LARGE INTERNATIONAL INVESTMENT funds and Real Estate Investment Trusts (REITs) – or cuckoo funds – are currently buying up houses and especially apartments en masse.
This is pushing up prices and putting new homes beyond the reach of many people.
According to the Construction Industry Federation, in 2019, 95% of new apartments were sold to institutions, leaving just 5% for everyone else. Individuals and couples can’t compete with these multimillion-euro funds.
As a result, an entire generation is being locked out of homeownership and forced to pay rents to investment funds that are much higher than a mortgage.
Rents in Dublin – which have almost doubled in the last 10 years – are now the most expensive in the European Union. This makes Ireland a very attractive option for investment funds that want to maximise profit. But it also means it’s an unaffordable place to live for people on average incomes.
Entire apartment blocks and some estates have been bought up all at once. Herbert Hill in Dundrum, in south Dublin, is a good example. An entire block of 90 apartments was sold to a German investor.
Subsequently, these apartments were leased to the local authority for social housing at a cost of over €2,000 per month per apartment for 25 years. This is an incredibly expensive way to provide homes for people who need them.
Better system needed
It doesn’t have to be like this. Every Government has choices to make.
The Government of New Zealand has chosen to ban non-residents from buying houses to dampen down prices and increase the supply available to people living there. The Overseas Investment Act of 2018 was introduced as a measure to help curb house price inflation.
The Government in Germany has banned Real Estate Investment Trusts from buying up residential property. This decision was taken by the German Government in 2006 specifically to ensure that large international investment funds would not be attracted towards buying up homes and apartments.
The Irish Government introduced the Real Estate Investment Trust regime to Ireland in 2013. They have subsequently chosen to appease big international investors at every turn with favourable tax treatment. This has resulted in rents spiralling out of control and has allowed the housing crisis to run and run.
We have to ask: what is our vision for housing in Ireland? Is it one where apartment block after apartment block is owned by vulture funds who rent them all out for record-high rents to tenants with limited security? Where potential first-time buyers are squeezed out, while favourable tax treatment applies to investors. Where housing is turned into a financial product instead of a basic necessity.
We have a choice
This is the track the current Government has put us on.
Ireland desperately needs a plentiful supply of decent, high-quality homes; where rents and mortgages are affordable; where people have security of tenure and the peace of mind of having a place to call home. To achieve this, we need to take housing policy in a new direction.
There are concrete examples in Ireland of how homes can be delivered that are affordable and within reach. At Dun Emer in Lusk in North County Dublin, Ó Cualann Cohousing Alliance is building homes ranging from €166,000 for a two-bed apartment to €258,000 for a three-bed semi-detached home.
This would mean a monthly mortgage repayment over a 30-year period of €698 for a two-bed apartment or €1,085 for a three-bed house.
Similar affordable housing is being built by Ó Cualann in Cork City and at Ardmore, County Waterford. These are good examples of affordable homes being delivered on public lands and provide a model that could and should be replicated across the country.
However, it is not enough to have a number of small schemes like this scattered around the country – the delivery of homes that are genuinely affordable needs to be scaled up very significantly to meet demand.
The interests of first-time buyers must be put ahead of foreign vulture funds. Tenants’ rights must be strengthened and secured. The State has to shift resources away from subsidies for developers which inflate house prices and start directing these resources towards supplying more affordable purchase, cost rental and social homes.
In particular, we have to think seriously about who should own Ireland’s homes. Like Germany, we should ban Real Estate Investment Trusts from buying up residential property and driving up prices.
This will increase the supply available to first-time buyers who want to own their own home and take some pressure off the spiralling cost of renting and buying a home.
Cian O’Callaghan TD is the Social Democrats spokesperson for Housing.
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