IRISH HOUSING POLICY - THE LATEST

Irish housing policy lacks any coherence

Another week, another housing policy change. Last week the Minister with responsibility for housing announced another significant change in housing policy. In the Programme for Government a commitment was given to continue to review the effectiveness of the Rent Pressure Zones (RPZs), and I guess what happened last week is consistent with that commitment. There had been suggestions in recent weeks that Government might scrub RPZs altogether, but instead they are now effectively being extended to the whole country. However, interestingly those who are ideologically pre-disposed towards rent controls are not in the least bit happy largely because landlords have been given more flexibility in setting rents. One of the main changes is that landlords will be able to reset rents when tenancies end of the renter’s own volition, instead of being tied into 2 per cent increases.

Reading the press release from the Minister is not terribly enlightening or clear, but that is totally consistent with many of the measures introduced by the various governments since 2011. There have been so many changes of direction in policy and so many interventions, one can be justifiably confused about what housing policy is.

RPZs were introduced in 2016. CSO data show that between May 2016 and May 2025 private rents have increased nationally by 63.2 per cent. Although these are national data and cover RPZs and non-RPZ areas, it is hardly a ringing endorsement of the concept of rent controls. At the launch of the Central Bank’s Financial stability review the Governor Gabriel Makhlouf said that the regulator had not yet had the time to adequately assess the latest changes to policy, but that they do know from international experience that rent controls have an impact on housing supply. I assume this a negative reaction to the extension of RPZs everywhere, but it was an opaque response.

The Minister stated that the main reason for the changes is to increase the supply of apartments and that there is a need to build 50,000 homes per year. That is a conservative estimate of housing need at this juncture, given the mess that is the housing market.

I may be proven wrong, but I cannot see this week’s changes bring forth the sort of supply that is required. There is a lack of serviced land; the water and energy infrastructure is not up to the task of supporting the level of new housing supply that is required; the planning system is not fit for purpose; NIMBYism is a national plague, which cowardly politicians are not prepared to address; the financing model for development is not fit for purpose; and there are question marks over the capacity of the construction sector to deliver what is required. This last point is the one that I would have least concern about, given that in the not-too-distant past we delivered close to 90,000 residential units. Different times, but it should still be possible.

On the question of a financing model for development, surely the sort of market failure that currently characterises the housing market warrants significant State intervention. We did it back in 2009 in the face of the collapse of the banking system, and again during Covid.

The reality is that at the end of April there was close to €164 billion of household deposits sitting in the uncompetitive banking system delivering little if any return to depositors, and in fact negative real returns. I wonder could these deposits be re-directed in a safe and secure manner to address the financing of housing.

We need to explore the possibility of issuing bonds to the public to fund housing development with State guarantees provided, offering rates of return well more than that being paid by the uncompetitive banking system. Fiddling around with the rental market is a waste of time, particularly given that close to 90 per cent of renters aged between 25 and 49 want to be homeowners. Addressing supply in all segments of the residential market needs to be given crisis-time priority, because it truly is a national crisis.

Many of our younger generation are disillusioned and angry about housing and I don’t blame them in the least. Successive governments and ministers have sat by and presided over this policy failure, and they should be forced to do something radical or pay the price that their failure deserves.