Might landlords be brought within the Crói Cónaithe (Cities) scheme?

The Irish housing crisis has reached a critical point, with the rental sector being hit the hardest. Michael McDowell, writing in the Independent, points out that private landlords in Ireland are exiting the rental market due to rent controls, which limit rent increases to below inflation, and restrictions on the reasons for evicting tenants. The proposed extension of the eviction ban would likely exacerbate the situation, causing the pool of rental properties to shrink and rents for new properties to inevitably rise.

To address the issue, Ivan Gaine, the chair of Property Industry Ireland (PII), suggests opening the Irish Government’s flagship apartment scheme, Crói Cónaithe (Cities), to landlords would make it more viable for developers. Under the current scheme, developers can receive up to €144,000 per apartment to incentivise the building of an extra 5,000 homes, with the requirement that apartments are sold only to owner-occupiers. However, Gaine argued that a mixed-tenure approach, including rental apartments, would make the development more attractive to financiers and potentially easier to fund.

The National Economic and Social Council (NESC) also recommends implementing a National Car Test (NCT)-type system to ensure minimum standards for rental properties, requiring owners of vacant residential properties to rent them out or face penalties. NESC suggests that tax breaks for landlords should be linked to secure and longer tenancies, similar to the Germany model.

At its core, the Irish rental market suffers from a lack of rental homes, leading to a sharp rise in market rents over the last decade. To keep rents stable, the country needs at least 10,000 rental homes to hit the market each month, which would bring the rental market back in line.  Right now, there are fewer than 3,000. This does not allow for annual and biannual turnover, which many tennant face. The government must give serious consideration to activating dormant planning permissions for rental homes around the country to address the housing shortage.

The main issue with Irish rent control laws is their failure to provide a balance between tenant protection and supply-side incentives. The difference between rent rates for movers and stayers began after the introduction of rent pressure zones in 2016, leading to significant problems with the supply side of the market. While tenant protection rules are important, investors need stability and predictability. One way of doing this is to exempt new supply from rent control rules, and another option is to use “third-generation” rent control, which limits the rate of rent increase within each tenancy.

The Irish housing crisis requires a multifaceted approach that gives tenants adequate protection, while being mindful not to disincentivise new supply. A stable and predictable environment for investors is crucial to attract investment in the housing market. By creating a balance between tenant protection and supply-side incentives, the Irish government can begin to solve the housing crisis. It finally feels like policymakers are starting to understand the problem, which is a critical first step towards finding solutions. 

Ian Lawlor
086 3625482

Managing Director 
Lotus Investment Group