Sunday 25 February 2018

Squeeze is worst in Dublin and close by

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

Ronan Lyons

On August 1 2009, there were 23,400 properties available to rent nationwide. On the same date in 2016, there were just 3,600. This 85pc reduction means that for every 20 properties on the market seven years ago, looking for a renter, there were just three on the market this year.

If that wasn't grim enough, there are more renters now than seven years ago. There was a dramatic increase in renters between the 2006 and 2011 censuses and it is likely that when the full figures for the 2016 census are released early next year, they will show further growth in the renting population.

So while demand has continued to increase, supply has fallen and fallen dramatically. This big-picture trend makes a lot of the trends we see in the rental market - and in the wider housing market - much easier to understand. The rise of the 'homeless family', living in a hotel or guesthouse, is due more to the lack of accommodation than the increase in rents.

But the increase in rents should not be dismissed. The map accompanying this piece shows the increase in the average monthly rent for a three-bedroom house. There are some counties where the rent has changed very little. In Donegal and Mayo, for example, rents have increased by just 3pc in the last five years.

In other parts of the northwest, and also in the southeast, the rent of a family home has increased by about 15pc.

However, in most rental markets, the increase has been significantly larger. In Meath and Kildare, the average rent has increased by almost 50pc - or over €300 a month. The increase in Cork city has been similar in size.

But it is in Dublin that the largest increases have been seen. In Dublin 8, the average rent of a three-bedroom home has increased by 64pc, or almost €675 a month. Other central postcodes have also increases of this size. Indeed, only in Dublin 10 (Ballyfermot) and Dublin 17 (Coolock) has the increase in the rent of a family home been significantly less than €500 a month.

An obvious pattern in the figures is that the more expensive the market, the bigger the increase has been, with the largest rise of €765 in Dublin 2. On the one hand, this may seem an almost inevitable consequence of urban areas being naturally better job creators. Density - people clustering together - is one of humanity's best inventions.

But to assume that more demand will automatically lead to higher rents is too fatalistic. It ignores supply. The link between high rents and access to jobs reflects an on-going problem - not only in Ireland but in many other high-income countries - where new demand is not met with new supply.

This is due to what are termed land-use restrictions, such as not being allowed to build above certain heights or not being allowed to change the use of a particular site.

While that is the main pattern, it is not the only one. There is an interesting contrast within the Midlands. On the one hand, in Offaly and Longford, rents have risen by between 20pc and 25pc. In Laois and Westmeath, however, rents have risen by roughly a third. Why have rents in two counties risen by so much more than in two neighbouring counties?

I suspect the answer lies in transport infrastructure, in particular the country's relatively new motorway network. The major towns of Westmeath and Laois are now, by and large, well served by motorways. This makes them closer, in practical terms, to Dublin and its jobs market than before.

On the other hand, the motorway network has largely bypassed counties Offaly and Longford. In other words, we are seeing the motorway network being used as a new pressure valve in the rental market. Without it, I'm not sure where the rental market in the greater Dublin area would be. However, the cost of this - in terms of congestion and extra fuel and time spent - means it can hardly be viewed as a sustainable long-term solution.

Ronan Lyons is assistant professor of Economics at Trinity College Dublin and author of the Reports

Sunday Independent

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