HOUSING AFFORDABILITY: IS THE REAL PROBLEM IN THE PRIVATE RENTED SECTOR?

June 26, 2004

News

26/06/2004



HOUSING AFFORDABILITY: IS THE REAL PROBLEM IN THE PRIVATE RENTED SECTOR?

Article by Tony Fahey in the ESRI Quarterly Economic Commentary, Summer 2004

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Policy on affordable housing in Ireland has been preoccupied with the cost of home purchase for owner-occupiers, especially first-time buyers, and has overlooked the more severe affordability problems facing tenants in the private rented sector. Private tenants pay more for their housing each month than do first time buyers and are more likely to experience financial strain as a result of their housing costs.

  • In the period June-August 2003, about 34,000 private tenants in the state, and 25,000 in Dublin, had rent payments in excess of €800 per month. The number of first-time buyers with mortgage repayments of over €800 per month was about 13,000 in the state and 7,500 in Dublin – roughly one-third the number of private tenants in that payment category.
  • In 2002, 28 per cent of private tenants had rent payments which exceeded a conventional housing affordability threshold (namely, where housing costs absorb more than one-third of household income). Only 11 per cent of first-time buyers had mortgage payment costs which exceeded the same threshold.
  • 20 per cent of private tenants considered their housing costs to be a heavy burden, compared to 11 per cent of first-time buyers and 13 per cent of all mortgage holders.

To get a full picture of housing affordability in Ireland, it is necessary to look beyond the rise in house prices since the mid-1990s and take account of two other developments which have narrowed housing choice for low income households: the decline in the relative size of the social housing sector and the sharp rise in the level of private rents, both of which have emerged since the late 1980s.

Housing policy needs to adopt a broader, tenure-neutral view of housing affordability and pay more attention to affordability problems in the private rented sector. For example, the provision for 10,000 additional units of ‘affordable housing’ agreed in the current National Agreement, Sustaining Progress, should be amended so that it targets the private rented sector as well as those purchasing for owner occupation.