Conor McCabe: On 14 October 2015 Taoiseach Enda Kenny stood up in the Dáil to speak against government intervention to tackle the rising cost of rents. ‘It is very clear that interference in the market to its detriment is not something that we should do’ he said, adding that ‘if you interfere in the wrong way you make the matters worse’.
It is no surprise to anyone that Fine Gael is a right-wing neoliberal party, so his comments while shocking were not entirely unexpected.
However, there is a wider context to his remarks, one that shows that what is at play here is not just ideology but the protection of a state-sponsored strategy that has led to profits of hundreds of millions of euros for private investors, to the detriment of social cohesion and stability.
When Kenny stood up in the Dáil to denounce rent freezes, it had been two years since Fine Gael and Labour had introduced legislation to allow Real Estate Investment Trusts [REITs] to operate in Ireland.
They had done so on the suggestion of the National Asset Management Agency (NAMA), which had been a champion of REITs since at least 2009. ‘NAMA executives have been talking about a REIT structure for over two years’ wrote the Irish Independent in 2013, ‘but sign-off from the Government is absolutely essential for such an event to happen.’
At the time NAMA had around 20,000 residential properties under its control, and the plan was to bundle them into REITs and to sell them on to investors, who would then benefit from the rental income.
The law needed to be changed first, and in 2013 the Fine Gael and Labour government did just that. NAMA then began to sell off its residential and commercial portfolio with gusto.
” Private investors were encouraged to set up REITs and buy NAMA assets by NAMA personnel”
Private investors were encouraged to set up REITs and buy NAMA assets by NAMA personnel. Stephen Vernon of Green, a property group, told the Sunday Business Post in February 2016 that John Mulcahy of NAMA advised him in Jan 2013 to get into REITs.
John Mulcahy was a former chief executive of Jones Lang LaSalle who ended up as head of asset management in NAMA before leaving the organisation to join property fund IPUT which set about “mopping up” discounted property in Ireland, including former NAMA assets.
“In Ireland, it seems a small circle casts a wide net over property”
In 2015 Mulcahy attended a private party in the Shelbourne Hotel to celebrate the 50th anniversary of the foundation of Green, along with Richie Boucher, Ray MacSharry, Gary Kennedy and Gary McGann. In Ireland, it seems a small circle casts a wide net over property.
Once the legislation was in place, the various REITs bought up NAMA apartments, as well as buy-to-lets and repossessed properties from the banks, initiating a business model based on high rents on an upward trajectory in a rental market with poor social housing provision and tepid residential construction levels.
In other words, the REITs business model, then and now, demands an under-supply of housing that forces rents up in order to work.
“… their profitability is based on crisis not equilibrium”
It is not in their interests to see the rental crisis tackled in any way, as their profitability is based on crisis not equilibrium.
And by equilibrium I mean rents (and mortgage repayments) that are linked to earnings, which in Dublin would require a 60 to 70 percent drop in rents in order to achieve a level in line with social cohesion and stability.
This goes against the business model of REITs and other institutional investment companies and they will fight any move to link the affordability of rents to actual income – instead pushing bogus measures such as ‘cost rental’ which will do nothing to tackle affordability.
Ireland is currently one of the most profitable states for these investors because of the crisis. They can expect returns of 3.75%, the highest in Europe.
The apartments they build are meant to be drip-fed onto the market in order to ensure the rents keep rising. In a report published this year by Knight Frank, the fact that supply shortages will continue for the foreseeable future was seen as a positive, as it will protect investment returns. ‘The fundamentals driving the Irish housing market – a rapidly growing population in a performing economy, coupled with an acute housing shortage – have intensified investor interest in residential investment assets’, it said. The future sale of non-performing residential loans by the banks – including mortgages and buy-to-lets – is also seen as an excellent opportunity for profit.
This is the business model that Enda Kenny was protecting in 2015 when he said it would be wrong to ‘interfere’ in the rental market.
David Ehrlich of Ires REIT: “I truly feel badly for the Irish people”.
The rent reviews that were eventually agreed by the coalition government had enough loopholes in them to allow institutional investors to continue to set high rents on an upward trajectory.
Which is why David Ehrlich of Ires REIT was able to say in 2016 that Ireland is ‘a great market. We’ve never seen rental increases like this in any jurisdiction that we’re aware of… I truly feel badly for the Irish people.’
“We have a housing crisis because FG, NAMA & the Dept. of Finance want it that way”
Fine Gael are not blind ideologues. They adhere to a right-wing ideology, but there is also a materialist basis for their decisions.
We have a housing crisis because FG, NAMA & the Dept. of Finance want it that way. Ireland is not a country to them. It is a business.
They see our laws, our tax code, and our shared resources and infrastructure as tradeable assets for financial interests, regardless of the social cost. It is not enough to say that Fine Gael are right-wing. They are. But they also have a plan. And it doesn’t involve us.
 Matt Cooper. ‘The West Winger’. Sunday Business Post, 7 Feb 2016. https://www.businesspost.ie/more-business/the-west-winger-614057ab (behind paywall)
 Roisín Burke. ‘Green party toasts past and present’. Sunday Business Post, 31 May 2015.
 Knight Frank. Ireland Residential Investment Snapshot 2020. https://www.knightfrank.com/research/report-library/ireland-residential-investment-snapshot-2020-q4-2020-7771.aspx
 Frank Knight. Ireland Residential Investment Snapshot Q1 2021. https://www.knightfrank.com/research/report-library/ireland-residential-investment-snapshot-q1-2021-8075.aspx
 ‘We’re the opposite of a vulture – we’re here for the long term’. Irish Times, 18 Nov 2016.