Rent Controls are Short Sighted

There is a critical need to address the housing shortage in the Dublin area. Private and public sector building programmes must be encouraged in order to meet the growing demand for homes. Rents will stabilise, and potentially fall, once there is a marked increase in the housing supply.

The accepted problem with rent controls is that they restrict the supply of housing. House builders and potential landlords are discouraged from investing in property due to the artificial cap placed on returns.

Evidence from Abroad

Sweden is a case in point. Rent controls have directly contributed to a housing crisis. Due to a fall off in development in the years following the introduction of rent controls a shortage of 40,000 units has arisen, mainly concentrated around major cities.

Germany’s complex ‘Mietspiegal’ system is often cited as a success, however this must be viewed in the context of a falling population. The German government has acknowledged that a proposed tightening of this system will only succeed if done in conjunction with new tax incentives for home builders, this is because they are well aware of the effects rent controls have on supply.

Ireland has a housing supply crisis, policies that further limit supply are short-sighted.

 

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