CORK developer Michael O’Flynn has described suggestions that up to 50% of Irish houses should be rented as ‘irresponsible’ and taking no account of ‘Ireland’s economic and pension policies or the mindset of people’.
He was speaking at the annual conference of IPAV, the Institute of Professional Auctioneers and Valuers, where he pointed out the flaws he saw in this model.
“How many people in this country have sufficient savings or a large enough pension to give them enough income to pay rent after they retire?” he asked.
“There are currently five workers for every pensioner but the projection is for this to drop to two workers for every retiree by 2050. Have we considered how that will impact on pension income?”
The current state pension in Ireland for a person aged 66 or over is €248.30 per week. But eligibility for the pension is to rise to age 67 in 2021 and 68 in 2028.
In addition to the pension age increase, many commentators have pointed out the unsustainability of the current amount of the pension, and expect it to decrease significantly.
Mr O’Flynn agrees and asked: “How can a generation herded towards home rental manage to continue to pay rent on their homes post-retirement on a pension which is bound to reduce based on these projections?”
The Government has plans to introduce an automatic entitlement for companies, and the state, to provide their employees with a pension and contribute to it. But at the moment, fewer than half of all workers have a workplace or private pension and so would have no supplemental income out of which to pay rent in their retirement.
“There are those who say that Ireland must move away from its obsession with home ownership,” Mr O’Flynn said.
“However, we need to ask ourselves whether this is, in fact, an “obsession” or simply a sensible economic and social decision that everyone should have a right to make.”
Build-to-rent investments have become increasingly popular in the global housing market in recent years; it is a multi-billion dollar market in the US.
These developments are designed and built with the express intention of the individual units being used as long-term rental accommodation, owned by an institutional landlord, rather than going on sale. Investors are now turning their attention to Europe and the head of global real estate firm CBRE in Ireland recently said he expects ‘the Build to Rent sector will grow exponentially over the next few years’.
There have been many applications for build-to-rent developments in Dublin and a number are in the planning stages in Cork.
Minister for Housing, Eoghan Murphy, has also spoken favourably about the build-to-rent sector and said he hoped to incentivise the sector when he updated draft guidelines for planning authorities on apartment developments in 2017.
“These new measures will address a number of challenges that we currently face,” he said.
“They will attract greater investment into the build-to-rent sector, which will relieve the huge pressure we are currently seeing in the rental market.
“They’ll allow for “shared living” options which I believe will be very attractive to our multinational sector with its young and mobile workforce.”
But Mr O’Flynn cautioned against a herd mentality in the construction industry, pointing out that many had become caught up in the group think about the sustainability of the Celtic Tiger years.
“The herd ran towards unsustainable numbers of new housing units then and is starting to run towards a model of home rental now without properly examining how this sits in our overall economic model,” Mr O’Flynn he said.
Mr O’Flynn was sharply critical of those who would promote renting for others while they themselves have the security of home ownership.
“Before prioritising build-to-rent, we need to consider if this is what people want and will be able to afford in the long term or is it just that the vocal few, comfortably living in homes they own themselves, believe that long-term rental should be good enough for others,” he said.