
The State has tried to make renting more secure for people by introducing a number of measures. For example, landlords’ ability to raise rents has been restricted to once every two years, instead of annually. There is now a longer notice period before a lease can be terminated and a longer notice period before rent hikes.
And, finally, there is now a deposit protection scheme whereby deposits are held by a third party, the Private Residential Tenancies Board, instead of being at the mercy of landlords. But all this does nothing to stimulate supply.
Ireland needs to build more houses, in the right places and at the right prices.
The next thing we need is a massive change to planning laws where developers or owners of land who are sitting on zoned land need to be given a “use it or lose it” option.
If they don’t start building on the land by a certain date, they lose the planning and the land reverts to agricultural land and they lose a fortune.
In addition, Dublin needs to “build up”, let’s say in the Docklands. We need a zone for 40-storey, top-of-the-range apartments which would be made available. Finally, the State needs to build council houses again, lots of them.
With the process of trying to put together a coalition ongoing, an undertaking to build 15,000 council houses a year in Dublin should be a condition of government. One thing that Irish governments over the years have done well is build houses. Let’s start to do so again.
There are now calls for incentivising the elderly to downgrade to smaller homes to ease pressure in the under-supplied market – with the ESRI estimating that 26,000 empty nesters are living in large homes.
However, the ESRI also noted that this plan will have limited effect, because there are still buyers struggling to get a foot on the ladder due to new rules surrounding minimum deposits.
We have now come to a place where buyers in Dublin are having to find a deposit of €50,000, on average, to secure a mortgage.