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Are International Investors Really To Blame For Ireland's Housing Crisis?


It has been described from the highest levels of Ireland’s political world as the country’s “great failure” and a “disaster.”

Ireland’s housing problems are both complex and have deep roots. However the ongoing commentary over the crisis has begun to focus the blame for seeming to skew the market, at least in part, on international investors.

The issue reached boiling point last week when Ireland President Michael D. Higgins gave an impassioned speech regarding housing, which he cited as a “disaster,” commenting on the “mad speculative” money that, in his opinion, was “destroying the country.”

“It isn't a crisis anymore — it is a disaster," Higgins said. “The basic needs of people in a republic: food, shelter and education.

"Housing and the basic needs of society should never have been left to the marketplace.”

It isn’t the first time that the role of international finance in Ireland’s housing market has been called out. The sector has many critics, from politicians through to academics. It has been vilified a number of times in recent years, yet the calls have grown louder as the housing crisis has worsened. 

“Investor fund REITs bought over three times as many new build units in Dublin as first-time buyers over [Q1 2022]. How is that the promotion of home ownership in Dublin?” Maynooth University assistant professor in social policy Rory Hearne said in a comment piece in the Journal

Quoting Ireland’s Central Statistics Office figures for new-build homes in Dublin, Hearne noted that non-household purchasers, which he defines as mainly investor funds and REITs, bought 725, or 63%, of all new builds in the city in Q1 2022. 

Property investors and institutional funds are not always adept at keeping out of the headlines. Recent figures unveiled by the Sunday Business Post found that the sector had purchased 350 houses at a cost of more than €100M in the past year, even though the Irish government laid plans to limit bulk buying of properties with a higher rate of stamp duty. The funds simply paid the €30K-per-home levy to secure the properties. This is 10 times the normal stamp duty.

However, whilst REITs and investors have bought up a huge share of new homes, the sector is also a huge funder for new Irish housing construction in recent years, more so than the general public may be aware.

According to Irish Institutional Property, in the two years between 2017 and 2019, a total of €4.2B was invested from foreign bodies into the Irish housing market. Foreign direct investment accounted for almost 80% of all funding into new-build housing. If investors are funding 80% of all new builds, then they are funding more homes than ultimately they end up owning (63%). 

Scoring Political Points

The president's comments have been seized upon by opposition politicians such as Sinn Féin, Labour and People Before Profit, who have all backed Higgins' sentiments that "the market" has led the housing sector in the wrong direction in recent years.

Sinn Féin, however, is the party which has arguably capitalised more than most on the discontent over housing, as well as other issues in Ireland. It is polling at around 37% and has a double-digit lead over rivals.

To hone its political advantage, last week following the president’s comments, Sinn Féin Deputy Leader Pearse Doherty asked of the ruling Fianna Fáil party in the Dáil, “Do you now accept that housing is a disaster?”

A new election may not be until 2025, but many are looking at Sinn Féin and wondering what its housing policies may be if it ever was to hold power — and whether its attitude toward international investors could change sentiment toward Ireland. The reputation of the party is mixed. 

Sinn Féin itself has looked to allay fears that it would reposition Ireland away from its current FDI-friendly regime. Speaking in February, Doherty, who is also the party’s finance spokesperson, said that it hopes that international investment will not just stay at current levels but even increase

Doherty took a different tone in his recent Dáil speech, according to the Irish Independent, accusing the current government of being “best boys in class” when it came to facilitating institutional investors in housing and ultimately driving up prices.

Politicians using complex issues to score political points is nothing new, but Ireland’s crop of politicians seem keen to gloss over some of the core causes of the housing shortage.

The housing supply issue is partly rooted in the collapse of housebuilding following the Great Financial Crisis in 2007-2008. At the time, housebuilders and construction firms were considered culpable for many of Ireland’s economic woes. Politicians of all political hues were reticent to meet the construction industry for these very reasons. 

The lack of political engagement in the half-decade following the 2008 crisis and the construction collapse led to a lapse in housing completions. The housing market never fully recovered from this hiatus in development, even as the country’s tech-led recovery gathered steam.

The average development takes four years to get from pen and paper to completion. Solving Ireland’s housing supply problems won’t happen overnight, whatever political promises are made.

Following the president’s comments, Housing Minister Darrah O’Brien defended the government’s policies, stating that Ireland’s housing policies “were not a disaster.”

"I do want to be very clear that certainly our Housing for All plan, which is only nine months old and which is taking effect right now, is certainly not a disaster, nor anything like it," he said. 

“It’s the most-comprehensive housing plans that any government has actually brought forward.”

O’Brien also agreed with the president that he wants the Irish state to be involved in “a major way” in delivering social housing and housing in general.

“This year we intend to build more new social homes than has been done in any other year in the history of the state,” he said. 

Plans for more state intervention may be welcomed by many in Ireland, but it opens up the question of how much money the Irish government has available to help build the homes Ireland needs.

The recent report by the IIP stated that in future, institutional investors could raise the funding level to €9.5B, or 86.4% of a total €11B in development finance, which would allow for 30,000 new homes per year to be built. 

If Ireland’s domestic funders, including government, are spending around €1.2B funding housing, can it take on the contributions from the international private sector? It has been argued that even if the Irish government ploughed €6B annually into the housing market, another €5B from the private sector is needed.

Academic commentators such as Hearne advocate the establishment of a state construction company to solve the housing crisis. That is a project that is easier said than done in the midst of a skills and labour shortage. 

Ireland’s future may indeed see a larger slice of state intervention in the housing market. However, whether Ireland likes it or not, for the immediate future, four-fifths of Ireland’s future housing supply depends on international finance to deliver it.