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This research considers the international evidence on the functioning and deployment of measures similar to the Irish "Rent Pressure Zone" (RPZ) framework introduced in late 2016. It also considers how these measures have worked in Ireland in the period from their inception until prior to the COVID-19 pandemic in early 2020 when the maximum allowable rent increase was 4 per cent.

In recent years, Ireland has experienced a notable decline in homeownership and a rise in the proportion of households in private rental accommodation. Concurrently, the cost of both rents and house prices have risen markedly and affordability challenges in terms of meeting housing costs have been well documented. While these challenges are immediate in terms of the housing costs burden, a longer-term issue arises as to how renting households will manage the financial adjustment to retirement with ongoing rent payments. This transition historically in Ireland has been smoothed by high homeownership rates and mortgage amortisation which lowered the cost of housing payments and increased financial assets. Indeed, existing international evidence suggests that being a homeowner can provide a 'double dividend' of lowering housing costs and increasing assets in retirement. This can help manage changes to income in retirement and allow households to maintain their standard of living. The continued requirement to cover housing costs for renters in retirement can be seen as an additional vulnerability in terms of retirement income adequacy in Ireland, over and above the general concern of sufficient pension income. While considerable research to date has documented this well-known challenge of providing a sufficient standard of living in retirement for many households in Ireland, the drop in the homeownership rate layers an additional complication in terms of the policy challenge. To address these related issues, this report explores indicative future paths for homeownership rates in Ireland and explores the impact in terms of income poverty in retirement. Using data from the Survey on Income and Living Conditions (SILC) and the Irish Longitudinal Study on Ageing (TILDA), we consider a number of scenarios to assess the possibility of renting households becoming homeowners, and then test the impact on income poverty rates if households were to continue to have rental costs into retirement.

Rental affordability challenges for low-to-moderate-income groups have been well documented. Changes to housing supports in recent years, notably the rapid expansion of Housing Assistance Payment (HAP), aim to address affordability challenges for low-income households in the rental sector. Within this context, this report seeks to inform our understanding of the current system of housing supports for low-income renters in Ireland. The report examines tenure patterns and rental affordability. It reviews the range and design of housing supports available to low-income renters and examines how the localised operation of differential rent schemes, which determines supported tenants' contributions, affects the level of and variation in support received. With the increased reliance on the provision of indirect housing supports (through rental subsidies or supplementary income supports), it also examines the availability of accommodation for low-income renters within the private rental sector. Housing supports - by virtue of being means-tested - affect the financial incentives individuals have with regards to being in paid work or working an additional hour. This report uses SWITCH, which is the ESRI's tax and benefit microsimulation model, to analyse the impact of these supports on the effective tax rates faced by low-income renters: a key consideration for any means-tested supports.

In this paper, we explore the impact of current household repayment capacity on mortgage default using household-level panel data over the period 2004-2017 for Ireland. We measure repayment capacity as changes in the level of the current debtservice to income ratio to capture a direct channel for affordability shocks. We model the relationship between repayment capacity and default using a discrete time logit survival model of default flows. We test for a non-linear relationship to explore whether negative and positive shocks have asymmetric effects and whether shocks depend on household absorptive capacity. We also test the differing impacts of repayment shocks in crisis and non-crisis times and whether any differences are explained by negative equity or liquidity constraints. A number of endings emerge. We find that deteriorations in current debt service capacity have a positive and increasing effect on default which is dependent on the level of indebtedness or absorptive capacity. We find that the relationship between deteriorations in the repayment capacity and default are worsened in crisis times and we show that this is due to the presence of negative equity and liquidity constraints in these periods.

The global financial crisis heralded a new era of macroprudential mortgage regulations such as loan-to-value and loan-to-income restrictions. Such measures safeguard the financial system but can lead to credit access difficulties, in particular for first-time buyers. In this paper, we examine the introduction of a direct public mortgage, the Rebuilding Ireland Home Loan, which aims to address these dfficulties in Ireland. We use new unique granular microdata for applications to the scheme to explore the relationship between households applying to the scheme and the broader commercial market. We show that RIHL applicants, particularly those in urban areas, are under-served by the commercial market as they cannot borrow sufficient amounts due to the regulatory framework. The scheme enables these lower to middle-income borrowers to access mortgage credit and thus directly targets the externality from the regulatory regime. We argue that these public, local authority loans, once accompanied by suffcient safeguards, can be an essential tool to bridge credit gaps while ensuring the commercial banks are subject to strong macroprudential rules.

In this paper, we estimate credit demand for potential Irish first time buyer households currently living in the rental sector. Exploiting individual survey responses to credit demand questions, and characteristics of the household, we estimate the level of latent credit demand that could be serviced by the market given prudent credit risk assessment and the current regulatory environment. We then compare this demand to current market provision to explore whether a credit gap exists. We find evidence of excess demand for credit and an undersupply of loans relative to latent demand. In terms of credit access issues, we find that insufficient savings for a down-payment, rather than income or affordability, is the most binding constraint. Scenario analysis suggests between 2,000 and 9,000 additional loans could be provided per annum depending on the degree to which demand is realised. This would imply an additional €0.4bn to €1.9bn in lending. We show a targeted public mortgage credit instrument could alleviate a portion of this gap and aid market access by providing between 1,100 and 5,800 loans at between €0.2bn to €1bn approximately.

This report provides a high-level review of the degree to which the Rebuilding Ireland Home Loan (RIHL) has met its objectives. It also scopes the need for ongoing intervention, details who is applying for the scheme and assesses selected operational considerations such as credit risks, funding considerations, and its market impact.

In this paper we examine the sensitivity of mortgage arrears for Irish households to changes in mortgage interest rates under a series of plausible monetary policy normalisation scenarios. Using panel data over the period 2004 - 2016 we exploit information on current income and current mortgage repayments to link arrears to the level of, as well as shocks in, households' current debt service ratio. In doing so we address gaps in the existing literature on modelling default and stress testing. Both are found to be strong drivers of arrears indicating the level of indebtedness, as well as changes to repayment capacity, matter for households. We find that a 100 basis point increase in policy rates would lead to a 0.5 percentage point increase in new default flows. We also test for heterogeneous effects across households and find younger, low income households and those on tracker mortgage rate loans are most at risk following rate rises. This has important consequences for the distributional impacts of monetary policy.

This paper examines housing affordability in Ireland by looking at the distribution of housing costs across households. Using microdata from the SILC survey over the period 2005-2015, the contribution of this paper is threefold. First, the paper considers the trends in the cost of housing in Ireland across groups of households split by age, region, household structure, and their position in the income distribution. Second, we apply selected international housing affordability definitions and explore the share, and composition, of households in Ireland that would be captured by these definitions. We do not find evidence of universal affordability difficulties in the Irish market. However, certain groups do face acute affordability challenges. Third, working towards a definition of housing cost affordability for use in Irish policy discussions, we provide some guidance as to what such a definition could look like.

In this paper, we use firm-level survey data to explore the determinants of SME investment activity and the extent to which observed investment is in line with that suggested by economic fundamentals. In contrast to previous literature which has focused on whether investment gaps exist at a more aggregate level, we find evidence that for SMEs actual investment is below what would be expected given how companies are currently performing. The estimated magnitude of this investment gap is economically meaningful at just over 30 per cent in 2016. We explore the extent to which the gap is explained by financial market challenges such as access to finance, interest rates, and the availability of collateral. Financing frictions are found to account for a moderate share of the overall investment gap (between 10 per cent and 20 per cent of the gap).