Mr. O’Brien has highlighted the pressing housing issue in Ireland and the government’s commitment to addressing it by implementing effective measures to attract and retain good landlords. However, the source of his information regarding the ownership of rental homes by landlords with one or two properties is unclear. To better understand the data set Mr. O’Brien is referencing, let’s examine the Central Statistics Office data from November 2021.
If it is indeed true that 84% of rental homes are owned by landlords with one or two properties, then we find ourselves facing a significant problem. These landlords, often referred to as “accidental” or “mom and pop” landlords, are highly favored by the government. Interestingly, about 80% of these landlords earn a net rental income of less than €20,000.
The statistics also reveal that this particular group of landlords has remained relatively stable in terms of age distribution from 2017 to 2021. Essentially, the buy-to-let market has become a closed shop, rooted in the era of light-touch regulation and 125% mortgages. Since 2009, there has been little to no new entry into this market. This implies that it is not a productive market but rather an effective generational monopoly.
However, the era of prosperity for these “mom and pop” landlords is coming to an end. With rising interest rates in the eurozone, UK, and US, it is becoming increasingly challenging for them to maintain profitability in their modest investment portfolios. Residential mortgage interest rates have now reached nearly 6%. When these landlords renew their mortgages, their interest expenses will have tripled. As a result, many landlords, regardless of their competence, will experience monthly losses. For example, paying up to €2,000 per month in mortgage interest repayments can quickly diminish a net income of €20,000.
Consequently, these monthly costs will force “mom and pop” landlords to make difficult decisions such as evicting tenants to sell the property, increasing rents beyond what the market can bear, or converting the property into an Airbnb for short-term rentals. This vicious cycle harks back to the buy-to-let craze of the late 1990s and early 2000s.
Only landlords with 20 or more tenancies have the financial means to absorb the increased costs. Their annual leveraged income of €200,000 or more allows them to pay down principals and hire property management companies for renting, maintenance, and rent collection.
While these landlords do exist, they are few and far between. In contrast, private equity firms or investment funds, such as Blackstone or the Ontario Teachers’ Pension Plan, are likely to acquire failing tenancies. Only the larger entities will survive in this market, leaving everyone else out of the game. It is clear that we need alternative solutions that transcend mere monetary incentives.
Given the figures quoted by Mr. O’Brien, here are a couple of potential solutions for the Minister to consider. First, the government should prioritize addressing unregistered tenancies through the Revenue Commissioners. Additionally, Ireland should implement an escalating tax rate as landlords expand their property portfolios, as this sector should not leave itself overly exposed to market fluctuations. Treating housing investments like stocks or bonds would ensure stability and prevent excessive speculation.
On another note, I find great satisfaction in two recent news items. Firstly, Ireland now boasts the highest male life expectancy in the EU. Secondly, the daily trips from the couch to the fridge and back now fulfill the reduced goal of 4,000 steps, which is associated with increased longevity. Previously, the target of 10,000 steps was unreasonable and necessitated multiple trips upstairs to bed throughout the day.
Turning our attention to the job market, Adrian Weckler’s article in the Irish Independent on August 9 raises important questions. With major tech companies mandating at least two days of in-office work, many individuals, like myself, who had to relocate from the western coast to the congested east coast for work, now desire to return home. During the pandemic, substantial investments were made in developing remote work hubs in rural areas to facilitate this exact scenario. However, with employers now insisting on physical attendance on a weekly basis, these hubs remain largely unused. Therefore, it is unsurprising that employees who wish to return home are expected to commute to Dublin multiple times a week. The previous decentralization initiative failed for various reasons, leaving many parts of rural Ireland deprived or in decline. Meanwhile, urban centers, particularly the east coast, suffer from overdevelopment, overpopulation, and severe challenges in transportation, housing, and services. The government has a unique opportunity to rectify this imbalance by actively promoting remote work, whenever possible, within the public and civil service.
Lastly, I want to express my wholehearted agreement with Gerard O’Regan’s tribute to the late Dr. Noel Browne. Dr. Browne played a pivotal role in shaping Irish politics and healthcare. He faced opposition from both the Catholic Church and Taoiseach John A Costello while successfully combatting tuberculosis as Health Minister. However, his subsequent Mother and Child Scheme was met with significant opposition, ultimately impeding its implementation. Though Dr. Browne was unfairly treated by the church and the state, his legacy and contributions to Irish history are significant. It is worth noting that during his time, Dr. Browne served as a member of a coalition government composed of five parties, illustrating the diverse ideologies that existed. Overall, Ireland has made progress in some areas, and Dr. Browne’s story serves as a testament to our nation’s growth and evolution.
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