Cian O'Callaghan (Dublin Bay North, Social Democrats) | Oireachtas source

I thank Deputies Ó Broin and Doherty for tabling the motion. I was looking forward to hearing what the Minister's proposals and solutions would be. I was disappointed that instead he used most of his time to engage the usual attack on Opposition parties. That is probably designed to deflect and avoid responsibility. I would like to hear more proposals. Last week, we were promised by the Minister that there would be action this week. I hope he will carry through on that promise.

The Bill the Minister tabled in 2019 when he was in opposition, and which was referenced by Deputy Nash, is far too weak. Its ambition is to allow only 0% to 30% of new development land to be reserved for first-time buyers. If we were starting at 30%, we might be going somewhere. There is also the fact that the Bill looks at land and not the number of homes. It looks at a percentage of the land. It would be quite normal in a development to have the higher density homes occupying most of the land and the lower density homes being sold to individual buyers. This aspect of it needs to be changed. Part of this needs to come from the planning side but this will take years to kick in. It will take far too long. We also know there are weaknesses in the planning system with regard to enforcement. This can only be part of the solution.

The Minister correctly stated that there needs to be a very strong role for small and medium builders in addressing housing supply and yet there are reports today that the home building finance agency is funding large developers to build homes to sell off to investment funds and cuckoo funds and in the process is squeezing out small and medium builders.

In 2010, 76 individual homes were bought by institutional investors. In the first quarter of this year, a record €696 million was spent by cuckoo funds, which means €53 million a week was spent on buying up homes. At the same time, we are seeing that each successive generation is less likely to own their own homes than the previous generation. In the past decade, Irish house prices rose by just under 30%. At the same time, rents increased by more than 60%. In Dublin, rents have risen by 85% since early 2011. This increasingly means that investors will get a better return on renting out homes than on providing them for sale on the open market to individual buyers. This is part of the problem.

A paper published by Dr. Michael Byrne of UCD's school of social policy, social work and social justice on institutional investment and the private rental sector states demand on the part of international capital for real estate assets in Ireland appears to be virtually insatiable. How does he reach this conclusion? He looks at the yields that investors can get in Ireland from the rental sector. He notes there is consensus that the yields are at 3.75%. These yields are higher than the European average yields in the rental sector, which are at 3.25%.

It is not surprising that they are higher because our rents are among the highest in Europe. Rent for a one-bedroom apartment in Dublin is higher than anywhere else in the European Union.

Irish yields compare favourably to Irish sovereign bonds which are in negative territory and they compare favourably to EU sovereign bond yields which were only 0.3% in 2020. These conditions, which include some of the highest rents in Europe, make investment in the private rental sector very favourable for investment funds. They do not need favourable tax treatment on top of that to encourage them. The imbalance that this has created means the Government needs to do the opposite. It needs to dampen the returns for institutional investors from the private rental sector to rebalance housing construction and give people a decent chance of being able to buy their own home.

The analysis that I was referring to by Dr. Michael Byrne from UCD shows that there is consensus in the property industry as to why investment in the private rental sector is such a good option for investment funds. CBRE Ireland stated: "The fundamental issue supporting the investment thesis ... is the inherent supply demand balance in the residential sector". Sherry Fitzgerald stated: "The fundamentals which underpin PRS [private rental sector] demand remain strong, most notably favourable demographic and economic trends, together with a supply shortage, which has been an enduring feature of the market in recent times." Irish Residential Properties REIT stated: "There remains a clear and significant supply and demand imbalance for all tenures of housing in Ireland." A 2020 report by GillenMarkets, a Dublin-based investment advisory firm, stated that Ireland's policy has "benefited ... institutions and developers at the expense of individual buyers." The same report notes that the biggest risk facing investors in Ireland's property market is Government intervention aimed at improving housing affordability. As such, not only is institutional investment supported by favourable tax treatment and investment conditions, it is also supported heavily by a lack of supply to meet demand and a lack of Government intervention to ensure housing affordability.

These are not the only supports for this type of investment. The list goes on. There is a range of direct State financing and support for this type of investment. Fianna Fáil and Fine Gael have told us that we must have cuckoo funds in order to provide finance for housing. What they did not tell us is that the State is providing some of the funding to build housing that is then sold on to these investment funds. I already referenced the reports today from the Home Building Finance Agency, which is financing large-scale rental developments that are then being sold on to investment funds. Funding for the agency is coming via the Ireland Strategic Investment Fund, ISIF, from which funding is also going straight into supporting this practice. In addition, long-term leases from the State are guaranteeing rents for many of these investment funds.

According to Dr. Lorcan Sirr of the school of real estate and construction economics at the Technological University Dublin, local authorities are offering exceptional terms to lease new builds from funds, offering rent guarantees, property management and an obligation to return the houses as good as new after 25 years. Dr. Sirr described the deals as "unbelievably good." I hope we hear from the Government this week what action will be taken on this issue. Analysis by the Dublin Inquirerof over 12,000 apartments and homes in Dublin city owned by institutional investors showed that 76% of them were already built when they were bought out by investment funds.

In addition to all of the measures the Government is putting in place to support investment funds, the favourable tax treatment, the lack of intervention on affordable housing, the favourable market conditions, the excellent yields that investors get and the long-term leasing, the Government has also created another incentive for investors to come in and buy up homes. In the immigrant investor programme, the only thing someone has to do to get a passport and citizenship, including for his or her family, is buy two homes valued at €500,000 each. That is why we saw people taking to Twitter last week to say that every time they tried to buy a home, they met the same people who outbid them as they tried to buy up homes for international investors as part of these schemes. If the Government is serious about this, it should exclude house purchasing from this programme immediately.

Another aspect of this is the vacancy created by some of these institutional investors. Reports from RTÉ show that in two developments belonging to Kennedy Wilson where rents are just under €3,000 a month, at Clancy Quay in Dublin 8 and at Capital Dock, vacancy rates have been up to 50%. With more than 8,000 people in emergency accommodation, including more than 2,000 children, these homes should be put to use and to do that, the owners would have to lower the rents. It is imperative that the Government bring forward a fast and effective vacancy tax to prevent such vacancy from occurring. It has completely failed on this issue.

The Government can do a huge amount to fix this problem. It is doing a huge amount right now to encourage these international investments. We need action on this issue quickly.

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