Context for Reform of the Private Rented Sector

Rory O’Donnell, NESC

Generation Rent : the Future of the Private Rented Sector in IrelandThreshold, RIA, 16 June 2015

Three Major Policy Advances

1. Goals of housing policy 2. Scale & nature of the challenge3. Social Housing Strategy

Three Major Policy Advances 1. Goals of housing policy:• Affordability • Sustainability• Inclusion (SHS, p. 17)

2. Scale & nature of the challenge3. Social Housing Strategy

Three Major Policy Advances 1. Goals of housing policy 2. Scale & nature of the challenge:

‘one-quarter to one-third will find it increasingly difficult’ (SHS, p. 17)

3. Social Housing Strategy

Three Major Policy Advances 1. Goals of housing policy 2. Scale & nature of the challenge3. Social Housing Strategy–Resumed supply & Task Force –Promise policy to manage Buy-to-Lets–Promise policy for private rental sector

Four NESC reports 2014-15 1. Social Housing at the Crossroads: Possibilities for

Investment, Provision and Cost Rental2. Homeownership and Rental: What Road is Ireland

On?3. Ireland’s Rental Sector: Pathways to Secure

Occupancy and Affordable Supply4. Housing Supply and Land: Driving Action for the

Common Good (forthcoming)

Understanding Ireland’s Changing Tenure Mix • The long-run role of policy & credit availability• Recent role of housing bust & credit freeze• The advantages of homeownership over rental

- given Ireland’s housing & rental system• Role of rent supplement & housing supports • Uncertainty facing tenants, landlords, investors

& public actors

It’s systemic not just conjunctural & sectoral

Homeownership• Developers claim its not

profitable to build at current prices

• The price at which it will be profitable to build will not be affordable for many

Rental• Landlords claim a loss at

current rents • The rents & regulations at

which investment will be profitable will be unaffordable & unattractive to many

What links these is the unstable, land-dominated market & failing supply system

The Current Dualist Framing Rent Control Incentives for

Developers/InvestorsOR

The Current Dualist Framing Rent Control Incentives for

Developers/InvestorsOR

Need policy on both fronts

From rent control to secure occupancyand

From ad hoc incentives to coherent supply-side subsidies with conditionality

Secure occupancy Supply-side supports with conditionalityand

Putting Secure Occupancy & Incentives in a Wider Context

Active land & housing supply managementSecure occupancy Supply-side supports

with conditionalityand

Supply-side subsidies with conditionality

Putting Secure Occupancy & Incentives in a Wider Context

Active land & housing supply managementSecure occupancy Supply-side supports

with conditionality

Permanent, affordable, rental as a guiding framework for conditional supply-side subsidies

and

Enhancing the Role of the Private Rental Sector: the Elements

Active land & housing supply managementSecure occupancy Supply-side supports

with conditionality

Permanent, affordable rental as a framework for conditional supply-side subsidies

and

Social Housing Expansion

Resolution of Buy-to-Let

Arrears

From rent control to secure occupancy

Secure occupancy Supply-side supports with conditionalityand

• Market-sensistive rent regulation•Make leases indefinite•Sale no longer ends a tenancy•Improve dispute resolution

From rent control to secure occupancy

Secure occupancy Supply-side supports with conditionalityand

•Market-sensistive rent regulation•Make leases indefinite•Sale no longer ends a tenancy•Improve dispute resolution

•Affordable housing for intermediate households•Student & elder housing•Tax reform of rental income •Vacant space•Reducing cost of construction

Pathways to Permanent Affordable Rental Housing

Pathways to Permanent Affordable Rental Housing

A strategy that is more than the sum of its parts

Direct Public Influence on Supply

FinanceRegulation &

Cost

Interdependent Elements of a Housing Policy

Housing market & rental system are relatedDualist & Speculative

• Unstable prices• Rents rise with asset price for

regulatory & market reasons• Tenants are involuntary & temporary• A ‘housing ladder’• Pressure to borrow, lend & give

demand subsidies • Landlords motivation is capital gain

as much as income stream• They need flexible tenure to achieve

capital gains

Unitary & Land Managed• More stable prices• Predictable rents for regulatory &

market reasons• Tenants are voluntary & long-term• Less ‘housing ladder’• Finance less housing-based,

reliance on supply-side policy• Landlords motivation is income &

long-term asset security• They can bear long tenancies &

predictable rent uprating