Housing Affordability:

Persistent, structural housing affordability challenges in Ireland have been well documented for particular groups (private renters, low to middle-income households, and those in urban areas (Corrigan et al., 2019)). Recent research has also documented the access credit constraints faced by first-time buyers and the challenges associated with accumulating a deposit and tight loan-to-income limits (McQuinn et al., 2021; Kelly and Mazza, 2019; Slaymaker et al., 2022). However, these challenges are not unique to Ireland, and worsening affordability pressures and falling homeownership rates have been highlighted globally (Demographia, 2022) as the share of household income spent on housing costs has risen over time (OECD, 2021a).

This paper aims to better contextualize the housing affordability challenges faced in Ireland by examining how key affordability indicators such as housing-payment cost-to-income ratios for Irish households (across tenures, incomes, household composition, urbanization, and age) compare with those in 14 other European countries.

This analysis is based on the 2019 Eurostat cross-country Survey on Living Conditions (EU-SILC) data to avoid any potential distortions in affordability indicators as a result of differing COVID-19 income support policy responses across countries. A considerable benefit of using nationally representative household-level microdata is that they provide a more complete affordability picture for the full stock of tenants and mortgage holders compared to frequently cited rent/house price index measures based solely on new tenancies/recent movers.

A particular focus of the work is how the housing cost burdens the most affordability-challenged groups in Ireland compared to similar households across Europe and whether there are other cohorts in Ireland who are comparatively better off (spending lower proportions on housing costs) than their internationally comparable peers.

Due to the challenges associated with cross-country comparison, we examine how the affordability outcomes for mortgage holders and all renters differ for similar groups of households (e.g. by income, age, urban, and household composition), rather than grouping households according to the type of support (if any) they receive due to considerable variation in the types of rental supports available across countries. We supplement this cross-country analysis with insights from more detailed Irish SILC data to provide the most up-to-date affordability picture for Irish households and also examine the changing composition of the rental sector in Ireland in recent years.

This analysis focuses on housing-payment-cost-to-income ratios as they permit comparison across countries. However, these measures of housing affordability have limitations as they do not account for households‘ differing capacities to pay across the income distribution, or that certain households may choose higher levels of housing consumption as a preference rather than out of necessity. The broader housing context within different countries is also important.

On average Irish households pay around one-fifth of their net incomes on their housing payment costs. Nine countries see higher housing-payment-cost-to income ratios on average than Ireland, with only five countries displaying better average housing affordability (Norway, Denmark, Portugal, Austria, and Sweden).

While the levels of outright homeownership vary significantly across countries, the distribution of outright ownership across incomes within countries is generally more comparable. In Ireland, though, this tenure is most common for households in the lowest income quintile, 54 percent of whom own outright and therefore have no housing payment costs. This finding is driven by very high rates of outright ownership for retirees (over 65) who make up half of Ireland‘s lowest income quintile.

Overall, renters in Ireland have the lowest rent-to-income ratios (RTI) among the 15 countries analyzed, paying on average 20 percent of their net income on rent. Note for renters, to facilitate cross-country comparison, we report findings for the full rental sector inclusive of those in social housing, in receipt of housing allowances, and private sector renters paying full market-price rents; there is considerable variation within the sector. This overall finding is driven by lower-middle-income renters, with those in the lowest income quintile in Ireland facing an average RTI 10 percentage points lower than elsewhere and RTIs for those in the second and third quintiles are 1 percentage point lower than elsewhere.