A tale of two cities’ housing crises: Dublin and Berlin

Rents now far exceed what they did at the height of Ireland’s property bubble more than a decade ago. They have risen by 37% since then, with prices for two-bedroom apartments in the city now routinely available for more than €2000 ($2257) per month.

To give an illustration of how unaffordable basic housing has become in the city, a scan through Ireland’s biggest property website Daft.ie is instructive.

One recent example, although not untypical, garnered considerable attention. Described as a studio apartment in the city center, what was on offer was essentially a small kitchen with a bed placed in the middle of the kitchen, facing the sink and washing machine.

Priced at €750 per month, the listing described the flat as being “finished to the very highest of standards.”

A housing crisis and a homeless crisis

For Bissett, extremely high rents stem from both a lack of housing stock and in some cases “pure greed” on the part of landlords. But difficulty for renters is only one part of the problem in his view. He says the Irish state needs to urgently build more social housing.

At the moment, close to 50,000 people in Dublin are on waiting lists for social housing while more than 10,000 people are homeless, including some 4,000 children. Many of them are living in hotels or so-called “family hubs,” which are essentially crowded emergency accommodation shelters.

During the financial crisis a decade ago, Ireland’s property bubble burst, plunging the country into a deep recession. One of the curious consequences was that housebuilding came practically to a halt in the country. Bissett says that the building of social housing by the state, already in decline by that stage, was particularly hard hit.

“We stopped building public housing to any degree and have moved to a market, commodified model of housing,” he says.

He believes the state has sufficient land to engage in mass public housing building, and could fund construction through both state resources and lenders such as the European Investment Bank.

“But there is a real resistance to that,” he says. “Ireland is a neoliberal, commodified state, commodified economy. The political parties are wedded to that model. ‘We live and die by the market’ is the message, and many people are suffering because of that.”

Same problem, different solutions

Most people involved in property and housing in Dublin agree on what the main problem is — years of sluggish construction rates have led to a woeful lack of housing stock, whether social or private, to buy or to rent.

But there is disagreement over how to solve the problem.

Marian Finnegan, chief economist with Ireland’s largest residential estate agency Sherry Fitzgerald, says the collapse of the Irish property market more than a decade ago scared investors off, leading to a dramatic dearth of supply. That problem lingers, she believes. “Our private investors are not getting a return as it stands from their investment and they are leaving,” she says.

While there has been a gradual rise in the amount of large institutional investors entering the Dublin property market — such institutions bought 11% of property sold in Ireland last year, according to Savills — she says it is still a “slow burn” and that they have not yet greatly influenced the amount of new housing stock.

“While we have improved our pace of construction activity, it is not meeting the demand,” she says. “My current estimate is that we need to be building 40,000 units every year (in Ireland). Last year, we built 18,000. The year before it was 14,000. This year it might be 21,000. In Dublin last year, it was 6,700 against a demand of about 14,000.”

Ronan Lyons, Assistant Professor of Economics at Trinity College Dublin, says the housing crisis in Dublin and lack of supply has roots which go far deeper than the recent property crash and financial crisis.

“Up until the late 1980s, it had been the case in Ireland that there was weak housing demand in general,” he says. “We lost people every year to emigration and were a net exporter of people for centuries. Only in the last 30 years has Ireland had to deal with a growing population and therefore to deal with challenges that other countries in Europe have had to deal with for a bit longer.

“So set aside the credit bubble and crash, from 2000-2012, and really this is the culmination of a problem that has been growing for 30 years.”

A European problem?

For John Bissett, he believes looking to the market to solve Dublin’s housing problems is foolish, considering what happened 10 years ago.

“After what happened here ten years ago,if we think logically that’s the way to run a housing system, it’s mad. Certain groups will benefit from such a system but the vast majority will not. The market does not self-regulate. And the cost on the lives of ordinary people is enormous.”

For him, the key to solving the crisis is that the state needs to own more property. He points to Vienna as an example to follow, a city with a very high standard of living where close to 60% of the city’s housing is in public ownership — in sharp contrast to Dublin where it is now less than 10%.

Lyons believes a mulfi-faceted approach is needed. “Ireland desperately needs lots of private rental accommodation built and it also desperately needs lots of public or social or subsidised housing built as well. It’s not either or, it’s both,” he says.

He is optimistic that one day Ireland can develop a healthy and sustainable system of housing. But he believes that a key problem at the moment is that the cost of construction, particularly of much needed apartment buildings, has become unviable due to high construction costs.

He says that while house prices fluctuated, building costs steadily climbed, particularly those associated with increased regulation. “The minimum standards in Ireland are now among the most onerous in the world,” he says.