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Private Rental Accommodation out of reach for many -Time for a Cost Rental Model
The housing charity Threshold announced this week that upon reviewing the Residential Tenancies Board Q4 Rental Index, a minimum wage worker simply does not earn enough to rent in the private rental sector and could pay as much as 82 per cent of their income on renting an average one-bedroom apartment.
Threshold reports that the average monthly rent in Dublin is currently €1,745 which is more than someone working in accommodation or food sectors earns in a month and that with 91 per cent of rents in Dublin now over €1,000, accessing affordable, secure, stable housing is proving a challenge.
Impacts of unaffordable rents
Many simply need more housing than they can afford at market rates. Threshold note that a one-bedroom house in Dublin costs more to rent than a four bedroom house outside of Dublin which has “huge implications for people considering whether to settle in Dublin and on peoples’ ability to remain in the city”. Unaffordable rent impacts more than just deciding where to live. Research has shown that spending more then 30 per cent of income on housing costs is linked with worse mental health. The larger proportion of income that is spent on securing housing, the less there is left over for other necessities and also makes a household vulnerable to any sudden or emergency expenses. The current reliance on the private rental market is not delivering for those who are most reliant on it.Rent affordability is not only a problem for tenants. In its Quarterly Economic Outlook, IBEC pointed to “growing congestion” in transport, housing and childcare as presenting difficulties in attracting and retaining workers (IBEC, 2019). This is clearly unsustainable from a social and economic perspective. A new way of delivering rental accommodation is needed.
Cost Rental model
Cost Rental is a method of delivering new build homes where tenants pay a rent that covers only the costs of delivering on the build and the management and maintenance of the build. The Affordable Housing Bill 2020 (not yet enacted) makes a commitment to defining Cost Rental and placing it on a statutory footing. As part of the Housing for All commitment made in Programme for Government 2020, in February 2021, approval in principle was given for Ireland’s first Cost Rental homes. Budget 2021 allocated €35 million to Approved Housing Bodies (AHBs) to deliver approximately 350 cost rental homes in 2021 to middle income households at rates that are, at a minimum, 25 per cent below those of the open market. Social Justice Ireland welcomed this development, however in order for cost rental to have an impact on rent affordability, this must be delivered to scale.
In June 2018, Social Justice Ireland made a submission to the Department of Housing, Planning and Local Government with an off-balance sheet model of cost rental as an affordable rental system. This model would see investment by both Government and private finance (the European Investment Bank funding could be part-utilised here), where Government would have a non-controlling stake in the delivery of affordable rented properties, the costs of which are fully recouped through the rent. Any subsidies available to other developers and tenants would apply here, so that tenants could avail of HAP or Rent Supplement, however as the nature of cost rent is to decrease over time with amortisation, this would present a significant saving to the State, which is currently at the mercy of a dysfunctional market.
Delivering cost rental in Ireland requires a radical policy shift, away from the idea that property ownership is an absolute right, and towards increased rights for tenants and the establishment of long-term tenancies. This is a particular issue for older tenants who face increasing rents on reduced income as they retire but has wider implications for young people wanting to move out of their family home and couples starting families.
Cost Rental will require upfront investment to develop, financed at a low enough rate to make the cost rent reasonably affordable. In June 2018, Social Justice Ireland produced a model of cost rental that could be financed outside of the general government balance sheet.
With more of us renting into the future, it’s vitally important that affordable rental is seriously explored. A cost rental model would be a major step in that direction.