Twenty thousand people are chasing fewer than 1,000 homes available to rent nationwide, as supply has now fallen to a new record low.

The "unbelievable scarcity" of properties on the market means that many growing families are stuck in unsuitable homes or are struggling to find homes to rent if they have to move location.

The squeeze on supply is also leading to rising costs, with the average rent up €165 a month over the past year to €1,567 - an increase of almost 12%, the latest rental report from Daft.ie reveals. Nationwide, there were just 851 homes to rent on May 1, down from over 3,600 a year ago. This marked a new all-time low in a trend that extends back to 2006.

Report author Ronan Lyons, associate professor of economics at Trinity College Dublin, said: "The economy has suffered from an underprovision of new rental accommodation for over a decade. As a result, market rents have doubled and rental homes have become unbelievably scarce."

Rents climbed almost 3% in the last three months of 2021 and are now more than double the low of €765 a month seen in late 2011.

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One property expert said: "There are probably about 20,000 people looking for rental accommodation at any particular point in time with fewer than a thousand homes nationwide."

Many of the 20,000 would already have somewhere to live but are looking to move for work or because they need less or more space.

"That's not 20,000 homeless. The mobility you normally expect to see in the rental market, that's just not there because the supply isn't there and everything is grinding to a halt. People are staying. If they're lucky enough to get somewhere, they'll stay there if they can," he added.

With property agents estimating that some 10,000 landlords are selling up and leaving the market a year, Senator Michael McDowell said that government policies will need to change radically to address the housing crisis.

Earlier this week, research from agents Sherry FitzGerald warned that there has been "no relent in the exodus of landlords" from the rental market, as the ratio was near three-to-one for those leaving the market versus those investing in the opening months of the year.

The former justice minister called for the government to use statutory powers of planning, compulsory purchase, taxation and incentives to increase the flow of land available for the construction of homes. He believes current government policies are contradicting one another, remarking:

"Private landlords are leaving the private rented dwelling market in droves and selling out - that is as a result of government policies," he stated. "We're not building enough homes at the right prices for the people who need them and that seems to be an endemic problem over a long period and it doesn't look like that's going to change under current policies in the foreseeable future."

After more than a year of volatile rents during the pandemic, rents in the capital have now recorded five consecutive three-monthly increases.

While there have been differences in regional trends in rents in recent months, the rate of increase was similar across all major regions between early 2021 and early 2022. In Dublin, market rents rose by 10.6% year-on-year, while in Cork and Galway cities, rents rose by 10.2% and 13.8%.

Rents rose higher in Limerick and Waterford cities, at 15.5% and 16.2% respectively, while outside the cities the average increase was 12.7% The recent fall in homes to rent is seen in all regions of the country, with an 81% drop in availability in Dublin and a 66% fall elsewhere in the country.

Business reaction

Small business lobby group ISME expressed ‘grave concern’ at the rent price inflation data and the impact this will have for small employers.

ISME noted that average rents in Dublin exceed the annualised National Minimum Wage by almost €4,000. The average house price is a multiple of 6.7 times the average industrial wage of €44,800 14 times the annual National Minimum Wage of €21,290. These multiples are unsustainable.

ISME’s view is that the supply of accommodation has been adversely affected in the last decade by significant policy changes in:

• The effective outlawing of bedsit accommodation.
• The ending of Section 23 incentives.
• The reduction of deductibles for private landlords, and the application of social charges to rental income (but not for REITs). Local property tax is not a permissible deduction, meaning landlords must pay this tax from their “after tax” or personal income.
• A planning system which is very accommodative of lengthy legal review, including from persons unaffected by a particular planning application.
• Rent pressure zones have frozen many landlords with long-sitting tenancies with rents that are far below market. They are selling up.
• Landlords must frequently endure long periods without rent from sitting tenants who refuse to pay and cannot secure vacant possession.

Neil McDonnell, CEO of ISME said: “The only entities willing to provide accommodation in the current market are REITs, which are building large build-to-rent developments.

“Their financial firepower means they can sit on vacant properties for a long time. While we acknowledge that REITs have a place in the provision of rental accommodation, they should not have a monopoly in doing so.

“We are watching the natural outworking of policies which have driven private landlords out of the market for more than a decade. It is time to time to acknowledge that this process has failed.

"It is time that the tax system acknowledged the importance of providing adequate levels of rental accommodation in the economy. The political system and especially those politicians who identify themselves as of the left must have the courage to recognise policy failure when it becomes so painfully self-evident.”

The organisation cautioned that pushing up wage prices is not the solution, since the vast majority of employers cannot afford to pay the wages being sought by employees to cover these costs.