DUBLIN (Reuters) - As Ireland bids to convince firms to redeploy tens of thousands of bankers, lawyers and insurance workers from London after Britain’s vote to leave the European Union, it is facing a stubborn problem: where to house them.
An eight-year building drought has spawned a housing crisis so severe that rents in Dublin have soared by over 50 percent in four years, homelessness has reached record highs and Ireland’s competitiveness in attracting foreign investment is in jeopardy.
In May the government established a new housing ministry to tackle the crisis. But with some London-based firms expected to make a decision on where to move to ensure access to the EU market in the coming months, time may be running out.
“It’s a big problem for Ireland Inc. right now... And that’s not a problem that business can solve,” said Dan Kiely, chief executive of tech outsourcing firm Voxpro, which employs hundreds of foreign workers in Dublin and Cork.
Ireland was recently known for its “ghost estates” left empty by a 2008 property crash, but property has since become scarce in cities with rapid population growth.
The government estimates Ireland needs 30,000-35,000 new housing units annually, but expects to build 14,000 this year.
Goodbody Stockbrokers estimates sustainable housing construction will not be reached until 2023, four years later than the government target, leaving seven years of housing inflation.
“It looks unlikely at this stage - even though we have started the journey towards normalisation - that industry will be able to ramp up to the level required,” said Goodbody chief economist Dermot O‘Leary.
Rising housing costs, which can represent up to a quarter of firms’ outlay for doing business, are “one of the biggest issues for competitiveness,” and the biggest domestic threat to the Irish economy, he said.
Real estate agents say big name London firms are sending teams to investigate office space in Dublin as they compare EU cities with significant financial services infrastructure.
While agents say they have convinced inquiring companies that new office space will arrive in time, satisfying them that housing will be available is “a harder sell”, said Declan O‘Reilly, director at Knight Frank.
The average monthly rent in Dublin was 1,686 euros ($1,760) in 2015, according to data portal Statista, compared to 1,543 euros (1,295 pounds) in Paris and 1,169 euros ($1,220) in rivals Frankfurt and Amsterdam.
But inflation has set Dublin apart - city centre rents are up 55 percent since 2012, says real estate portal Daft.ie.
The cost of a 100-square-meter Frankfurt apartment is up 22 percent in the period, according to wohnungsboerse.net, while the rate per square meter in Paris is up 9 percent, French Housing Association OLAP data shows.
Savills Ireland is forecasting Irish rents will continue to rise by over 10 percent annually in the next two years.
The biggest problem for foreigners is availability, forcing well-paid workers to queue for poorly maintained apartments. There are just 3,700 units advertised as vacant in Ireland now, compared to 23,700 in 2009, according to Daft.ie.
PayPal’s chief executive last year told a conference it was asking existing employees to rent rooms to new arrivals, the Irish Times reported. Several firms have set up induction programmes to brief new employees on housing issues.
“I like my company, I have a good job. But to be honest if someone asked, I’d say go to another city: to Amsterdam , to Berlin,” said Lucia Gonzalez, 36, a Brazilian who moved to Dublin from Madrid to work for Google and had just viewed an single room studio for 950 euros ($992) per month.
The government has faced flak from both industry and social organisations about its housing efforts, which have focussed on boosting private-sector construction, including a help-to-buy tax break for first-time buyers of new properties, funding for infrastructure and fast-track planning.
Facing angry constituents, the government this week announced plans to cap rent rises in “rent pressure zones” to 4 percent per year for three years.
Industry groups have warned the measure may scare off the big foreign developers they say are needed to add housing units at scale in a short time and warned availability may suffer as renters cling to existing leases covered by the measures.
Groups representing renters are equally angry, saying the rent caps do not go far enough and the focus on private builders is misplaced.
As earlier house building booms in Ireland have fuelled rather than reduced price inflation, the government must grasp the nettle and start large-scale social housing to free up the private rental sector for workers, said Lorcan Sirr, a housing lecturer at the Dublin Institute of Technology.
Without a major overhaul of weak renter protections, the rent market will never become fit to accommodate well-paid foreign workers, he added. “It’s bordering on the futile for the country to have an attractive corporation tax rate if company employees cannot afford to house themselves.”
Editing by Mark Heinrich