A 'knee-jerk response' over property investment funds could make the rental crisis in Ireland even worse, a leading economist has warned.
Ronan Lyons says the current rental problems have occurred not due to the funds themselves, but from the fact that housing is scarce.
It comes as his latest report for property website Daft.ie shows the cost of renting has almost doubled in the past 10 years.
Rents have increased by 2.1% in the first three months of the year.
The average monthly rent is now €1,443, compared to €742 in 2011.
Supply continues to be a major issue with only 66 properties available to rent across the Midlands in May.
Speaking on Newstalk Breakfast, Mr Lyons - economist at Trinity College and author of the report - said 2020 saw a "bit of a split" between Dublin and the rest of the country.
He said: “In Dublin, rents were down - in part because there was some short-term letting stock that moved over to the long-term rental market.
"That didn’t happen in the rest of the country: in fact, scarcity worsened.”
However, rents in Dublin are now rising again - up 1.2% in the first three months of the year.
Mr Lyons explained: “It’s not enough to offset what happened in the last nine months of last year, but it does look like people and renters in Dublin are planning ahead.
"They’re moving back to the city for the next academic year, for the return to work, or whatever it might be.”
Investment funds
Recent weeks have seen discussion around housing dominated by the issue of institutional investment funds.
There's been a public outcry after reports that so-called 'cuckoo funds' are buying up large numbers of properties in some new housing estates, in order to put them on the rental market.
The Government is working on measures to prevent such bulk-buying, amid calls from opposition parties to ensure homes are available to first-time buyers.
However, Ronan Lyons says it's important the response is carefully considered as Ireland "badly needs" all types of homes - including for both owner-occupiers and renters.
Mr Lyons observed: “I completely get the frustration of someone who’s trying to buy a property and find it has been bought by a fund. That problem comes not from the fund itself, but comes from the fact that housing is scarce.
“These funds were on the cusp of building 30,000-40,000 new rental units in Dublin and Cork over the next few years. Those extra units would be a big increase in supply.”
He suggested that the situation is currently “much, much worse” in the rental market than in the owner-occupier market.
He said: “No new rental homes were built in the last 15 years - we were just about to get some.
"It looks as if now we could chase the very organisations that were going to build new rental accommodation out of the market.”
A lack of affordable homes here means we'll also struggle to attract new jobs, he suggested, adding that he hopes a compromise can now be reached.
He said the benefits of decisions around housing take years to be seen, and it's vital to avoid making a wrong step now.
He said: “It’s not that we shouldn’t do anything, but the underlying issue here is not professional landlords coming in and building new rental homes. The issue is the scarcity of new homes overall.
“I’m absolutely in favour of lots more social housing and owner-occupied housing being built.
“But rents have doubled in the last ten years… I’ve been studying rents in the country back to the 1900s, and I can’t find an episode as bad as the one we’re currently in. I fear we’re going to make that worse.”
