Housing Sector

Into the Unknown

Ireland had a target of around 35,000 new homes to be delivered in 2020, aiming for supply to catch up with steadily growing demand. With the spread of Covid-19, its classification as a global pandemic and subsequent national restrictions to curb the spread, construction slowed. The pandemic had a marked impact on the housing sector with measures such as restrictions in the rental market helping tenants, even if only in the short-term.

Demand and supply of housing stock in Ireland remains a key obstacle to achieving balance in the sector, throughout the pandemic and beyond.

The stunted progress of the Irish construction sector in delivering more stock during 2020 began with the onset of government restrictions in March. Construction sites were required to cease operating by the end of March 2020 and did not recommence operations until the latter part of May 2020.

The number of completions in Q3-2020 indicates that the sector was able to make up some of the ground lost during Q2. The CSO indicates that total new dwelling completions for the third quarter of 2020 were 5,118, representing a decrease of 9.4 per cent on the same period in 2019. It does however represent an increase of 55 per cent on Q2-2020, confirming completions were dramatically affected by Covid-19 and the associated restrictions. With the worst effects demonstrated in Q2-2020 completion numbers, the sector began to catch up again in Q3.

A similar narrative unfolded globally with a slowdown in construction productivity during the initial phase of Covid-19-related restrictions in Q2-2020. In the UK construction output fell by 40 per cent in April 2020 and in the US, it fell by 30 per cent in the same period. There is evidence that as countries implemented ‘lockdown’ procedures during the year, real estate activity fell including rentals and appraisals / inspections.

Unfortunately, 2021 is already off to a shaky start with the recent announcement that construction must once again cease at least until the end of January 2021. This could hamper the industry’s attempts to make up some of the ground lost during 2020 closures and reduced capacity due to social distancing requirements on site.

With progress set to be curtailed in January with Government announcing all non-essential construction is to cease, there are some exceptions including what is described as social housing projects or “designated as essential sites by Local Authorities”.

Although the sector could not deliver as much as anticipated during 2020, it did surpass earlier pessimistic outlooks for the year. Prices held more firm than initially anticipated. The month-on-month change in the house price index shows a slight fall in the month from January to February (-0.1 per cent) and from March to April (-0.1 per cent). Although prices picked up month-on-month from May onwards, overall prices decreased by 0.4 per cent nationally in the year to October 2020.

The cost of renting also rose for another consistent year to the end of Q3-2020 marking a year-on-year rise of 1.2 per cent overall. There was a notable fall in rents in the month from March to April 2020 (down 2.1 per cent) and although they recovered considerably during the remaining months to October 2020, the rate of growth during 2020 was at a slower pace than the previous year overall. Additionally, for the first time in almost a decade, rents fell in Dublin. Rental prices reached their peak in September but began to fall back again in October (-0.8 per cent).

Covid-19 brought with it a myriad of complexities and with each wave of new infections, new restrictions including the moratorium on evictions extended from Q2 2020 offering some protection for tenants but likely to create some difficulties for landlords.

With the Government encouraging people to stay at home, limit movement and interaction with others, and to work from home where possible, people were forced to spend more time than ever before in their properties. Homeowners could take the opportunity to renovate where they had the time and money, but renters generally rely on landlords to identify and facilitate such projects.

The Housing (Standards for Rented Houses) Regulations 2019 stipulate a prescribed set of minimum standards for rented accommodation in a range of categories including structural, ventilation, and fire safety, among others. They represent not only a chance for renters to enjoy a minimum standard of safety and comfort in their rented homes, but also a statutory obligation for landlords to provide this.

Fire safety is an area of consistently high non-compliance across the regulations. A sample of over 1,000 rented dwellings inspected by Inspex on behalf of Local Authorities in 2020 shows that less than 1 per cent were compliant with Regulation 10 (Fire Safety) at the first inspection stage. However, a cumulation of follow-up inspection data shows that after the follow-up stage it is observed that almost 49 per cent of properties are compliant with fire safety requirements.

Although it is encouraging to witness safety standards improve throughout the inspection process, fire safety does remain a concern and requires careful monitoring through the Local Authority PRS inspection process.

The construction sector in Ireland proved during the tumult of 2020 its ability to adapt quickly to new health & safety guidelines and restrictions to limit and contain Covid-19 spread. Data pertaining to Regulation 10 compliance, as outlined above, shows that landlords in the rented sector are similarly capable of complying with regulatory requirements when inadequacies are highlighted.

Unlike the construction sector in 2020 that was subjected to the rapid introduction of several new industry requirements requiring quick adaptation, the Housing (Standards for Rented Houses) Regulations 2019 represent a long-term and consistent standard. This consistency gives PRS landlords the opportunity to familiarise themselves and, ultimately, to comply.

Local Authority inspections are a necessary and reliable means of determining vulnerabilities that might exist in rented accommodation. In some cases, failure to comply with the regulations can be due to any number of factors. For the most part landlords appear keen to comply and upon receiving the summary of non-compliant areas set about rectifying problems where required.

National and sectoral responses to Covid-19 globally have shown how Government measures can impact individuals and industries. The additional problems brought on by Covid-19 highlights the importance of consistent checks of properties to ensure compliance, as landlords are statutorily obliged to do.