As the Government continues to try to tackle Ireland’s housing crisis, why has the cost rental market failed to take off?

Cost rental housing, which aims to offer long-term rents for tenants at prices at least 25% below market rates, was introduced in 2021 by then-Minister for Housing Darragh O’Brien.

The system, while proving popular with potential tenants, has faced issues as plans for new developments have been scrapped in recent months due to rising costs.

On The Home Show with Sinead Ryan, Professor of Housing at Technological University Dublin Lorcan Sirr said the Irish Government’s approach to cost rental is flawed.

Comparing Ireland’s system with Vienna, the “go-to place” for cost rental housing, Prof. Sirr said Ireland could not “follow the process” and “put their own spin” on the scheme.

In Vienna, rent prices are fixed at a cost calculated by dividing the cost of building the unit by the length of the lease, returning no profit for the owner.

Prof. Sirr explained that “the amount of money that you pay every month is exactly that required to kind of pay for the building over 40 or 50 years.”

The Irish approach

In contrast, Prof. Sirr noted that rents for Irish cost rental buildings fluctuate as they are “connected to market rents”. He explained that rents can rise if market rents increase.

Prof. Sirr argued that this approach can be a problem as cost rental rents can increase to become “more expensive than a mortgage.”

He said there was no need for the Government to take this approach, and that they “should do the decent thing” and disconnect rents from the wider market.

‘The model they have will always be expensive’

Prof. Sirr said that the Government “are competing with first-time buyers” for houses, noting 80% of social housing stock is purchased from the market rather than built by local authorities.

However, he doubted this housing stock would lead to more cost rental housing and said the Government should go “back to basics” if they wanted a working cost rental system.