US multinationals warn that action is needed. But is Ireland’s housing crisis more severe than elsewhere or is it part of a global epidemic?
The American Chamber of Commerce (AmCham), a body representing some of the biggest multinational tech employers in Ireland, is worried that the ongoing housing crisis is damaging the country’s competitiveness.
In a new report, Growing Great Teams in Ireland: The Role of the Residential Rental Sector, co-written with Ronan Lyons of Trinity College Dublin, AmCham is warning that the availability of quality and affordable accommodation is having a direct impact on the hiring of talent.
‘With a large enough landmass relative to its small population, Ireland has the room to manoeuvre if it puts its mind to the task’
We have previously warned that the accommodation crisis is harming Dublin’s perception as a go-to place for overseas talent and indicated that some are already choosing jobs elsewhere because it is too hard to find suitable accommodation.
In August, a study by Prosperity, a recruitment firm, showed that 40pc of people it helped to hire for tech employers in Dublin came from overseas.
In 2016 and preceding years, the recruiter had a rejection rate of approximately 15pc on job offers to candidates living abroad but, by the third quarter of 2017, that has doubled to nearly 30pc.
How much housing stock does Ireland need to feed the boom?
According to the AmCham report, about 232,500 new housing units will be required nationally over the next five years, including 81,500 in the greater Dublin area.
Out of these, around 82,500 will be required in the rental sector, including 32,500 in the Dublin area.
Current demand for new dwellings stands at close to 50,000 per year and, if the market cannot keep up, this will have an impact on foreign direct investment (FDI).
“In an era where much of Ireland’s FDI is based on access to skilled labour, there are two clear implications for housing,” the report’s authors said.
“Firstly, companies locate where skilled labour wants to locate, and skilled labour seeks locations that offer a greater variety of amenities, ie larger cities.
“Secondly, wages make up three-quarters of the cost base of the typical FDI service-based operation currently and, with housing comprising one-third of the typical household’s disposable income, this means that housing is roughly one-quarter of Ireland’s competitiveness.
“Further, this paper estimates that in the greater Dublin area alone – taking into account the various sources of demand during the period 2017-2022, as well as trends in tenure – over 30,000 new rental dwellings for one- and two-person households will be needed in the city by 2022, largely in or close to central urban locations.”
The report points out that employers are deploying a wide range of novel measures to manage accommodation challenges.
In one such instance, according to a report in the Irish Independent, consultancy giant EY has begun offering graduate recruits interest-free loans just so they can secure accommodation and take up placements in Dublin.
A spokesperson for EY confirmed that the loans are available to graduates starting with the firm. “At EY, we understand that starting out in your career and living independently for perhaps the first time can put some people under temporary financial pressure. First-year graduates at EY can avail of a salary advance of up to €2,000 to support them with expenses they can incur on starting their career. This can be used at the graduate’s discretion to cover housing-related costs, such as rental deposit, or for other expenses that may arise.”
A global housing crisis deepens
But how does Dublin compare with elsewhere? According to a recent McKinsey report, Housing Affordability: A Supply-side Toolkit for Cities, global housing stock has not expanded quickly enough to keep up with demand.
It points out that in 1950, New York City and Tokyo were the only cities in the world that had more than 10m residents. Now, there are more than 20 cities of that size. And they are doing a bad job of keeping up with demand.
California, for instance, added 544,000 households, but only 467,000 net housing units from 2009 to 2014.
In New York City, McKinsey estimates that 1.5m households cannot afford the cost of a decent apartment at market rates. This puts the city’s total ‘affordability gap’ at $18bn a year, or 4pc of the city’s GDP.
As London’s economy has boomed over the past two decades, the city’s annual home completions increased by just over 10pc, falling far short of demand and driving home prices five times higher.
Worldwide, McKinsey estimates that 330m urban households currently live in substandard housing, or stretch to pay for housing that exceeds 30pc of their income. If not checked, this could rise to 440m households by 2025.
McKinsey recommends three core actions: find the land for new homes, cities need to remove barriers to growth and the construction industry has to evolve.
Laying a solid foundation
Returning to the AmCham report for Ireland, there are four key recommendations:
- Benchmark construction costs against international locations
- Report on the cost and benefits of regulations on construction viability
- Establish a database of ownership and residency to support targeting of policy measures
- Increase densification and appropriate land value taxation in order to boost supply
In conclusion, the report by AmCham rightly points out that Ireland has one of the EU’s fastest-growing labour markets, and more jobs were created in in percentage terms in Ireland between 2000 and 2015 than any other European economy, apart from Austria.
Not only that, the continued growth of digital means more and more jobs will be coming. Only last week, Facebook CEO Mark Zuckerberg indicated that several hundred new jobs will be created in Dublin by the social network next year, for example.
With a large enough landmass relative to its small population, Ireland has the room to manoeuvre if it puts its mind to the task.
People looking in the window of Dublin estate agency. Image: kay roxby/Shutterstock