It’s a shame, the way this eviction ban has been framed. It’s bad from both a communications and policy perspective. 

The Taoiseach has said the government is trying to balance the rights of landlords and tenants. But if that were really the decision, surely it wouldn’t be a hard one? Tenants’ needs are much greater than landlords. If eviction bans help tenants at landlords’ expense, why not keep them?

But that’s not really the trade-off. It’s more like a choice between tenants’ short-term interests and their long-term interests.

The eviction ban helps a large number of tenants, right now. There’s no denying it. It keeps people in their homes.

But in the long run, the ban is against the interests of tenants. It contributes to accommodation shortages and higher rents. 

The ones who bear the pain of the policy are those looking for a home — both today and in the future. And in the long run, all tenants are looking for homes. They’ll get a new job somewhere else, or they’ll have a family, or they’ll break up with their partner, or their kids will move out.

Policies like the eviction ban (and rent pressure zones) treat the symptom of the housing shortage. But they make the underlying shortage even worse.

That’s because the ban is part of a package of measures that make it unattractive to be a landlord.

And make no mistake, Ireland has a landlord shortage. It has a landlord shortage because it has a shortage of rental accommodation. 

As Ronan has reported on this site, between 2015 and 2022, market rents increased by almost 75 per cent, while in the same period, rents for sitting tenants increased by just 19 per cent. 

Tenants and landlords are symbiotic. For every tenancy, there is a landlord. This is why policies that try to help tenants at landlords’ expense tend to fail. 

If rules like these made it possible to get people good quality affordable housing, the world’s housing problems would be solved a long time ago. 

These policies are tempting for politicians. They buy time and alleviate pressure. Especially in a system that’s already dysfunctional. But they’re very hard to back out of, as we’ve seen this week. Those who lose out as a result of the change understandably get angry at the government. And, as we’ll see, the policies themselves make the underlying problem worse.

Track record

The biggest problem with eviction bans and rent pressure zones is that they shrink the supply of housing.

Landlords leaving the market is only one part of it. We can see that with our own eyes. Newspapers can write stories about it. 

Landlords leaving is bad for renters, but at least when a landlord gets out of the rental business, the home is still part of the housing system. Someone gets to buy it and live in it. 

The bigger problem is the landlords who choose not to enter the market in the first place. They’re the ones we need. They’re the ones who would have added new homes into the system, which lowers rents and alleviates shortages. Those are the landlords we should be worried about. But we can’t see them, we can’t count them, so they get ignored.

There’s a “dog that didn’t bark” quality to the Irish housing system. The last time our housing market was this hot in the Celtic Tiger period, house building went into overdrive. A paper from the Central Bank in 2019 showed that, for an equivalent rise in house prices, the supply response has been only about one-third as strong. That amounts to about 40,000 missing homes per year. 

Of course, many things have changed since the Celtic Tiger days. It can’t all be put down to our rent control rules. But if investors aren’t pounding into Ireland, given our strong economy and high rents, we should be asking why.

Other developed countries have been experimenting with rent control laws since the middle of the 20th century. Their track record isn’t strong. The first iteration of rent controls was introduced after the Second World War in many countries, and they capped rent increases at a set level (Ireland’s RPZ’s resemble these first-generation rent controls). These policies were gradually removed and replaced by second and third-generation rent controls, which limited rent rises within tenancies but not between them.

Studies of international rent control regimes have not shown encouraging results. A 2019 paper by Diamond, McQuade and Qian looked at rent control in San Francisco and found that, between 1994 and 2010, the policy saved existing renters $2.9 billion in rent — and increased the rents of new arrivals by exactly the same amount. The paper found landlords shrunk the housing supply by 15 per cent.

The authors said: “Rent control operated as a transfer between the future renters of San Francisco (who would pay these higher rents due to lower supply) to the renters living in San Francisco in 1994 (who benefited directly from lower rents). Furthermore, since many of the existing rental properties were converted to higher-end, owner-occupied condominium housing and new construction rentals, the passage of rent control ultimately led to a housing stock which caters to higher income individuals.“

Another problem is that eviction bans and rent pressure zones encourage people to stay in their homes, even if the home no longer suits them. The San Francisco paper found renters moved 20 per cent less than normal. And a separate paper by Ed Glaeser found 20 per cent of homes in New York City are allocated to the wrong people, for the same reason.

What we expect of the state

An argument that gets made in favour of eviction bans is that they’re a temporary solution that will allow the government to fix the underlying problem. 

The implicit idea here is that government-provided housing is the solution: Eviction bans might put landlords’ noses out of joint, but that doesn’t matter — they’re not going to solve it anyway.

But while more government-provided housing would be helpful, it’s insane to expect it to solve the housing crisis. There isn’t a well-functioning housing system anywhere in the world that doesn’t have a big private rental sector. 

The following chart shows the size of the rental sector in Europe. Ireland is about two-thirds of the way down the list. Note that the countries with more rentals than Ireland — Sweden, France, Cyprus, Denmark, Austria and Germany — are known for the stability and affordability of their housing sectors.

Of course, there's a difference between public and private rentals. But it's not as though the countries with more rentals than Ireland have much more public housing. According to the OECD, Switzerland and Germany have less; Austria France and Denmark have more; Sweden and Cyprus don't disclose.

A strategy of pausing evictions while the government solves the problem is colossally misguided. The shortage is so great that there is no hope that the government could do enough to make a difference. And in the meantime, the ban is shooing away private landlords, a group that is essential to every functioning housing system in Europe.

The missed opportunity

The annoying thing is we are missing an open goal. There is an opportunity to reduce the rents paid by renters, without reducing the attractiveness of the market to landlords, at no cost to the state. 

Contrary to popular perceptions, investors do not prize profits above all else. They want two things: big returns, and predictable returns. Many institutional investors prefer to operate in markets where they make less money because returns in those markets are more predictable.

The big German landlord Vonovia made this point in a presentation to investors last year. It boasted that it operated in modern regulated markets with second and third-generation rent controls, which in turn gave it stable predictable returns. The green line on the left is the rent growth in regulated German markets; the red one on the right is rent growth in unregulated American ones. 

A 2022 paper by McCollum and Milcheva found the same thing: modern rent stabilisation laws lower the risks associated with investing in apartment construction and can encourage more of it.

The open goal is that the state can regulate the rental market, and moderate rents, alongside a flourishing private rental sector. The German rental sector is one of the best-functioning in the world. Rents are affordable relative to incomes. Housing is of a high standard. Tenants have security.

But to get there, investors need certainty. Investors need to know the rules of the game. If the rules are subject to change, companies can't calibrate their investment spending, so they build homes elsewhere instead.

Ireland has missed the open goal by making the Irish housing market highly volatile and uncertain. Rent pressure zones were introduced in 2016, and described as temporary. They were gradually extended. In 2019 they were again described as temporary. They were amended in 2021. And amended again in 2022. Now, nobody says they're temporary any more. The eviction ban was brought in, and extended. Now it's to be lifted again. All this chopping and changing happened with Fine Gael as the biggest party of government. And the opposition parties, led by Sinn Féin, have their own ideas.

We could've had the best of both worlds — plenty of investment and gentle rent increases — if we'd only made a plan and stuck to it.