It is accepted on all sides that we have a major issue with the supply of affordable accommodation, for purchase, and more specifically for renting, in this country. The problems of recent years are at the opposite end of the scale to the problems of a decade ago, in the aftermath of the financial crash. The problems then were caused by the dramatic fall in the price of property which plunged tens of thousands of home owners into negative equity, and half built ghost estates were left lying idle as property construction came to a shuddering halt.
Fast forward a decade, and ‘housing’ is now top of the list of issues of concern to most people, but for the opposite reasons. In our discussions with a large number of Galway based auctioneers over recent weeks, a number of common themes, and potential solutions, were raised.
However, identifying a problem, and devising a solution, are very different challenges. In the rental market, there is a chronic shortage of supply, and incentivising investors to remain in, or enter, the market is one solution that will help the situation. In an era of ever increasing populist politics, it may not be popular to say this, but, people who are willing to purchase property as an investment should be encouraged to do so.
Estimates suggest that for every three investors leaving the market, only one is looking to enter. Based on the anecdotal evidence from Galway based auctioneers, this figure could be closer to ten leaving for every one entering the market.
Contrary to the broader media narrative on the property rental market, most of these landlords are not greedy, and are just grateful to have tenants who pay their rent and get on with things. But for a number of reasons, landlords are exiting the market in record numbers, and this is making the situation much worse.
There are a variety of reasons why this is so, including rental legislation (where landlords feel they are losing control of properties which they have bought ), higher interest rates, strong prices being achieved, and high taxation on any profits earned. At each stage, government intervention in the rental market has had the opposite effect to that intended.
Approved housing bodies buying housing stock
Another factor adding to the problem of increasing house prices, and lack of rental accommodation, is the decision of local authorities and Approved Housing Bodies to purchase a significant number of properties for social housing needs. The difficulty here is that for every house purchased in this manner, it is one less house available for a private purchaser, and one less potential house available in the rental market.
So while the impression is given of solving one aspect of the housing problem, the provision of social houses, it makes life much more difficult for private purchasers and those hoping to invest.
The proposed solutions from Galway-based auctioneers involve:
tax incentives to keep small landlords in the market, and to encourage new investors into the market, even for a limited time period of five to seven years. We need to improve infrastructure in services, water, waste and transport to facilitate the level of construction required.
Reduce taxes on developers to increase supply in vital areas.
The planning process is too complicated and lengthy, and many dealing with local authority planning departments are frustrated at the delays and obstruction involved. Planning departments and utility companies must see there is a crisis in the provision of housing, and they need to facilitate developers and builders in providing accommodation by removing obstacles and streamlining the process. No-one is suggesting a lowering of standards, and all are in favour of high quality residences. The speed of delivery is the problem.
A tax on vacant properties and implementation of a strict register for short term rentals may also bring more stock back to the long term rental market. Recent reports suggest that the government’s plan to free up 12,000 properties for the rental market, through a new registration system for homes that are advertised for short-term lets through online platforms, will prove overly optimistic.
Airbnb hosts who act as voluntary community leaders say their surveys show 90% of Airbnb hosts would rather leave their property idle than rent it out to long term tenants, if they are forced to stop operating on the platform by new laws.
However, a large number of landlords will leave the market when the eviction ban is lifted, and this will add further to the lack of supply in the rental market. If the advice to the government from Galway auctioneers could be summed up in one sentence, it would be to make the planning process simpler and faster to increase the supply of housing and stop penalising landlords who wish to invest in property
.It might not be politically popular with a vocal minority, but it will help solve the problem.
