Lower paid are protected better due to state supports.
Younger people and higher earners are worse off here than in the rest of Europe when it comes to housing costs.
Middle and high-income earners in Ireland face more extreme rent pressures in Ireland, a report by the Economic and Social Research Institute (ESRI) has found.
The report also shows that the under-40s are being squeezed out of home ownership.
As a result, young people here were moving back in with their parents at the fastest rate in Europe in the years leading up to the pandemic, the ESRI said.
The ESRI research, funded by the Department of Housing, paints a mixed picture for renters and mortgage holders in Ireland, compared to 14 other European countries, using data from 2019.
Since then, Covid lockdowns, rising interest rates, shortages of building supplies and construction workers, inflated costs and the war in Ukraine have deepened the housing crisis.
Homelessness has reached a new record, with the number of people using emergency accommodation rising above 12,000 for the first time in May.
The ESRI report found that overall, Irish households – renters and mortgage holders – spend less of their income on housing than their European counterparts.
But Irish renters seem to fare worse the more they earn because “extensive” rental supports shield lower earners, the ESRI found.
More than half of Irish renters were on some form of state housing support in 2021.
Low earners generally spend more of their income on rent than high earners, but the proportions in Ireland are smaller than in the rest of Europe, the ESRI found.
Spending over 30pc of your income on housing is generally considered unaffordable.
Around a quarter of those on the lowest incomes in Ireland were above the 30pc threshold, compared to well over a third in Europe, and over 90pc in Greece, in 2019.
The trend reversed for those earning more.
The report found 16pc of Irish households earning between €34,000 and €49,000 a year in Ireland spent more than 30pc of their income on rent. That was almost twice the average rate in the other countries in the study.
And 14pc of households earning between €49,000 and €70,000 were above the 30pc affordability limit, almost five times the rate in the rest of Europe.
More than half of private sector renters that don’t receive supports fall within these income brackets.
The maximum income limit for social housing (and to qualify for the private sector Housing Assistance Payment) is €40,000 in Dublin and up to €35,000 elsewhere.
A new cost-rental scheme announced this week sets an income limit of €66,000 in Dublin and €59,000 elsewhere.
When it comes to home ownership, the ESRI report found a yawning generation gap, with less than half as many under-40s owning homes as those aged over 40 (34pc compared to 80pc).
Only Greece, Denmark, Austria, Germany and Switzerland saw lower rates of home ownership for the under-40s.
Most of those countries have a long-established tradition of renting and strict rent controls.
Over-65s in Ireland had the highest rate of home ownership in Europe in 2019. Over-65s also make up the bulk of Ireland’s lowest income earners, which affects the data.
Almost half (43.5pc) of the Irish population either own their home outright or are in free accommodation, according to the CSO.
Just over a quarter are mortgage holders and just under a third are renters.
The ESRI said high house prices, tighter Central Bank lending standards and successive tenant purchase schemes – which have allowed low-income tenants to buy local authority housing at a discount for decades – had meant fewer low-income people needed to or could afford to buy a home.
“Essentially, lower income households in Ireland fare better than elsewhere (due to extensive supports and higher outright homeownership levels driven by older cohorts) but those in the middle-to-higher parts of the income distribution fare worse (these are mainly those in private rental sector not in receipt of supports),” said the report’s author and ESRI research officer, Rachel Slaymaker. “The overall picture hides these substantial differences.”
The state of the Irish housing market means that one in four young adults (aged 25-34) were living with their parents in 2019.
While that is far less than in Greece, Italy, Portugal or Spain – where close to 50pc of young people live at home – the rate in Ireland rose 23pc between 2015 and 2019, the biggest hike in Europe.
Read the full report at: https://www.esri.ie/publications/housing-affordability-ireland-in-a-cross-country-context
(Source – Irish Independent – Business – Sarah Collins – 20/07/2023)