Housing crisis grips Ireland a decade after property bubble burst

Dublin

FOR GENERATIONS, the Irish took for granted that affordable, plentiful housing was the bedrock of their economic security and government policy. Not long ago, Ireland had one of the world's highest rates of homeownership. The past several years have torn up those assumptions, leaving the country in the grip of a worsening housing crisis.

Home ownership has dropped, evictions and homelessness have climbed sharply, surging demand for rental units has led to a shortage, and soaring rents are fodder for daily conversation, political campaigns and street protests.

In the past few years, Dublin has become one of the world's 10 most expensive places to rent, ahead of cities like Tokyo, Sydney and Singapore.

Deutsche Bank reported in May that typical rent for a mid-range, two-bedroom apartment in Dublin was US$2,018 a month, 23 per cent more than in 2014 - the biggest increase of any city in the top tier.

"Almost everybody I know who is renting has been given notice to quit at some point. It happens so often that it's scary," said Carly Bailey, who had been homeless twice before she was elected to Dublin City Council this year. "I don't know where to put my daughter down for school. People like us just don't know where we are going to be in a few months' time."

The crisis has been particularly severe for young adults who see little choice but to spend much of their incomes on rent, and little prospect of being able to save and buy later on. "You have a generation being locked out of the Irish social contract," said Rory Hearne, a lecturer in the sociology of housing at Maynooth University. "A lot of young people are now realising they will never own their own home, and that is a particularly terrible outlook when you live in a country where a house is usually your main asset for retirement."

The chief executive of Ires Reit, Ireland's largest private landlord, said in late-2016: "We've never seen rental increases like this in any jurisdiction" and "I truly feel badly for the Irish people".

Over the next two years, rents nationwide rose about 14 per cent, the government reported.

The Irish division of Savills, an international property company, predicts that rents will increase an additional 17 per cent over the next three years.

"The social and political risks are very high," said Orla Hegarty, a professor of architecture at University College Dublin. "The high cost of housing is now a barrier to inward investment, to emigrants returning with skills, to people hoping to start families and who want to move. We will see that soon in lost growth and a falling birthrate."

For those struggling to pay rents or unable to find homes, the risk is not in the future, but now. Homelessness in Ireland has nearly quadrupled in the past five years, according to the government. Official figures for May showed 10,253 homeless people, including 1,700 families with 3,749 children. Many more, who emigrate or move in with parents or friends, go uncounted.

Even those who can afford their rents find that they have little security in a rising market. Leases can be for as little as six months, and Irish law allows landlords to evict tenants if they want to sell the property, renovate it or move in a family member.

Much of the anger in Ireland has focused on foreign-owned companies like Ires Reit, whose largest shareholder is a Canadian company, or Kennedy Wilson, a California firm, that have bought or built thousands of units in a few years and are expanding their holdings, while paying little or nothing in Irish taxes.

Such companies, often backed by foreign banks, pension funds and real estate companies, have been dubbed "cuckoo funds", for birds that lay eggs in the nests of other species and crowd out their young. But they own fewer than 5 per cent of the rental homes in the country, concentrated at the high end of the market.

Home ownership was long something of a national obsession in Ireland, where memories run deep of 19th-century tenants suffering at the hands of landlords. After the country gained independence in the 1920s, its government went on a building campaign, and later sold many publicly-owned homes to their renters. But by the last decade, Ireland, like the US, had a property bubble built on debt, fuelled by reckless lending and tax incentives. When the bubble burst in 2008, starting a deep recession, real estate prices plunged, people defaulted on loans, construction came to a halt and Irish banks, deeply indebted to foreign banks, flirted with insolvency.

Home ownership fell from about 80 per cent of households to fewer than 70 per cent - still ahead of peers like Britain, France and Germany, but lower than it had been in Ireland in four decades.

The government was forced to borrow US$77 billion from the International Monetary Fund and the European Union, and impose austerity measures on its people. US investment banks bought up mortgage loans at a discount, profiting as the market recovered.

The number of households renting privately owned homes doubled, to almost 20 per cent, according to Focus Ireland, an advocacy group that works on homelessness and housing. Adding to the rising demand, Ireland has become a magnet for major international companies, pulling thousands of foreign renters into the market. It now costs far more to rent than to pay off a mortgage. The property website daft.ie recently reported that the monthly mortgage payment on a two-bedroom house in the city of Cork would be about US$700, but the same house would cost almost US$1,300 to rent.

Home prices have rebounded since the recession, but homeownership has not, in part because people paying high rents often cannot save for down payments.

To curb dangerous lending and borrowing, the Central Bank of Ireland in 2015 capped mortgage loans at about 3.5 times the buyer's annual income, but the median price is about 5.6 times earnings.

"We are seeing a growing number of people in the private rental market who do not want to be in it because they would rather buy but cannot afford to," says John-Mark McCafferty, the chief executive of Threshold, a tenants' rights group.

Despite such high demand for housing, new construction continues to lag, depressed by tight mortgage lending, high building costs and land-hoarding by speculators. While the government estimates that 30,000 to 35,000 new housing units are needed annually, in June the investment firm Goodbody Stockbrokers predicted that only 21,000 would be completed this year. To bridge the gap, there is an increasing clamour for the centre-right government of Prime Minister Leo Varadkar to build publicly owned housing.

The government started a "Rebuilding Ireland" programme three years ago, with a goal of ultimately adding 25,000 units a year to the housing supply, but critics say it is not enough, and rents continue to rise. NYTIMES