IT was just over a year ago when the purchase of a residential area in Maynooth by an investor fund aroused great popular outrage.
People felt that it symbolized the locking of a generation from being able to buy a home or rent in the long run affordable, without having to worry about eviction or rent increases.
I wrote an article at the time of Journals to highlight how sky-high rents, rising house prices, the lack of affordable housing and investor funds buying up entire properties and apartment buildings were not a coincidence, but were in fact the government’s policy. It went viral.
The government responded by saying that it introduced measures to deal with the big deal by institutional investors. So a year later, how is the situation now?
Unfortunately, the government still supports investor funds, real estate investment funds and Generation Locked Out developers – those who want to buy a home, tenants and people who are stuck in their parents’ box rooms.
The major global and Irish institutional real estate funds are taking over in particular the housing market in the Dublin region and expanding to Cork, Limerick and Galway.
Rents have been allowed by the government to rise so high that regional rents are now high enough for it to be profitable for investor funds to invest. Rents in Cork and Galway have reached what rents were in Dublin at the end of 2016, when we saw an increase in investor funds’ interest in the Built to Rent development in the capital.
There are no signs that the government is launching a large affordable housing construction program in Cork, Limerick or Galway and therefore the investor funds continue to see high demand from Generation Locked Out.
The government did not build an affordable home to buy last year. This year, we will see at most a few hundred affordable homes for purchase and rental being built, a sea away from the government’s target for Housing for All of 6,000 affordable homes per year. In my opinion, it just does not want the scope of affordable housing, because it would discourage investor funds, to which the government has linked its car.
Since the government’s measures were introduced, we have seen a further increase in the development of build-to-rent only buildings, and large purchases of new apartment buildings, where all apartments are only for rent (at astronomically high rents), and none are available for home buyers to buy.
A global real estate player such as the German fund Union Investment has pre-sold hundreds of apartments in Dublin; IRES REIT, Ireland’s largest private landlord, owns close to 3,800 units; The US fund Kennedy Wilson will own close to 3,300 rental apartments.
The Irish real estate fund Urbeo develops apartments for rent and advertises a studio in City West for € 1,500 per month and a 2-bed apartment for € 2,000 per month. The US fund gray star bought 342 apartments currently being built on Griffith Avenue, which is advertised for a single bed for € 2,140 per month.
Darragh O’Brien, the housing minister, claimed in its latest report that measures to restrict institutional investors from buying new housing greatly increase home ownership and “have an impact”.
But the devil is, as always, in the detail. And as they say, politics never lets good evidence get in the way of claims that politics “work”.
The evidence from Sales data for newly built CSOs for Dublin in the first three months of this year shows that 1151 newly built units were sold. First-time buyers bought only 217, or 19% of these.
By contrast, non-household buyers (mainly investor funds and real estate investment funds, or REITs) bought 726, or 63%, almost two-thirds, of all new construction in Dublin in the first quarter of this year.
This means that investor funds REITs bought over three times as many newly built units in Dublin as first-time buyers during that period. What is it like to promote home ownership in Dublin?
Instead, I see this as the obliteration of home ownership for first-time buyers.
And how can this be the case when the Minister claims that his actions have stopped investors’ mass purchases of housing?
This is because his actions excluded apartments.
In a not so subtle twist of language and messages, he has given the impression that the new measures stop the investor funds, when in fact they have left apartments completely open for investor funds to buy as they want, without restrictions and no measures to promote home ownership of apartments.
As the Minister’s press release explains:
Apartments were not included in this measure as the focus was on protecting traditional family homes.
I then emphasized that it was a mistake in the policy to exclude apartments. But in fact, it was not a mistake – it was intended. I see this as a policy for investor funds. They are not interested in buying a house. There are apartments, and large residential buildings, in our cities, which they want to buy up and then rent out, which creates a permanent income stream for their shareholders and wealthy investors.
The fact that the government has only moved to protect so-called “traditional family homes” is a deeply worrying conservative approach that expresses a prejudice against non-traditional families.
So single-parent families, singles, couples who do not marry or have children, etc. are not protected by government policy. They are the ones who do not have the income to buy a traditional three-bed semi-detached or terraced house on today’s market.
In fact, it is families and singles in Dublin who are left to the clutches of vampire funds. But those who need the most protection are the most vulnerable, those who can not afford to pay the crazy prices for houses in Dublin (lower and middle income workers, single parents, etc.), have to rent out the investor funds, facing impossibly expensive rents, with little opportunity to own a home.
It just shows how untrue the minister’s claim about home ownership is. Home ownership is promoted by the government, but not if you live in Dublin or the wider Dublin region, and definitely not if you are single, a single parent or a small family or elderly person who wants to buy an apartment.
In addition, the tax credit for real estate investments remains, enabling large investor funds to pay little if any tax on their huge rental income that they earn on Generation Rent and the purchase and sale of real estate and land in Ireland. I think the most appropriate name for the investor fund REITs is vampire funds, because they want to feed Generation Rent forever, unlike the vultures who come in to clean up the carcasses and then fly away again when they have been satiated.
These new corporate landlords, REITs, are here for the long term – not to provide affordable housing, but to maximize rent by getting as many people locked into their rental properties as possible, with no alternative but to pay their sky-high rents.
The investor funds also benefit from the state’s social housing system – the housing benefit payment and leasing. IRES REIT received more than 8.7 million euros in rental income from the state through the HAP system, during the first half of 2021, according to Business Post.
The Government’s 2021 Housing for All plan is also completely dependent on the private market, and especially on global investor and gamble funds. Of the € 12 billion a year needed to build the planned 33,000 homes, € 10 billion will come from “private sources of capital”. Of this, “the majority will be required from international sources … come from well-established investors”.
So the private market and investors should provide 83% of the new housing, where the state plays a small role, less than a fifth of all new construction.
This is history that repeats itself. The reasons for the current crisis are the low government construction of social and affordable housing since the 1980s. We have now added global funds that see Irish housing as the gift that continues to be given.
There is also another issue that the Minister does not address with his new plans for bulk purchases.
No news is bad news
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There is nothing to stop an Irish homebuyer from buying up some of the new houses, such as a pension or investment.
We know that there are people in this country who are encouraged and facilitated by financial advisers to buy a second or third property. These Irish homeowners are buying homes across the country, turning them into rental or short-term accommodation for tourists, and also lock Generation Rent from being able to buy homes.
The Minister stated that the evidence that his measure works is found in the 15,883 homes that have received a building permit with conditions limit the bulk purchase or multiple sales to a single buyer.
But recent figures on building permits granted for 2021 show that of the 43,000 homes granted building permits, 26,272, or 61% were for flats (mainly in Dublin, but also across the country) and only 9,195 were housing construction to market sale. The rest were “disposable houses”.
So only one-fifth of the new supply is protected by investor funds and will be sold to home buyers, and two-thirds meet no restrictions on investor funds and are likely to be mostly bought up by institutional investors as landlords.
So how can the government claim that it will increase home ownership when two-thirds of all supply of new housing (and is likely to be the same again this year) will be open to being bought up by investor funds and locking in home buyers?
And as apartments are increasingly being built in regional cities such as Limerick, Cork and Galway, watch as investor funds, not homebuyers, buy them up.
The same policies that created the current housing crisis are those pursued by the government.
It’s the market, the market the market. Just wait until supply is equal to demand, then everyone will have affordable housing.
Investor funds will never provide an affordable supply. What helps tens of thousands of apartments that are just pushing tenants into permanent poverty and costing the government more and more in HAP?
The crux of the problem is that the government has failed to do what we did before: build social and affordable housing on a massive scale. And treat housing as a home – as a human right – not an investment asset for hedge funds, the rich and property owners.
The home should be a home, not a pension fund.
Homes should be limited to being sold to home buyers, not to multiple property owners and funds.
Rents should be reduced.
We need a state-owned construction company set up to build on the huge public land we have – to actually build real affordable housing on the scale needed for Generation Locked Out.
Dr. Rory Hearne is the Assistant Professor of Social Policy at Maynooth University, hosts the Reboot Republic podcast and author of the forthcoming “Gaffs: Why No One Can Buy a House, and What We Can Do About It” published by HarperCollins Ireland.
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