Just yesterday it was announced that rents in Ireland have surpassed their previous peak in 2008. As it stands there is no sign of this trend slowing down. It is well documented in the media that the cause of the shortage is that recent economic growth and lack of supply is driving prices. Is this the real reason? Could it be that policy in housing and planning is the root cause rather than the publicized causes? Look at Tokyo for example. Tokyo is a city of 13 million people with no available land banks and a rising population yet residential prices remain steady and have done for almost 20 years. On paper, Tokyo has the same problems as most Irish cities – growing populations and limited land banks. It has also experienced a population surge as people move to urban areas. Same as Ireland. Both countries constitutions have strong property rights. So what is the difference? Japan suffered a huge property collapse 20 years ago. A decision was made to speed up their permit approval (planning) process and to relax regulation and zoning laws to make it easy to re-purpose land for residential housing. This flexibility facilitates the market to produce sufficient accommodation for the rising population. Safety is still paramount given how prone Japan is to earthquakes. The availability of housing regulates the prices in the open market. It’s that simple. Maybe it’s time Irish policy makers look to the east?
Rising housing prices are not an inevitable consequence of growth and fixed land supply — high and rising housing prices are the result of policy choices to restrict land development. The policy choices were made — they can be unmade.