Politics and Property - The RQTwo House View
Land reform, housing, and tenant’s rights have been a long-standing feature of politics in Ireland and it looks set to increasingly feature as an issue over the coming years. Sinn Fein have won the popular vote leading with housing as an issue, and the establishment parties now need to get in sync with this policy.
Armed with the Sinn Fein manifesto (PDF Download) as a base case, let’s look at what is actually promised and how the compromise might be delivered in a coalition government.
The issues can be broken into 3 elements, and whilst they are all captured under the heading of housing, this is a crude broad categorization.
1. Public Housing
2. Homelessness and rough sleeping
3. Private sector housing and the mortgage crisis.
Public Housing
Any potential government looks set to greatly expand the state’s activity in buying and owning residential real estate to meet the demand for public housing. The Sinn Fein program calls for the following targets :
20,000 public houses per annum at a cost of €6.5b
Public land to be prioritized for public housing
Increase Part V to 25%
7% of public housing to provide Universal Access.
End the use of JV’s and PPP to deliver this housing
The provision of public housing by the State is a vital element of a balanced society and this increase in supply is an important policy that is likely to be adopted by a wide range of parties. The private sector is not designed or set up to deliver and manage public housing and the scaling up on this sector via Housing Associations is nothing to fear.
Public housing will be expanded and invested in by all parties in a future government, and it’s unlikely to be left to the private sector. To deliver on the required numbers, we expect the state to get further involved in the direct leasing and acquiring of property. This will put them into competition with the current pension fund buyers for the scarce stock.
UK Comparison - The Housing Associations.
There are 2.8m units/bed spaces in the UK and this has no negative effect on the private property sector. This sector grows at a rate of 1.1% per annum. The Irish Housing Association sector currently has 27,000 units and is severely lagging behind the UK.
Homeless and Rough Sleeping
The sight of people sleeping rough, or dying on the streets has brought the homeless issue to boiling point. Sinn Fein, indeed any new government needs to deal with this and the only credible pathway is through increased government expenditure in Healthcare, Social Issues and Accommodation.
Dublin (and Ireland) needs to be an attractive city to live, work and invest in and this level of investment in the homeless is welcomed to manage the challenge.
Private Sector Regulation
The regulation and state management of the private rental sector looks set to increase under any new government. The principal goals of this regulation are to protect tenants rights and to increase environmental and quality standards - which are all good aims. Sinn Fein have proposed the following in their manifesto.
Tax credit for all tenants equivalent to 1 months rent.
3 year Rent Freeze on all existing and new tenancies.
A reduction in the State leasing of individual apartments designed to free up stock.
Increased tenant protections.
Rental increased linked to CPI.
NCT Style certification and regulation of all rental properties.
Active Local Authority inspection of 25% of properties.
Government regulation of the private rental sectors looks set to continue the trend towards the institutionalization of ownership. The new regulation costs and standards are set to be onerous on the individual private landlord and this will continue to drive them away from the sector.
The future development of the private sector in Dublin will continue to be dominated by institutional investors. Private rental property remains an excellent asset class for long term investors who are attracted to the robust nature of the underlying rental income, and the inflation proof nature of the asset. The proposed policies outlined by Sinn Fein add an element of uncertainty to the near term outlook for the market, but the underlying supply and demand dynamics, driven by Dublin’s positioning as the tech capital of Europe will continue to be the dominant theme.
The PRS rental sector in Dublin is dominated by non-Irish workers, and this trend looks set to continue as the multinationals, both established (Facebook, Amazon, Google, Microsoft, Salesforce) and emerging (Revolut, TikTok, Coinbase) continue to increase their investment and headcount in Dublin. This trend will be the principal driver of the sector over the coming years, and the supply of new units is the only solution to the market pressures. Today’s Irish Times piece only reinforces this view.
It is our view that any measures taken by a government that threatens this supply will be watered down to cater to the growing demand needed to maintain Dublin’s growth as a city of global importance. Ultimately, the private sector construction and development of new PRS developments is the only solution to the housing needs of the new international workforce.