Generation Rent & affordable housing Dr Rory Hearne, Department of Applied Social Studies

1. Generation Rent & affordable housingDr Rory Hearne, Department of Applied Social Studies

2. Ireland’s market based homeownership model fails for ‘Generation rent’ Source: Turnbull, 2018 • Dramatic structural change in Irish housing system - decline in home ownership & rise in private rental • Increase in households in private rental: 2006 (145,317) 2011 (305,377) 2016 (342,222) • Geography: Dublin 25% private rental, 59% home ownership in urban areas • Generation rent: a majority of households aged 35 and under are now renting their home. Back in 1991, a majority of households over the age of 26 were renting their home. • Social class: home ownership rate above 60% of median income - 72.7% for those below 60% of median home ownership rate of 47.6%

3. https://www.cso.ie/en/releasesandpublications/ep/p-cp1hii/cp1hii/tr/https://www.cso.ie/en/releasesandpublications/ep/p-cp1hii/cp1hii/tr/ • At 40 years of age – 35% are renting – less likely for banks to lend to. Likely to be life time renters.

4. Significance of dramatic change over last 25 years

6. Share of young adults aged 20-29 living with their parents - EU-SILC survey Highest point in last 15 years

7. Impact on household formation • The problems around being able to access housing which first emerged during the boom years, and which have re-emerged in recent years are having a marked impact on the lives of young people in Ireland. • They are more likely to rent accommodation and they are getting married and forming family units at a later age.

8. Psychosocial impacts of insecure housing on generation rent • Housing impact on wellbeing: delivers a‘wellbeing dividend’ for ‘non-shelter benefits’ that arise from housing health, education, employment, social relationships, etc. • - impacts on children’s cognitive development • -impacts on the (mental) health of the occupants • Particularly in context of precarious work • Dramatic increase in households in private rental sector, and spending longer time there (extra decade) –means much greater exposure to Ireland’s insecure private rental housing system • Impact of insecurity and unaffordability in private rental sector on health& mental health of already precarious generation

9. New findings on housing stress • Housing and health: new evidence using biomarker data –Journal of Epidemiology and Community Health (Clair & Hughes (2018)) • A growing body of literature explores associations between health and housing payment difficulties/affordability. • The importance of financial aspects of housing to health is likely due to its role as a key source of ontological security. • Ontological security is ‘the confidence that most human beings have in the continuity of their self-identity and in the constancy of the surrounding social and material environments of action.’ • the availability of biomarker data allows us to add to this evidence using objective indicators of health. • Use C-reactive protein (CRP), a biomarker associated with infection and stress,

10. Where control is low, ontological security is reduced, which may affect health through chronic stress responses. • Private renters have significantly higher (worse) CRP than owners with a mortgage • In terms of housing type, respondents living in detached homes had lower CRP than those in semidetached or terraced houses, or those living in flats. Supports arguments for greater consideration of the negative effects of the current private rented market in the UK (and Ireland), characterised by greater insecurity, higher cost and lower quality than is typically found in other tenures. 

11. A post-home ownership country? • Generation rent is not just a temporary phenomenon – these are long term trends with major implications into the future • We are now in a state of major flux in housing -a post-home ownership country? • Although some continue to extoll the positives of heavily indebted mortgage model…purely altruistically of course

12. While dominant political parties still favour/promote homeownership ‘ideal’ .. rising house prices benefit most higher income home owners (older/voters), landlords, landowners etc – although increasing paradox that their children are generation rent – creeping realisation amongst growing sections of the population that current housing system doesn’t work for most people…although politicians still cling to political, consumer, psychological, benefits of rising prices…

13. Why cultural preference for home ownership? • Some 86.5 per cent of those surveyed expressed a preference for home ownership • Irish preference for owning a home would not change unless there was a significant strengthening of tenants rights. • The most popular reasons respondents said they preferred to own a home related to security and life cycle events, such as having children and providing them with a good education, or having control over your living space

14. In narrative of home ownership promotion (e.g. ‘help to buy’ and easing CBI lending rules) why does no one want to talk about the legacy arrears crisis of last mortgage based credit expansion?

15. Or context of landlord buy-to-let in arrears (and tenant impacts)

16. Current heavily indebted home ownership model is not a viable, sensible or desired option for large numbers of people. • A staggering 25% of all homeowners experience ‘some difficulty’ in affording their mortgage (rising to 50% in Dublin) (Housing Agency)

17. Another less talked about Generation Rent – the new older renting demographic • “over the age of 65 is expected to reach 1.4 million by 2040, or about 23 per cent of the population • Currently, 13 per cent of the population. • Afurther 150,000 age-friendly accommodations will be needed by 2031.'rightsizing‘ • Dramatic increase in coming years of elderly in private rental -Only 2% of those people aged 65 and older were renting from a private landlord, compared to almost 10% of those aged 50-54

18. Who will house the older Generation Rent? • Who will supply affordable secure housing for older population? • Expecting speculative private market to provide is naïve and wrong – market will provide co-living pods not elderly homes • Likely reversal in positive low levels of elderly in poverty • How appropriate HAP as social housing for elderly? – if insecure in elderly ages – mental stress

19. Reality check – generation rent is here to stay (homeownership illusion) • Increasing proportion will be renting permanently • Not a temporary housing and homelessness crisis but a structural unaffordable housing crisis affecting low and middle income workers (families and individuals) • Expansion of mortgage credit in period 2001-2007- masked growing unaffordability – resulting in major arrears crisis • Macroprudentialrules • Precarious work, lost decade of income for under 40s (Turnbull, 2018) • Generation rent – in late 30s and 40s-– wont qualify for mortgages • House prices remaining unaffordable – house prince to income ratio • Increasing proportion of income on rent = inability to save for deposit • Dramatic cultural and societal shift. • So…. • Policy should not be based on return to pre 2008 situation but on providing affordable secure rental (and cooperative shared ownership) rather than subsidising home ownership model inappropriate to large sections of households

20. So question is what type of rental housing will be available for generation rent? What type of rental system for Ireland for next 10, 20, 50 years? Current path suggests BTL investor-lead • Global ‘wall of money’ Global institutional investors such as private equity funds, large investors, investor landlords, BTLs • Global trend is new rental being provided by BTR sector • Build to rent is “compelling opportunity because of the limitless demand” • (PWC, Emerging Trends in Real Estate, 2017) • A battle over the future of housing – investment asset or affordable home? • This financialisation (commodification) of residential as real estate rather than homes undermining access to affordable homes – undermining the right to housing

21. These are not providing affordable housing - worrying evidence from UK & elsewhere

22. Current policy approach • Embracing & supporting financialisation and BTR • Investor funds not having significant impact • BTR is ‘exciting’

23. Increase in role of investors/ ‘cuckoo funds’ • ‘banks, holding companies, trusts, funds, and real estate management companies’ were the largest purchaser of residential property in 2017, spending €1bn. • That is a 43 fold increase on investor spending in 2011. • Central bank data shows investor flows into real estate in Ireland have quadrupled from €6.9bn in 2014 to €27bn by Q3 of 2018.

24. Institutional investors ‘price-setting’ • Effectively set new higher market rents in an area. • This risks embedding a permanent unaffordability into the housing market. • Monopolistic pricing power will grow as they scale up over time. • These investors also further expose the Irish housing market to global risks. • Investor BTR Gaining increased power over policy

25. "There is a lot of talk of affordable rental but what we are seeing in terms of planning permissions is co-living. Many argue there is a place for co-living but our question is where is the place for affordable rental?“

26. BTR, tax injustice & inequality • Government policy, along with tax and fund firms, ensure these funds and investors pay minimal, if any, tax on their huge profits made from tenants and taxpayers. • costs the taxpayer twice - through unaffordable housing and as tax forgone.

27. Market & REIT investor approach to housing doesn’t provide reliable or affordable supply • Supply from market is erratic and unreliable - CSO data shows that residential construction has fallen for the third quarter in a row and the number of new homes this year will be half of the actual demand. • Most housing economics (mainstream neo-classical) is based on wrong assumptions -does not reflect reality of housing systems • Market does not respond to real housing need (real demand) • Investor profit forecasts (prices falling?) • Incentivising the private sector will not guarantee delivery of sufficient (affordable) supply

28. Yet Rebuilding Ireland dependent on market approach • Just 15% of the 134,000 ‘new’ social housing outlined in Rebuilding Ireland are new builds by Local Authorities and Housing Associations -85% is private market provided

29. €2.4 billion in 2019 on housing….but… • €1bn on current - no asset accrued to state from the investment…

30. Unsustainable and illogical social housing model • Rent subsidies/HAP - poor form of housing investment - Poor value for money (more expensive than building social housing, rising as chases market rents, asset value accrued by private landlord ) • Diminution of security for Generation ‘social’ rent – from permanent social housing to insecure private rental HAP • Total funding on HAP and Rent Supplement has increased 47% since 2015 from €326.7m to €480.8m in 2018 • By 2021 87,000 HAP units – likely cost in region of 1bn per annum • Within 10 years by 2029…what will it be? 150,000 HAP units? €2bn a year? • HAP – projections and illogicality – how is this sustainable? unsustainable model of social housing

31. Cost rental a key solution • Affordable rents - Unlike the market setting ever higher rents, cost rental are homes where the rent is always affordable over the long term as it is linked to both net household income and the cost of building and maintaining the home. • Long term real security of tenure: tenancies are life-time and you can make your apartment or house a permanent ‘home for life’ • Cost rental is available to all households. This is a holistic general needs approach to housing provision • a stable supply of homes unlike the fluctuating private market • Quality secure employment – encourage workers • Key way to stop climate disaster - providing sustainable, env passive homes – Green New Deal

32. A framework for a holistic assessment of housing systems/models

33. But lack of cost rental targets and plan • However, only two cost rental pilot projects are underway • St. Michael’s Estate - pace of project is worryingly slow. • Proposed for Enniskerry are €1,200 a month for a 2 bed apartment. Is this truly affordable? • Need to ensure it is genuinely affordable rental • Tying rent to income - and not to market rate. • Genuinely affordable housing for wage of €39,000 pa means around €800 a month for housing costs.

34. Need a new vision for affordable community housing • A new housing tenure –affordable community housing - available to all incomes • All public and state lands should be used to build 100% affordable ‘non-market’ housing - inclusive mixed developments with some variant of cost rental – (60/70% ) /affordable ownership (cooperative –only sale back to body not open market- the O Cualann model ) 20%, 10/20% traditional social housing and 20% • Design is essential – creating beautiful places to live – spacious, family friendly (finance) spacious high quality living, excellently designed, socially inclusive, aenvironmentally sustainable communities. • If build private housing on public land for sale or sell off public housing – its gone – lost as public resource and asset • Need a dedicated delivery mechanism - a dedicated public Homes and Community Building Agency - just as the ESB rolled out electricity across the country in the 20th century • Could LDA be this? Need dedicated focus on delivery ofaffordable community homes • Need a clear delivery plan and Targets for cost rental • NAMA land -sales should be halted and used for affordable community housing not sold to become ‘co-living’ pods, expensive student accommodation and investment vehicles for speculators. • many areas out of our control- what FDI and investors do- but we can control housing - we can build it - provide it –finance it – we have the land- so why dont we ? • Target should immediately be set to build 10,000 affordable community homes within 18 months, and aiming for 15,000 per annum within three years.

35. Growing consensus for cost rental & affordable (non-market) homes on public land Housing Agency believes “cost rental public housing should be a major part of the housing we provide”.

37. Current public opinion on Right to Housing – ground for change