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.
This country needs a decent transport system so people can live further afield. Not sure about 40 Storey buildings but we definitely should be building higher. Would love to hear more on the ‘use it or lose it’ proposal and how it would work in reality.
How many TDs are landlords again? There has to be a conflict of interest when they’re voting on Housing Issues which increase their rents received!
There are solid ideas here. The solution to this problem needs to be a longterm plan, something over decades. Unfortunately, Ireland doesn’t do long-term planning very well. I asked a politician who visited my doorstep what her 50 year plan was for the country.
She almost gasped in horror at the thought of it. She had clearly never even considered the idea before.
Why not remind the Government to place more emphasis on the National Spatial Strategy (Do we have one?). Try getting development in other parts of the Country and not force all of our population into the greater Dublin area? I accept there are houses in places people don’t want to live, but they don’t want to live there because there has been no investment, and no jobs promoted in the regions. I would like to hear David’s opinion on how the other regions can be developed. The Government obviously totally under estimated the “Keep the recovery going” mantra because it… Read more »
So here is a question worth considering……. How/what can we change to make it in the interest of the politician to focus on, and be accountable for real long-term planning for the country? They have to ‘need’ to do it. Everyone here knows, this is possibly the biggest failing in Irish politics. But nobody wants to really talk about it because it is too hard. When I have asked this question of people previously I have been accused of being too aspirational. “It’s not realistic to make those types of changes”people tell me. The same people make the same complaining… Read more »
I went sale agreed on a property on the outskirts of Dublin last year, it was a house owned by an elderly couple who wanted to downsize. It was only after they/we went sale agreed that they went looking for a replacement property, after they looked around, they couldn’t find anything of value to warrant downsizing to, so after 9 months of keeping us on the hook they pulled out of the sale. So two things, incentivising elderly home owners to downsize is not the simple fix it sounds like, they are actually more likely to be competing for the… Read more »
The Boss of Masters are laughing. And the Local Masters are laughing. It is all about control. In being an “urban” Tenant ==> u are more controlled by the Landlord & the Bureaucrats. For most of Irish State’s history — i.e. since 1921 — the most numerous private professional landlords of urban dwellings have been cute hoor country folk. And no problem for them ; Because, in the official narrative of Irish history, the urban poor have not been written worthy of similar pity etc. as was the tenant-farmer. David, himself, has noted that it is the rural — we… Read more »
Does said publican pay the living wage of € 12 per hour ? Seeing as a bowl of soup and a dessert costs € 10 in most hostelries, this seems reasonable. Only those that pay the least have problems finding staff. Many parts of Dublin – Clontarf, Donnybrook, Foxrock etc etc have house prices and rents that are more expensive than the London mean purchase price of € 400 k ( for the average sized house). The average wage in London for a full time male employee is £ 900 per week, that’ works out @ € 30 per hour… Read more »
We’re fast approaching a crossroads in housing policy and the present route is leading straight into a cul de sac. What amazed me while out canvassing before the election was the lack of joined up thinking between the availability of affordable accommodation/housing and productivity. Experienced employees paying high rents with little or no security of tenure are likely to move to places where rents are more affordable The landlord is the curse of the Irish system – that no linkage to the cost of living gives them a free hand. Leeching on the backs of the real drivers in the… Read more »
1) Residential housing density limits need to be increased. 2) State investment and bureacracy in the East region is making everythin worse. 3) Public Transport in the East region is not efficient at moving large volumes of people over 15 km distances. 4) Embrace micro-apartments. They are very useful in the US and Germany. Particularly for people who reside in distant regions, and who need a bas for three days a week in the main business city. 5) Build the DART-U. It will make it possible for people to be residents of the next four largest cities, whilst using Dublin… Read more »
“Have a read, would love to hear your thoughts!” Here are my thoughts. 1. As you have noticed in one of your previous articles, in considering what steps to take we should bear in mind that we are not coming from the free-market position because the market is distorted anyway by things like 1.1. land zoning, 1.2. tax incentives and – I do not think you pay enough attention to that property-bubble factor in your articles, Dave – 1.3. near-zero interest rates which prevent investors from optimal allocation of their resources (so that, i.e., money goes to housing rather than… Read more »
There is an obvious bind going on here in that all new public debt except for bank related bail-outs of course is “verboten´´ by the EU. This works well for our sniveling, obsequious right leaning political class who have an excuse to stifle even debate on the use of State resources or even backing to lead in any way on re-investment and stimulus for the Economy in general. Present day election fantasy promises are the exception to this norm. It is always, and will always be, easier to blame faceless officials in Brussels rather than take some responsibility on the… Read more »
Here, have a look at where some of your precious tax paid currency gets spent instead of housing ; https://en.wikipedia.org/wiki/Directorate_of_Military_Intelligence_(Ireland) Yeah, that’s right ; ” … works closely with the … & is understood to have a relationship with …” Yes ; The very folks who organise all the false flags [ fake [ crisis-acting ] events & real [ real victim ] events, & are organising all the Arab-Spring wars, & the genocide of nearly 2 million Iraqi people, & more to come. All those supposably “mad” moslems are faking it [ unless they have been co-opted by the… Read more »
Its not too long ago that Davif was obsessed by Ghost Estates and how we would never fill those spaces
All accurate of course. And worse after the bust. What happened to all these houses?
We didnt build but we have had lots of inward migration, so now we build and what if the migration reverses again ( I bet we are at peak Irish boom post bust right now).
Thats the problem with the EU, britain also has the problem. You cant really know your population in 3 years, never mind 10.
1. Increase Corporation Tax forcing a few multis to leave and take their foreign McJobs with them freeing up 1,000s of properties.
2. If they want to stay and maintain low Corporation tax, “encourage” them to re-locate down to Sligo or somewhere else where property cheaper and more plentiful and where land not scarce for further building.
The housing market in Dublin has the same problem as the rest of the economy. Too much regulation and red tape caused by government interference to the point that there are no proper markets, only distortions. Likewise in other “markets” around the world we are reduced to guessing. Inflation is on the move all over and in the weakest currencies first. As reported yesterday the local store told me their produce is up 20% in price from a year ago. Here is a discussion as to what to do about this. Basically get rid of the interference and revert to… Read more »
The ECB lower interest rates as Ireland reports a growth rate of 7.8% for 2015.
Given the subject matter of this article the question has to asked.
Is ECB policy appropriate for the Irish economy?
If it is not then what should our government /authorities be doing to minimise the damage.
Over to you David – Surely there’s at least one article in this.
I am beginning to like first past the post elections more and more.
Bay area (San Francisco ) has a housing problem also http://fortune.com/2016/03/07/san-francisco-housing-prices/ a lot of tech co’s there too
Ireland is Dublincentric.
Strategic thinking and ACTION is required to get a more balanced economy geographically speaking.
A decision is required to develop another metropolis
The area between Gort and Ennis is one possibility. A green field city properly designed and planned out.
Limerick and Galway would become satellite towns
Hi David Good article, couple of comments : Thriving pub owner staff can’t afford to live etc. Well, if the pub is thriving I’m curious as to why he’s not paying thriving salaries. The pub industry may need to think about creating careers for staff, there are many ways to keep staff that are not even money related. Ultimately, I don’t see this as a failure of the housing market so much as an unwillingness of a beneficiary of economic growth to accept a rise in cost base. I see similar attitudes in Singapore where I live, employers complain that… Read more »
RED LINE RATIOS . Three people working in a respectable Dublin city TOP pub are paying no more than 22% of their joined 6000euro net monthly take home pay in the 1300euro house. Assuming that they each earn 35000 yr gross. People earning below min wage will pay a higher ratio and the Red Line that should not be crossed is 30% of net income for shelter needs. It is a “REALITY” as much as a crisis that people earning below the average wage can not afford to live in Dublin City inless they live in NON EXISTING 2011 TO… Read more »
http://www.telegraph.co.uk/business/2016/03/10/ecbs-draghi-plays-his-last-card-to-stave-off-deflation/ Last gasp of a deranged policy. Inflation of the money supply caused a boom. people over extended which caused a bust. Depression is the result but mistaken as deflation. Now and as continued is a constant inflation of the money supply and thinking it will get different results is the delusional insanity. We are headed for a bigger bust because of the inflation of credit and debt. This is also the inflation of the money supply which is the inflation and the debt is killing all. The interest on the debt is the nail in the economic coffin. All… Read more »
Inflation is on the prowl. ECB devalues the EURO following, US Dollar, Chinese, pound et al. The benchmark to value the currencies is in fact the age old money–gold Broken Bazookas! “There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are we now afloat. And we must take the current when it serves, or lose our ventures.” William Shakespeare First it was the Fed, then it was the Bank of Japan, now… Read more »
Guys you are looking st effects.
The cause is the issue.
The cause is that there is an ever increasing mismatch between supply and demand.
This phenomenon is not going to go away.
Worse the people pulling the levers are in denial.
Print more money and boost demand is their answer.
It isn’t working and no matter the currency used, the demand PROBLEM will not be resolved.
Adam good luck to you on the speculation and fair play to you for looking after number one.
However the currency we use will NOT address the demand issue.
E pluribus unum. You’ve heard of that. Well, here we have ex uno plurimi.
Keep this up and there will be nobody left because people can sense when something is amiss.
It’s like good music. Most people don’t like it but if a restaurant or whatever started playing it nobody would complain. They’d just feel uneasy and know that something was wrong and start going somewhere else where they don’t play good music. Now in your case it should be bad music but the analogy doesn’t work that way.
Psychology is very relevant to economics as it happens. David often writes about the irrationality of animal spirits and there is no lack of irrationality in today’s world (especially among the night shift and the followers of Chris Spivey). As for having done your cameo I know that one when head is cut off seven more spring up to take its place. It’s hopeless I know. I for one won’t be losing sleep but I have said my piece, at least for the time being. Do do realize you’ll end up on here talking to yourself and everyone else will… Read more »
Final word on this because reasoning is hopeless. I had a neighbour once with manic depression and he used to call at all times of day and night. He was educated and amusing and I sometimes wonder what became of him. Once he wanted a bible and when he returned it later he told me that it was all contained in the Book of Kings. He once asked us to post his letters for him because the security guards at the Coombe Hospital nearby were watching him (I think they could read his thoughts). One of the items was an… Read more »
TGIF although I personally prefer POETS Day.
I have changed my mind. I had hoped for 6-10 storey high apartment complexes. Now, I think that this will have to go further, simply because it will take too long to make an impact. Otherwise, move public administration to Athlone, and free up the area between the canals to a massively increased quantity of residence. In other words, the city centre becomes the suburb/dormitary town, essentially speaking. And Athlone becomes Ottawa – essentially speaking. With the AIT, or NUIG-East becomming the public administration university of Ireland. On a side note, the institutional state needs something big to happen to… Read more »
Prices will only be affordable in Dublin if employment moves out, or construction moves up.
I live in a housing coop apartment in Germany and if we want to move, members of the coop have first call on vacant apartments. A neighbour moved out recently to allow her pregnant daughter move into her old place. We now have 8 kids under 10 in the 5 apartments in our house – it gets loud. The grandmother moved 100m around the corner. The housing coop also builds apartments especially for older people. It is celebrating 140 years’ anniversary this year. The rent is 550€ per month including heating and water in a very attractive and comfortable University… Read more »
Can a couple with joint average national income earnings afford a three bed semi in,
NEW YORK ?
The 31st Dail with a mandate to sort out the GROSSLY OVERVALUED DEBT CRISIS of 2006 to 2010
PREVIOUS ABUSIVE POLITICIANS.
DO THOSE ” PRICKS ”
WANT OUR CHILDREN TO APOLIGISE FOR ?
WHO ON BEHALF OF THE GREATER PUBLIC INTEREST
” STOP ? “
SWEDEN TRIES TO INTEGRATE WITH MIGRANT CULTURE
Again I’m just not at all sure about the figures being offered here. I wonder what the source is? Has anyone any good datd on this? The numbers in this article do not accord with the Private Residential Tenancies Board data and the CSO figures do not appear to be gathered beyond 2011? However the problem in my opinion is not a housing (shortage) problem, but rather Irelands old problem of…Dublin. The degree of centralization which exists with the city as the now European hub of operations ensures that Dublin sucks a disproportionate amount resources and energy from the rest… Read more »
SOLUTIONS FOR IRISH HOUSING.
National government backed banks sell 25 yr fixed mortgages @ 2%.
1060 euro mth for 250000euro.
+ property tax
+ house insurance.
Shelter needs still less than 30% of net 4000e average earning couples take home pay.
It is not magic.
It is a REAL solution.
We are in a ” 0% ” zone.
Its mad not to help the citizens cashflow plus housing needs, that in turn really helps the REAL ECONOMY.
For homelessness and mortgage arrears
REAL VALUE DEBT is the solution.
If a government has its own currency and can print on demand then there is no reason to issue bonds or levy taxes. It can always print what it wants.
Bonds taxes and national debts are all fictions That allow the state to coerce its subjects under threat of fine or imprisonment.
Thus we are all kept in thrall.
[…] could become a developer of some vital social infrastructure (otherwise known as housing). David McWilliams presents many familiar arguments and uses typical […]
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