There has been much negative commentary in the past few weeks about cuckoo funds acquiring newly built homes.  There is a widespread sense that such purchases should not be allowed to happen, and that some way needs to be found to stop them. Legislation has now been introduced to limit their purchases.

However, this is an example of whack-a-mole policy making, where policies are crafted in reaction to the latest and noisiest issues, losing sight of society’s longer term and more important needs.

In the case of housing, the important goal – rightly agreed by a wide consensus a few years ago – is to improve the availability and affordability of homes so that homelessness is reduced and so that individuals and families can secure appropriate places to live at their various stages of life. This has never been about home ownership, and it should not be.

A high proportion of owner-occupiership is good for society as it creates a greater sense of belonging and permanence with possible benefits for community engagement and neighbourliness. But widespread renting is not a bad thing and itself brings the benefits of flexibility, accessibility and convenience. The people of many European countries depend more heavily on rented homes than we do in Ireland, and they are no less healthy societies for doing so.

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Societies do have real problems where many people are homeless or where people are condemned to live with their parents for too long, or in badly-sized houses or too far from their places of work or community. This issue – a shortage of affordable, well-sized and well-located homes – is a big problem in Ireland. Rightly, it’s an issue that has occupied the attention of citizens and lawmakers for some time now.

Housing policymakers should remain focused on addressing that issue and not be diverted to tangential matters like home ownership, especially where seeking to address such non-issues may make the real problem worse.

It is wrong-headed and destructive to argue that limiting investment by professional funds will improve Ireland’s housing position; it will do the opposite. Discouraging institutions from investing in Irish houses and apartments will make our housing problem worse. Encouraging them, as governments have done in recent years, has been key to the gradual improvement in Ireland’s housing situation.

All property developers take a financial risk in pursuit of a financial profit, and the country needs them to do this.  There has to be sufficient probability of a profit before they will commence building; this has been lacking until recently, which has led to insufficient numbers of homes getting built. Having international investors ready to buy or refinance large numbers of units is a good way to encourage their construction, and we should ensure we don’t weaken that dynamic.

Having more funds supporting the construction of homes will improve the affordability and availability of homes.  The rate of increase in rental prices will be dampened by wider institutional investment activity.

Rental charges are set by supply and demand, with demand driven by demographics and average income levels. The support of institutional investors increases supply and has no impact on demand.

Of course, there’s more to housing than building, and Ireland’s housing problem – the shortage of affordable, well-sized and well-located homes – will not be solved solely by building new homes. Steps should be taken also to ensure far greater numbers of properties are available for the different stages of people’s lives. Empty nesters should be encouraged, for example, to make their larger family homes available to families; that would encourage growing families to move out of their smaller homes and allow them to be acquired by couples and individuals as first-time buyers. The owners of vacant properties should be nudged to bring them into use as accommodation.

The weakness of these normal housing dynamics in Ireland is surely a big part of our problem. While policymakers have wrestled to increase the flow of newly-built homes, they seem reluctant to address the supply problem from the other end.

Finally, as the debate has moved away this month from our real housing issue it has moved instead onto the rights of young people “to get on the housing ladder”. Renters are pitied for “pouring money down the drain”, while homeowners are seen to be better off financially. There is an important fallacy here – or at least an unspoken assumption that is itself part of the problem. The suggestion that a person is financially better off for having bought a home is nonsense. Rent is no more wasteful than interest is.

The property owner is better off than the renter, of course, if house prices rise disproportionately. If that happens, the renter finds herself at a disadvantage when she wants to buy a home for the next stage in life.  But if house prices fall – or rise only slowly – the positions are reversed.  The property ladder argument rests on an assumption that house prices will and should rise quickly. That’s surely a mistake and bad for society.

Ireland’s policy makers should be clear about their objectives; what problem are they trying to solve and what are they aiming to make better?  Any significant actions they take in the area should move those objectives forward, and certainly not set them back. If Ireland’s most important objective in housing is to improve the availability and affordability of homes, the political discourse and policy changes of the past three weeks indicates unfortunately that these aims are about to be damaged further.

Peter Cross is the managing director of Trasna Corporate Finance.