Friday 28 October 2016

Housing minister faces a critical situation

Ronan Lyons

Published 15/05/2016 | 02:30

Simon Coveney
Simon Coveney

Over much of the last two months, this column focused on the priorities for rethinking the country's housing strategy as the electorate waited for a government to be formed. Last week, a new Government was formed and a new Cabinet-level Minister for Housing, Simon Coveney, was appointed. This is a very welcome development, as it means that there will be a voting member at every Cabinet meeting whose first priority is housing, in the same way that health and education have always had their advocates at Cabinet level.

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However, just in time for the appointment of the new minister, a number of developments showed just how critical the housing situation in Ireland is. The latest Rental Report is a prime example.

In many ways, the headline findings were nothing new. Rental inflation remains at close to 10pc countrywide. While there are a few differences across the regions - with rental inflation highest in Cork city and Galway city, and in Meath and Louth, and lowest in the north-west - the shortage of rental accommodation is now a countrywide phenomenon.

One of the more frustrating aspects of housing policy in this country over the last few years has been the extent to which many people involved have needed to be convinced that there is a growing shortage of housing.

In 2009, I wrote a post on my blog that took high-level figures, projected them forward and estimated that Dublin would run out of excess housing from the bubble in or close to 2011, while the rest of the country would reach the same point a few years later.

By late 2010, this had already come true, with a dwindling number of units available to rent in the capital, and throughout 2011 rents had clearly stabilised in Dublin. The same happened in the sales market in 2012 and 2013, again starting in Dublin but then spreading. But even into 2014, the dominant narrative when it came to housing policy was still about ghost estates, mortgage arrears and negative equity - in other words, legacy issues around excess homes, rather than current and future issues about shortages.

Clearly, it is important to deal with those in mortgage arrears and negative equity. Nonetheless, public policy needs to be able to deal with a reality that is far more than one-dimensional. In particular, it is possible for there to be too few homes of one type or location and too many of another at the same time. This inability for the policy system to entertain a more nuanced picture of housing has cost the country up to five years as the housing crisis has worsened.

One of the more alarming figures in the latest report was that there were just over 3,000 homes available to rent on the market nationwide on May 1 this year. In Dublin, the figure was just over 1,000 units. On the same day three years previously, in 2013, there were more than twice as many homes available to rent in the Dublin rental market - and that was at a time when rents were already rising rapidly and shortages were already there in the capital.

Nationwide, the fall has been even greater. The total number of homes on the rental market has fallen from nearly 12,000 three years ago to just 3,000 now. We have far fewer homes on the rental market - at a time when, the 2016 Census is likely to show, we have far more renters than ever before.

But dwindling stock is only half the problem. In principle, it might be possible for people to find their homes a lot faster now. Economists think a lot about 'search and match' in markets like the labour market and the housing market. And, theoretically, it could just be that the internet or some other factor has meant lots of properties are listed for rent, but they don't stay online as long, because it takes less time for homes to find their match.

Unfortunately, the figures don't back up this optimistic possibility. The graph to the left shows the total number of rental listings nationwide for the first three months of each year from 2008 to 2016. In the language of the trade, this shows the flow, not the stock.

And what it shows is a dramatic reduction in the number of rental listings over the last seven years. The fall has been steady and persistent. Whereas over 42,000 rental ads were posted in the first quarter of 2009, this had fallen to just under 35,000 by 2012.

Perhaps, in a country with roughly 300,000 homes in the private rented sector, this was something like equilibrium - the typical rented property turning over once every two years.

Since then, though, the number of ads posted in the first three months of the year has halved again and the typical rental property now changes hands close to once every five years.

Those who stay in their rented homes for longer out of choice certainly benefit from this. But those who stay because of a lack of other options - and more importantly, those who are setting up a household or who are looking to move for work or other reasons - are the clear losers.

The first week of his tenure has shown the new Minister the size of the task in front him. Let's hope he's up for it.

Ronan Lyons is assistant professor of economics at Trinity College Dublin and author of the reports

Sunday Independent

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