In recent years, Ireland has witnessed a seismic shift in its private rented sector, with a notable decrease in the number of landlords. One of the primary drivers behind the diminishing numbers of landlords is that property ownership has become increasingly challenging.  While rent control policies are well-intentioned, policy makers must avoid the unintended consequences.

While the RTB data shows that private non institutional landlords are the single largest landlord set in the market, a report from IPAV & IPOA shows private investor participation in the market dropping from 19.9 per cent of total mortgage lending in 2006 or €7.9 billion to 1.4 per cent in 2021 or €143 million.  This trend has significant implications for the broader housing market.

One of the primary drivers behind the diminishing numbers of landlords in Ireland is that property ownership has become increasingly challenging due to rising costs of acquisition and maintenance, coupled with stagnant rental yields.

Following years of significant rental inflation, Irish Rent Pressure Zone (RPZ) legislation or rent control was introduced on 24 December 2016.  The legislation was designed to limit landlords, in designated areas, from increasing rents by more than 4 per cent per annum.  In 2021, the 4 per cent ceiling was changed to 2 percent or a maximum of 2 per cent if inflation was higher than that.  Separately new housing stock not previously let and new tenancies in properties not let in the previous two years are exempt from these controls.

Rent control is a contentious topic anywhere a housing market faces challenges related to availability, affordability and increasing rental costs.  So not just in Ireland.

While its supporters argue that rent control provides relief to renters, critics highlight several disadvantages associated with this type of intervention in the housing market.

Critics argue that rent control does not effectively address the root causes of housing affordability and disproportionately benefits certain groups. For example, although rent control has been shown to increase stability and affordability for tenants in controlled units, some studies show these benefits are offset by greater costs in the uncontrolled rental market because of reductions in the overall supply of rental units.  This means that new renters entering the market have fewer units to choose from and face higher costs.

One of the main disadvantages with rent control is the restriction on a landlord’s ability to adjust rents in line with market dynamics and inflationary pressures. By capping rent increases, landlords find it challenging to cover rising operating costs, such as maintenance, insurance, and property taxes, thereby eroding  rental yields and profitability.  Additionally, mortgage interest increases make it untenable for many landlords to continue renting property, resulting in these properties being sold.  As investors will not purchase where rent is restricted, the number of properties available to rent falls.

The decreasing number of landlords in Ireland’s private rented sector underscores the complexities inherent in balancing rent control policies with the need to maintain a sustainable rental market.  Landlords that historically charged rents under market rate that are subject to minimal increases under RPZ regulation are exiting the market in greatest numbers.  These landlords are being replaced in part by new properties at much higher rents owned by institutional landlords.

While institutional landlords bring certain efficiencies and economies of scale to the rental market, their rise should raise concerns about how these landlords wield considerable influence over rental prices and housing availability.  The dominance of institutional landlords in the rental market stifles competition and exacerbates affordability challenges.

While rent control policies are well-intentioned and aim to address the affordability issue, policy makers must avoid the unintended consequences that exacerbate affordability, availability, disproportionately affect smaller landlords and undermine the rental market as a whole.

The Irish residential housing market is currently characterised by demand far outstripping supply while the demand on the part of international capital for real estate assets is currently unsatiable. Does this appetite really push house prices up and squeeze out owner-occupiers?

Over time, Government policies changed from being housing providers to being ‘facilitators.’  These policies have left governments somewhat accountable to investors, worsened housing affordability, accelerated a decrease in homeownership and a simultaneous increase in private renting.

The financialisation of housing refers to the transformation of housing and real estate markets by corporate finance; hedge funds, private equity, banks, insurance and pension funds, and other financial intermediaries with massive amounts of capital to invest.

Global real estate is a more valuable asset class than all stocks, shares and securitised debt combined – which, together amount to just US$170 trillion. The value of all the gold ever mined throughout history pales into even greater insignificance at a mere US$6.5 trillion.

The dominance of financial markets in the housing sector means that houses are algorithmically assessed, bought and sold in bulk landing straight in the portfolios of institutional investors and large-scale landlords while often bypassing the potential homeowner.

The combination of natural increase and positive net migration suggests the population of Ireland is to increase to 6 million by 2050. If the housing stock is to reflect the country’s demographics, close to 50,000 homes need to be built each year until 2050. Simply put, investment funds are needed to meet the country’s housing need and to reduce the burden on the State to deliver this housing.

The arrival of foreign capital in Ireland bypassed domestic banks and established a direct link between foreign capital and the Irish property market. Based on recent investment funding patterns, Ireland needs significant foreign investment to meet its housing need - an extra €75bn each decade, of which €70bn is likely to come from international sources.

Both international and Irish-based studies confirm that Ireland is one of the most expensive places in the world in which to build. The Society of Chartered Surveyors Ireland (SCSI) puts the cost of delivering apartments in Dublin at between €493,000 and €619,000 so the price metrics to sell these units to owner-occupiers just don’t work. Over the past decade, most of the bigger schemes in Dublin have been built on a forward purchase or a pre-let agreement, while the construction players engaged in largescale housing put significant demand on labour and material resources.  This leaves little for the small to medium sized builders to work with to deliver product for the owner-occupiers. All of this creates the perception that owner-occupiers are being squeezed out of the market.

For critics, institutional landlords are the vultures who prey on the wreckage of a monetary crisis and separate house prices and rents from local incomes. On the other hand, some argue, all supply is good supply particularly given the acute housing shortage and the need for investment in both the sale and rental market.

The private rental sector (PRS) in Ireland has trebled in size since 2000 – partly because of declines in social housing provision and also because it has become more difficult to become an owner-occupier.  Until the arrival of international capital, Irelands' PRS had been served by a large number of small landlords. The Rental Tenancies Board (RTB) says that around 86 per cent of landlords own one or two properties and supply just over half the total market. But recent RTB figures show the profile of landlords is changing with 26% of small landlords with 1-2 tenancies intending to sell a property within the next five years. Large landlords (with 100+ tenancies) plan to continue to invest and expand their portfolios.

Those who support the idea the institutional approach professionalises the rental sector might be suprised by the findings of a recent study of 1200 PRS housing standards inspections.  This study reveals 3 per cent of compliant properties and 11 per cent of non-compliant properties is owned and managed by the institutional landlords.

Institutional PRS investment is driven by long term demographic and housing policy trends, resulting in structural affordability problems in homeownership markets and the absence of social housing. In the context of declining home ownership, a declining number of private landlords and significant funding invested in the PRS across a number of public housing schemes, our local authorities have a critical duty to ensure rented accommodation, in their administrative areas, follow the regulatory standards

With significant public investment in the private rented sector (PRS), consistent application of housing standards and fair enforcement of the regulations are needed. Our local authorities have a public duty to ensure rented housing complies with minimum accommodation standards.

A strong and viable PRS is a key component in a healthy housing market while the quality of rented accommodation is critical to sustaining the sector over the long-term. Residential rental properties should provide safe, comfortable and environmentally sustainable homes for those who live in them. Updating and improving accommodation standards and regulating their application are essential.

For the period from 2014 to 2020 the number of private registered tenancies with the Residential Tenancies Board (RTB) increased by 17.39%. All landlords, including AHBs and student specific accommodation (SSA) providers are obligated to register their tenancies. Currently, there are 334,588 tenancies registered.

Local authorities play an important and strategic role in meeting new and existing housing needs through their involvement in the provision of housing by Approved Housing Bodies (AHB’s) and housing units through the Department of Housing, Local Government and Heritage (DHLGH) funding streams, such the Housing Assistance Payment (HAP) and Rental Accommodation Scheme (RAS).

The allocation for the housing programme increased by 230% (€943 million to €3.1 billion) between 2016 and 2021. In 2019 total expenditure on public housing was almost €2.6bn, HAP and RAS schemes accounted for almost 50% while leasing (Social Housing Current Expenditure Programme (SHCEP)) and RAS accounted for almost 30%. The overall capital allocation for DHLGH in the current year is €2.8 billion, an increase of €500 million on 2020.

In the context of the current high-level of demand for a limited supply of rented housing stock and significant public funding invested in the PRS our local authorities have a critical duty to ensure rented accommodation, in their administrative areas, follow the regulatory standards.

Without an inspection system in place, there is no mechanism to ensure that dwellings comply with standards. The purpose of an effective inspection regime is to recognise the importance of safety standards and in this context ensure a rented property complies with the minimum accommodation standards as set out in Housing (Standards for Rented Houses) Regulations 2019.

Substantially increased DHLGH funding has been made available to local authorities each year since 2018 to enable the authorities to build inspection capacity and deploy external contractors such as Inspex. The number of inspections more than doubled from 19,645 in 2017 to 40,728 in 2019.

Annually, the DHLGH expects that 25% of all registered tenancies with the Residential Tenancies Board (RTB), in the administrative area of all local authorities, are inspected to ensure compliance with the Housing (Standards for Rented Houses) Regulations 2019. Where properties are deemed to be non-compliant following inspection, the Housing Acts 1966 to 2014 allocate the responsibility for enforcement of the Regulations to the Local Authorities.

Where properties are deemed to be non-compliant following inspection, the Housing Acts 1966 to 2014 allocate the responsibility for enforcement of the Regulations to the Local Authorities. Failure to comply with the minimum standards can result in penalties and legal proceedings. With sufficient resources made available, the local authorities are now more likely to issue Improvement Notices and Prohibition Notices to property owners whose properties breach the Housing (Standards for Rented Houses) Regulations 2019.

Current social housing tenants have existing rights under the Housing Acts 1966-2019 and the provisions of the Housing (Standards for Rented Houses) Regulations 2019 apply to all local authority dwellings. While social housing is regulated under the above Acts, private rental tenancies are regulated under Residential Tenancies legislation. A goal of the ‘Housing for All’ plan is to examine whether the social housing sector requires independent regulation.

Consistent application and fair enforcement of standards is critical to sustaining the PRS over the long-term. A proficient deployment of IT means that Inspex provides its local authority clients’ consistent inspection and verification services when capturing, analysing, and determining the condition of private rented dwellings and in particular confirming whether minimum accommodation standards are met under the relevant housing legislation.

Student Specific Accommodation (SSA) is housing built or designated for students.  This includes purpose-built student accommodation (PBSA) and accommodation that is let for the sole purpose of providing accommodation to students during the academic year.  While PBSA is an important component of the government’s housing strategy, its critics argue that PBSA is built for profit and not according to what students need.

In recent years, the unprecedented growth in those participating in higher education – 168,000 in 2014 to an estimated 193,000 in 2024 has led to an increase in demand for suitable student accommodation.  In tandem, the purpose-built student accommodation sector (PBSA) has seen significant growth, between 2014 and 2020, almost €950m worth of PBSA assets transacted. From an investment perspective, being relatively insulated from market cycles, student housing performs well.

The Government’s Rebuilding Ireland Action Plan 2016 underlined the importance of providing well designed and located student accommodation to meet demand.  The objective of the Government’s National Student Accommodation Strategy 2017, was to incentivise affordable student housing and ensure an increased supply of PBSA bed spaces -  an additional 21,000 places by 2024 – to ease demand pressures in the private rented sector (PRS).  The strategy also highlighted the significant upfront capital investment required to increase PBSA supply and the necessity to seek the funding shortfall from private developers.  Recent reports indicate of the 8,229 PBSA units completed since 2016, 84% are privately delivered and €87 million in tax breaks granted to the PBSA providers.

The Residential Tenancies Acts 2004 to 2020 deal with the regulation of the mainstream PRS including the approved housing body (AHB) sector.  The Residential Tenancies (Amendment) Act 2019 brought SSA under the remit of the RTB in July 2019. This means that SSA tenants have most of the same rights as private tenants (excluding Part 4 provisions).

Under the Residential Tenancies (No. 2) Bill 2021 students now have safeguards in place around the payment of rent in advance, notice periods and refunds. The Bill ensures any upfront payment upon the commencement of a tenancy is restricted to a total value that does not exceed two months’ rent i.e., a deposit and one month rent in advance. This restriction applies to all tenancies including for students. A student can make a larger upfront payment by way of an opt-out option but they cannot be forced to do so. The Bill also provides that the notice period in respect of student specific accommodation is limited to a maximum 28 days’ notice. All SSA providers must now comply with the law governing rent reviews. From 16 July 2021, for tenancies in a Rent Pressure Zone (RPZ), rent calculations are based on the Harmonised Index of the Consumer Price (HICP) values.

Critics of PBSA development argue there is an over reliance on the private sector for its provision and the reason why the cost of PBSA is rising beyond the reach of the average student. In terms of rents charged for accommodation within PBSA schemes for the 2020/2021 academic year, rates varied depending on schemes but the average advertised headline rent in Dublin was approximately €9,000 for 39 weeks in line with the previous year. Some operators offer incentives to take-up accommodation and as such, the average effective rent was about 2% less overall.

More recently, PBSA providers report a lack of student demand that has led to Dublin City Council (DCC) granting permission to convert student beds to short-term lets. These change-of-use decisions have led to some serious accusations that DCC is perpetuating the student housing crisis.

Purpose-built student accommodation is defined as housing built or designated for students.   Between 2014 and 2020, almost €950m worth of PBSA assets have transacted in Ireland and €87 million given to the private operators in tax breaks.  Clearly PBSA is an important component of the government’s housing strategy but its critics argue this is housing that is built for profit and not according to what students need.