Policy without Evidence, Strategy without Goals

‘Facts are meaningless.  You can use facts to prove anything that’s remotely true.  Facts schmacts.’ (Homer Simpson)

Fact:  private rental accommodation supply is falling.  Between 2016 and 2021, the number of private tenancy registrations fell by 44,000, or 14 percent.  However, this fact doesn’t tell us why supply is falling. 

Is it falling because the number of landlords leaving the market is accelerating?  Or is the number leaving remaining steady, its' just that new entrants are not keeping pace?  Is there data on churn?

Is it falling because of tenant-protection legislation such as rent control?  The picture is not so clear.  We can get some insight from the Rental Sector Surveys conducted by the Residential Tenancies Board (RTB).  One relevant response from landlords is their future intentions to sell.

16 percent and 28 percent of small and medium landlords respectively are likely to sell the rental properties with three years.  That is not an insignificant proportion.  However, the overwhelming majority of landlords do not intend to sell over the next three years; though it should be noted this survey was published in mid-2021 so intentions may have changed.  And even if they sell, they might do so to other landlords who will maintain the rental stock.

Of the minority that are likely to leave, what are the reasons?  Again, the RTB asked this question.

There are various reasons for landlords leaving the market.  For mid-sized landlords, retiring is the biggest.  A significant number cite reasons related to the value of the house.  The regulatory environment doe not appear to be a major reason.  However, some of those who claim they don’t want to be a landlord anymore might be reflecting a more difficult ‘market’ to operate in (though it might also reflect ‘accidental’ landlords who didn’t want to be in the market in the first place) while ‘high’ taxation is another reason.

In short, there is no simple reason or set of reasons as to why landlords are leaving.  To attribute it solely to tenant-protection measures would be a misrepresentation. 

It also suggests that some measures to incentivise landlords to stay in the market – such as tax cuts – might miss the mark.  if most landlords do not intend to leave in the short to medium-term then tax cuts will come with a high deadweight cost - subsidising most landlords to do something they intended to do anyway without the tax cuts.  If landlords are leaving because they are retiring and want to cash in for their pension, cutting taxes may not have much impact.

The Government is rationalising the decision to end the eviction ban on the basis that continuing the ban would lead to a further loss of supply.  What is the evidence for this?  Ministers and Government TDs keep repeating the fact that private tenancies are falling (true) but assume without much evidence that this is due to regulation.  Could the eviction ban increase the tendency for landlords to leave?  Yes, possibly.  By how much?  We don’t know.  If we get rid of the eviction ban will that help incentivise landlords to stay in the market?  Maybe not as many are leaving because of other reasons.  The whole thing is a fog.

At times, the options available to a government all have downsides.  The skill (the ‘art of politics’) is to pursue the least damaging option while taking steps to ameliorate the next damaging option.  It’s hard to imagine anything more damaging than homelessness.  And if the government is confident that the measures to compensate for the removal of the eviction ban would protect tenants from homelessness, then – on the balance of probabilities – they should wait until such measures are on stream. 

Ultimately, we have two problems.  First, a clear lack of evidence to guide housing policy.  It is so bad we don’t even have robust measurements of how many houses we build each year as Lorcan Sirr and Mel Reynolds recently pointed out.  As such, what few facts there are can be manipulated to support unsubstantiated assertions and poor policy choices.

More crucially, we don’t have a policy destination.  What is the long-term plan for the private rental sector?  Where is the capital going to come from to provide truly affordable rental accommodation?  What is the delivery agency?  Institutional investment may divert to a more ‘profitable’ bond market (and, in any event, they veer towards the upper-end of the market).  Small and medium-sized landlords may struggle to generate the income needed to invest in new-build rental units.  The Government has ultra-modest proposals for cost-rental which still may not be affordable.

We have a relatively short window.  While most landlords don’t intend to sell in the next three years, a high number see it as likely over the medium to long-term.

It is long past time to stop treating rental accommodation as a ‘market’ and start treating it as ‘public good’.  The Nevin Economic and Research Institute’s proposals for a unitary ‘network’ in rental accommodation remains the most proactive and potentially transformative model. Such a model could incorporate private landlords, providing them with a real incentive to remain in the market while at the same time as expanding rental units through public intervention.

In the meantime, there is the danger that policy will be supported with little evidence, and strategies will fail to resolve the crisis for lack of direction or goal. 

And in that situation, facts can become meaningless.

Comments

[Jerry Melinn]

It's a key point that we don't have a policy destination. The Housing for All model is a failure so the measures are not working. The assertions that the government doesn't want to solve the problem, and acts on behalf of vested interests, are gaining more traction. This leads to the assumption that someone is benefitting from the current policy. The only certainty is that thousands are suffering. The councils should go back to providing homes, whatever it takes.