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Why is the rental market terrible?

14 January, 2025

It is hardly surprising for anybody living in Ireland to learn that the rental market is dysfunctional. The real question is why and a Property Service Provider (PSP) occupies a unique position to understand and parse all of the competing factors that affect our seeming inability to solve the problem. Demand for all rental properties is high and Ireland's success (there is no other word for it) in attracting employers to our regions means demand is remaining strong. Lots of talented workers with specific skills are drawn to base themselves here while furthering their career in successful multinational & domestic firms. This is good news. Most countries, like Ireland decades ago, have the opposite problem where people are voting with their feet and leaving which causes a brain drain with dwindling & aging communities. The best & brightest of the international community are beating a path to our door and the Technology & Pharmaceutical industries based in Cork want & need them to come here. With demand strong, surely we cannot let housing become the bottleneck for the success of our country and our communities? Unfortunately that is exactly what is happening.

Here are the reasons we see every single day, affecting supply:

  1. Legislation that changes all the time. Setting aside whether a person agrees that certain legislative changes are positive or not, if there is almost continual change and no stability or stasis for all stakeholders to become accustomed with new rules before they are changed again, this will not help supply. The Residential Tenancies Act has changed in 35-50 substantive ways over the last number of years. Politics plays a role here. The list of Ministers appointed in this role is long and the change in leadership further negatively affects this problem as each person has their own opinion on what is required.
  2. Unequal enforcement in dispute resolution. There is over €150 BILLION euro sitting on deposit in the current/deposit accounts of Irish citizens doing little to nothing productive for it's owners. The message is that citizens would rather lose money to inflation than invest in a rental property which could provide a much needed home for tenants TODAY and a higher return on investment for the property owner. Surely more private investment would be a win/win? New rental supply is desperately needed today (not years from now) but potential supply providers read about rent arrears or overholding cases where the property owner is left with crippling losses and no practical enforcement. We have evidence of multiple RTB cases where the property owner has followed the letter of the law and participated in lengthy dispute resolution cases (while rent was not being paid) and ended up winning their case only to be told that the ruling cannot be enforced for payment because the person in rent arrears has not provided the RTB with a forwarding address. This is beyond ridiculous. Property owners are easily located if they find themselves on the wrong end of an RTB ruling with costs/damages to pay. This discrepancy is important and glaring when figures of €30,000 rent arrears or more are at stake.
  3. Planning hell. No sane person would argue that we don't need more homes. However it's difficult locally to agree where they should go or who is going to be inconvenienced by these new homes. It seems like each community has a reason why any new development should NOT go ahead. You'll hear things like "I'm not against development but...". Each time a development is delayed or denied is devastating for the national crisis of our inability to provide homes. Will we see courageous local elected officials choosing to have a difficult conversation with their constituents, explaining why that new development must go ahead despite traffic/environmental concerns, instead of quietly joining in the objection/delay process? Or can we even blame the elected person if their future votes are dependent on supporting the status quo. If there was a catastrophic food shortage in Ireland and shipping containers of perfectly edible food arrived into our ports only to be denied/returned because a certain a minority of well fed citizens believed the emergency food could be better. Would this be allowed? Of course not. And this is why people with homes should have less influence than those without homes when deciding on new developments. If families could live inside a 'planning objection' or a 'judicial review' then we would have plentiful supply.
  4. Rent controls gone wrong. If rent controls worked in bringing rents down then that would be a reason to champion them. They do not work. It would be difficult to argue that the spike in rents WITH CORRESPONDING decrease in supply was a coincidence at the end of 2016 which is when rent controls were introduced. Lots of landlords were happy to not increase rents for years at a time and then when their existing tenant left they would increase the rent. Rent controls mean that rents cannot change outside prescribed limits during or between tenancies or even by the new owner after the property is sold, with vacant possession. This means that investors will not buy a property that was rented previously at a "low" rent. This is surely the opposite of what was intended? The properties with the lowest rents are likely to be sold first and not return to the rental market. That's a win for First Time Buyers while tenants who are likely to be more precarious lose out again. Certain academics (who do not have any experience in the property industry) might argue that investors leaving the market is ok and that any exit of investors will be filled by plans to build 100,000 subsidised new homes. Do you want more homes or less homes today? Losing existing rental properties before this new supply arrives (slowly if at all... see planning hell above) will make life more difficult for those in already precarious situations. Daft.ie shows that supply has fallen off a cliff from just under 25,000 rental properties advertised nationally in 2011 to 2,233 today. 91% less supply is insane!

Politically speaking, it is akin to Hari-kari for an elected representative to argue for more (or any) 'investor friendly' legislation. However property is not a zero sum game. Understanding or discussing what investors consider in making long term decisions would no doubt lead to more property supply, which ultimately helps tenants. Trying to sound tough on investors gets more sound bites and coverage. Discouraging investors (whether intentional or not) will actually hurt the most vulnerable tenants more than any other stakeholder. The problems above are not simple but they are worthy of discussion, especially the ACTUAL/REAL impacts of what might seem like tenant friendly legislation rather than what was merely intended or hoped for. 

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