Housing Affordability across Europe: mixed picture for Ireland

July 18, 2023

Macroeconomics
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Research published today by the ESRI explores the housing affordability challenges faced in Ireland by comparing housing-payment-cost-to-income ratios for Irish households with similar households in 14 other European countries. This work was funded under a research programme with the Department of Housing, Local Government and Heritage.

Focusing only on households with housing payment costs (either mortgage or rent payments), the research finds that overall, housing-payment-cost-to-income ratios in Ireland are not out of line with those observed across Europe. On average Irish households pay one fifth of net income on housing payment costs; only Norway, Denmark, Portugal, Austria and Sweden display better average housing affordability. However, this overall picture masks considerable differences across groups.

Key findings of the report include:

  • Overall Irish households are less likely to be paying more than 30% of income on housing costs than European peers:  Elsewhere in Europe, 20% of households face housing costs greater than 30% of their income, whereas the equivalent share in Ireland is lower at 15%. The share of households who pay more than 40% of income on housing costs is similar in Ireland to elsewhere (8%).
  • Mortgage holders across European countries are consistently concentrated at the higher end of the income distribution: In Ireland, along with Belgium and Germany, this is most pronounced, with over two-thirds of all mortgage holders in the top two income quintiles. Irish mortgage holders rank 3rd highest for the share of income spent on mortgage repayments. Despite this relative position, few households pay more than 30% of income on mortgage payments.
  • Renters[1] in Ireland face the lowest rent-to-income ratios (RTI) on average: This finding is driven by lower income Irish renters paying a lower share of income on rents compared to European peers; those in the lowest income quintile in Ireland face an average RTI 10 percentage points lower than compared to their European counterparts (26 vs 36% of income). Extensive rental supports in Ireland have had a clear impact in sheltering lower income households from more significant affordability pressures. In addition, high levels of outright ownership amongst Irish households in the lowest income quintile (half of whom are aged 65+) means that more than half of these lowest income households in Ireland face no housing payment costs at all so are not included in this analysis.
  • However, middle-to-higher income renters in Ireland are more likely to face high housing costs than their European counterparts: 14% of renters in the 4th income quintile in Ireland pay more than 30% of income on rent vs 3% on average elsewhere. 16% of renters in the 3rd income quintile in Ireland pay more than 30% of income on rent vs 9% on average elsewhere. More than half of private sector renters not in receipt of housing supports in Ireland fall within these income bands.
  • Greater urban/non-urban divide in Irish rental sector: The Irish rental sector sees one of the largest urban/non-urban divides; a 5.5 percentage point gap in average RTI compared to a difference of just 2 percentage points elsewhere in Europe. While this reflects the pressures faced by urban households, it also reflects that Irish households renting in non-urban areas have lower RTIs compared to European peers. Amongst mortgage holders the gap is less apparent.
  • Affordability and availability concerns also impact the formation of new households - indications Ireland faces significant challenges in this regard: Ireland has the 4th highest rate of homeownership for households aged 40+ (just under 80%), but only the 10th highest for households aged <40 (34%), resulting in one of the biggest gaps in ownership rates between younger and older generations. More than one-in-four young adults aged 25-34 in Ireland remained living with parents in 2019 and Ireland saw the largest rise in this share between 2015 and 2019.

Commenting on the report, author Rachel Slaymaker of the ESRI stated:

“While elsewhere in Europe rising affordability pressures have been primarily concentrated amongst the lowest income rental households, in Ireland extensive rental supports have mitigated the effects for these households. However, in the market price rental sector, affordability pressures remain elevated and middle-to-higher income renters in Ireland face greater affordability pressures than similar households in Europe.”

[1] Full rental sector inclusive of those in social housing, in receipt of housing allowances and private sector renters paying full market-price rents.