Housing Agency warns private rental supply will soon collapse
Supply of private rental units will fall significantly due to the collapse in institutional investment, the Housing Agency has warned.
Martin Whelan, Housing Agency CEO, will tell the Oireachtas Housing Committee today that there are significant 'capacity constraints' on the construction sector as the country tries 'to scale up to 50,000 new homes each year'.
Mr Whelan will tell the committee this will require an extra €7billion a year while the cost of soaring equity within the housing market has increased by one fifth. Pic: Getty Images
The committee will also be told that between 2018 and 2022, institutional investors helped pay for 2,000 private rental homes each year, but this has plummeted.
'Since 2023, there has been almost no new forward investment deals in Ireland, which means the supply of private rental units will fall significantly,' he will tell the committee.
A report by the Department of Finance last year on residential development found that €20billion a year is needed to build 50,000 homes each year, with €16.9billion of this coming from institutional investors who told the Government to ditch Rent Pressure Zones (RPZs) if they want their money. Pic: Crispin Rodwell/Bloomberg via Getty Images
Institutional investors have highlighted the country's RPZs as a barrier to investing here. Last week, the Cabinet agreed to extend RPZs nationwide but also to allow rents to be reset when a new tenancy begins.
Emergency legislation is due to be agreed by Cabinet today to speed up the process in a bid to prevent thousands of renters facing rent increases before their tenancy is covered by RPZ rules.
Mr Whelan will tell the committee: 'The availability of this type of equity financing is particularly important for meeting supply targets for residential development over the medium term.' Pic: Getty Images
Mr Whelan will point to investors' equity, noting its 20% increase is impacting the viability of building projects.
Mr Whelan will tell the committee that the 'high cost environment' for construction, particularly for apartments, 'remains a major obstacle to delivering viable homes' for both the private market and cost rental schemes.
The Housing Agency is delivering targeted subsidies, low-cost debt and equity programmes designed to help bridge this viability gap.
The committee will be told that between 2023 and 2024, the number of planning permissions granted for apartments decreased by almost 39%, while the number of house approvals was down just 2.7% over the same period.
Mr Whelan will say: 'Between 2018 and 2022, fewer than half the number of apartments granted planning permission were built. Over this period, there were 44,000 apartments built compared to 95,000 apartments granted planning permission.'
The committee will be told that a three-bed semi costs €450,000, a two-bed apartment in a suburban location costs just below €550,000, and a two-bed apartment in an urban location costs around €600,000. Capacity constraints will also be flagged as a major issue.
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