Institutional Investors In Housing

The End Of The Road

By Diarmaid Ó Conaráin

Whispered in the circles of power, be they the corridors of Leinster house or the boardrooms of international finance, there are two prominent approaches emerging to housing in modern Ireland. The first being that it is a lucrative asset, to be accumulated as the obvious investment for idle capital. The second being that it should be considered a human right, with legislation brought forward to support, implement and enforce such a concept. Ironically the circumstances that have inspired the former attitude are the same circumstances now presenting the latter as a necessary reaction. As is often enough the case I believe the answer lies somewhere in between. In a previous article I have made my argument against housing becoming a constitutional human right. Here I will outline why I believe it cannot be reduced to a mere asset to be accumulated either.

Western civilisation as a whole is grappling with a multitude of seismic changes over the last century or two, many of which are newer introductions relative to the scale of existence that precedes them. Home ownership in the modern form is one of these many aspects. Although the days of feudalism seem long resigned to the pages of history to us today, in truth home ownership did not become widespread until mid way through the 20th century. It is an idea and practice that is for all intensive purposes still in its infancy. Though all of Europe lived through feudalism, home ownership in Ireland is an even more consequential issue. Forever logged in Ireland’s history books are the accounts of absentee foreign landlords that Irish people suffered under. Ireland saw The Land League rise, The Land Wars, followed then by The Land Acts. It is estimated that in 1870 over 95% of Irish farmers were tenant farmers. By the 1930s it is estimated over 95% were now owner occupiers. This is not a defence or nod of approval of exactly how ownership was transferred during that period, but simply a recognition of how recent the concept of individual ownership is, and that it should not be considered a finished conversation. Even Brehon Law did not facilitate the type of individual property ownership and free transfer that we now consider the norm. Although it had strong property rights they were firmly anchored in much more communal approaches. That is not to say there is nothing to be integrated into today’s systems from it still. The concept that land cannot be sold at the expense of the kin or community can be applied today in the sense that international vulture funds and wealthy foreign buyers or migrants should not be permitted to purchase property over an Irish buyer, or essentially at all. This could become the beginning of a merger between the Brehon Law approach to Irish land and the individual freedom for Irish people to purchase or sell a home or land without being tied to a specific community.

I believe that a society being taken from communal ownership to foreign landlordism has shaped a people’s genetic memory, and I believe this has left a mark on the Irish psyche. A mark that displayed itself when Ireland became one of the leading nations in Europe with regards to rates of home ownership. In 1971 in Ireland approximately 71% of Irish people owned their home, while in Sweden only 35% of its population owned their home. By 1991 Ireland had peaked at around 80% of people owning their home, while countries like the Netherlands and Denmark had a rate of 47% and 51% respectively. I believe this was driven by the Irish embrace of home ownership as a foundational aspect of freedom and independence, in direct response to being denied all three for too long. Now Irish home ownership rates are facing a decline with no sign of slowing down.

This has not happened organically, however. It cannot be attributed to some cultural or societal shift in preference towards renting over buying. Between the year 2000 and 2006 the average price of a home in Ireland more than doubled. It is estimated the average price of a home in Ireland rose by up to 400 percent between 1995 and 2007. Having peaked initially in 2007 house prices then crashed as the world went into recession. Between 2013 and 2022 house prices then doubled again. As we all know from first hand experience, earning power did not inflate relative to the cost of buying a home, and this mismanagement has sent hundreds of thousands of Irish people into limbo. Purgatory might be a better description if we’re all honest. Today in Ireland barely a third of adults under 40 own their home, leaving a large amount of adults approaching a point of no return, where they’ll soon be considered too old to take on a mortgage. In 2024 the average age of the first time buyer had risen to 38 years of age. While the Census of 2022 highlighted that 440k young adults between 18 and 34 were living with their parents. All of these facts combine to paint a picture of a housing market that is destroying the standards of living and the demographics of an ancient nation.

Inflation has not been the only other problem, immigration has also destroyed what could be a relatively healthy ratio of organic demand to growing supply of housing in Ireland. During a decade long homeless crisis and a full on crisis in housing, our managerial class think it prudent to allow the immigration of higher numbers of people than houses being built each year. This could not work without a housing crisis, it is negligence and bordering into sabotage to pursue it during one. The primary culprits contributing to the continuous rise of house prices in Ireland are in truth the government, both in their management of immigration and their economic illiteracy. Vulture funds are not the largest contributor to the problems in housing, but that does not exempt them of the status of problematic. It is estimated they currently own in the region of tens of thousands of homes, likely around 30k homes, though fully detailed data seems unavailable. That is still no reason to avoid the conversation of what is happening, why it’s happening, and how we need to respond.

In 2024 an investment fund bought 46 out of 54 new homes in Belcamp Manor in Dublin. In 2021, again in Dublin, Round Hill Capital in partnership with SFO Capital Partners purchased the entire estate in Bay Meadows, 112 new homes in total. We are being confronted with the limitations of many of our established ideals. The idea that an individual can accumulate capital was never meant to translate to Bill Gates buying as much farmland as he can. The idea of home ownership and the freedom to buy or sell as an individual was never intended to lead to some groups owning thousands of houses, while thousands of individuals and couples are left without one. The idea that someone can immigrate cannot mean that a native remains without a home or a job. Technology and logistics have expanded the scope of possible outcomes regarding many of our ideas, and many of them now need to be fine tuned to the age we live in.

So, my own conclusion on this issue is not motivated merely by a demand and supply squeeze. Nor is it a dramatic recoil attempting to compare vulture funds to feudalism. It isn’t even driven by the principle that a home is arguably a person’s launchpad for life itself. It is where we rest, invite friends and family, make memories, start families, and orchestrate and plot our very existence from. This alone would be a good enough reason to end the practice in my eyes. Yet it is not quite reason enough to declare everything we need to be a human right at the expense of others.

The real reason I would argue for banning investment funds from home ownership is that , as mentioned above, society is grappling with relatively new ideas, and we have allowed a flawed system to create an inevitable outcome with multiple consequences. Most people, particularly having lived through the last few years, are all too aware of the damage inflation can do when allowed to run rampant. The way our systems currently operate inflation is a certainty, the only question is by what percentage. Individuals who have large sums of wealth understand that this constant inflation is perpetually eroding their purchasing power. The amount of items they could purchase today will be far higher than in 5 or 10 years from now, when inflation shrinks their idle capitals relative worth. This motivates the wealthy to seek investment opportunities to sustain or even grow their wealth. Start up companies can have high yield, or mostly fall flat. Established stocks of major companies are subject to factors that can present risk, or place a ceiling that minimises any potential upside. Housing has therefore emerged as the ultimate hedge against inflation, and therein lies the problem.

It is, unfortunately, the perfect answer for the wealthy to their experience of inflation. What better solution could exist than to not only place your capital in an asset that has virtually always kept pace with or exceeded inflation rates due to demand, but also provides a steady income of thousands per year. This way your 100 million isn’t just maintaining its value with regards to being exchanged for capital with the same purchasing power years down the line. It is creating a revenue stream in itself through rent. Our monetary system is flawed by nature. Those with the power to insulate themselves from its effects will surely do so. This leads us to the inevitable conclusion that what we are witnessing is just the beginning, and the percentage of homes snapped up by investment funds will only continue to grow and grow. So long as we are bound to the Euro we cannot successfully control our rate of inflation. Leaving us no choice but to act in ways that are within our current sphere of control. Vulture funds see no issue outbidding Irish first time buyers by tens of thousands, knowing their first tenants first couple of years rent will pay for that, while their original capital amount appreciates with inflation. It is win win for them either way, while Irish people seeking to buy are forced into unsustainable rents or moving back in with family to continue saving.

Another aspect of this is that ironically it creates what it seeks to avoid. In economic circles it is usually acknowledged that the availability of credit usually has the effect of accelerating growth, and for this reason is deemed acceptable. If a small business can see a growth in demand for its product or services, it will be profitable to expand. If it takes the business owner years to save the capital required to expand, then those are years when people could have been employed, and consumerism could have been higher. Both positives in the eyes of most people. It is this thinking that facilitates the process of credit/debt creation. If investment funds are deprived of entry to ownership in housing they will necessarily seek life elsewhere. Meaning that stagnant wealth sitting in home ownership portfolios will once again be on the move seeking opportunity. The availability of genuine credit will soften the need for the creation of credit, which in turn should lower inflation of a particular currency if it exists independently. Perhaps the capital will now be put behind building housing, and producing rather than consuming. Perhaps it will seek out small and medium businesses ready to expand. Perhaps more will take chances on start ups worthy of financial backing. Either of the three are preferable to existing capital only serving to block Irish people from buying a home.

The idea that things that exist now are set in stone forever is short-sighted looking both forward and backwards. History stands as testament to the fact that the systems we live under are always evolving. Modernity has been approaching inevitable questions regarding the path forward in multiple avenues, and the time has come for genuine appraisals and tough decisions. Basic rationalism can facilitate us moving down the line to the consequences of a thing without having to endure them. I believe there can be no other outcome with regards to investment funds in home ownership in an environment that provides rewarding structures to some while most are negatively affected on the other end. Corporate ownership in housing in Ireland must be brought to an end, with owners given a window of time to sell their stock and remove themselves from the market completely.

This particular situation cannot be compared in any way to beneficial FDI in Ireland. It provides nothing. It employs nobody. It takes existing assets out of the buyers market to be rented back to those who likely wished to buy. It is predatory. It is exploitative. It is entirely self serving, and we need not permit it on our island. Those who are worried about becoming slightly less wealthy will have to take one for the team, for those who are being priced out of the primary requirement of shelter and a place to sleep. If we can no longer hope for philanthropy from the rich, we must enforce decency as a minimum.