Nat O'Connor: Rents drop 17% over 12 months according to DAFT’s latest Rental Report. This headline will be referred to in the next Budget to justify cutting Rent Supplement payments. But it isn’t that simple.
As noted previously, the Rent Supplement maximum payment will cover a significantly different proportion of average rents, depending on what part of the country you live in. So people in some areas are more likely to be squeezed into poorer accommodation and/or to make further top-up payments from their social welfare than are their equivalents in other areas, by the mere chance of what administrative area they live in.
Another problem with the headline figures is that it is an average across all housing units, from one-bed studios to 5 bed+ houses. However, some detail is given on page 7 of the report based on the number of bedrooms in the dwelling. So, let’s illustrate what Rent Supplement will do for you (bearing in mind the limits of the available data):
A three-bed unit will cost an average of €695 in Waterford City, €780 in West Leinster, €1,273 in Dublin 8 or €1,486 in Dublin 1.
Rent Supplement for a family with 3 or more children is the highest possible Rent Supplement payment, and it varies across the administrative regions of the health services (who administer the payment). Including the family’s contribution of €103 per month, the maximum payment is €788 in Waterford City, €909 in Meath or €1,203 in Dublin.
So far so good, if you don’t live in Dublin. Maximum Rent Supplement covers average asking prices. But given that it has already been cut and rents have fallen, is there really much scope for cutting RS further? Also, it is a maximum, so a CWO can simply decide to pay a lower amount. Do we need a further blanket cut of payment ceilings? Dublin already lags behind by €70 per month in Dublin 8 or €283 per month in Dublin 1, which is a lot of money for a family on welfare. So there is a clear problem with how this payment is calculated. And if other social welfare payments are cut in the next Budget, people’s ability to pay for their housing will be put further at risk.
Now take the example of a one-bed housing unit, which will be an apartment in most cases. A one-bed will cost an average of €532 in Waterford City, €511 in West Leinster, €849 in Dublin 8 or €892 in Dublin 1.
Maximum Rent Supplement for a single person living on his/her own (plus contribution) will cover €571 in Waterford City, €571 in Meath or €632 in Dublin. So, it’s sufficient in Waterford or Meath, but €217 too low in Dublin 8 and €260 too low in Dublin 1 (and these are not the most expensive areas in Dublin either). There is a massive gap in Dublin between average rents and Rent Supplement, which is likely to force single people into the cheapest accommodation and to make further top-up payments from their welfare payments.
Some people will say that we should expect people on Rent Supplement to move into the cheapest accommodation. But let’s examine this logic.
If lower Rent Supplement forces people into the cheapest accommodation, the taxpayer ends up subsidising the worst flats, which are often owned outright and can undercut modern apartments (e.g. buy-to-let) in terms of low rent. It also increases ghettoisation, as families on welfare become priced out of large areas of Dublin. The fact that market rents are lowering is an opportunity to move people into better quality, modern apartments and to achieve a better social mix. These are stated goals of national housing policy.
Bedsits have been banned, which is a move towards higher quality standards in the private rented sector. But this means that rents will be higher. So, we have to look at how we meet those costs. Rent Supplement will cost an estimated €490 million in 2009. But part of the problem is the decision to pay near-market rent rates to private landlords, rather than take a long-term view and build (or acquire) more social housing, which very soon becomes a cheaper option for the taxpayer.