With all the commotion of the last decade or so, markets are not very fashionable these days. We forget that markets work a lot of the time and when they work well, they are invaluable. They help identify who has the greatest need for something, as identified by how much they are willing to give up to get it, and transfer it to them.
Obviously, there are many instances where markets are not the solution. In most countries, you are not allowed sell your vital organs, for example, as there is a concern that the vulnerable will be tempted into making short-run decisions with long-run costs.
Less dramatically, we know that not all housing can be left to the market. As different households enjoy very different incomes at any given point in time, if housing was left completely to the market could mean that many households would not be able to afford housing. (Indeed, this has largely been the problem with social housing over the last two decades: it has been left to a market that was never going to provide it.)
For the bulk of people, though, the market is where they source their home. And for markets to work well, certain key ingredients are needed. One of those key ingredients is information. Those active in the housing market a decade ago or more will know all too well the feeling of not knowing whether you have overpaid for a property.
That fear may still exist, as those who buy today worry about overpaying compared to what it might be worth in two or ten years’ time. However, there was a more basic fear that existed: until the Residential Property Price Register was launched nearly five years ago, you had no idea if you were overpaying compared to the person who bought next door, a month or a year previously.
The Price Register helps solve that problem, by publishing information about property transactions in the country on one site. In truth, it is only halfway there. It includes only the most rudimentary information on transactions – the date, price and address. A proper Register would also include the Eircode and information about the dwelling itself, such as size, type, age and energy rating.
But even with it only halfway there, it is world away from the private rented sector. Last week, I wrote about how the system of Rent Pressure Zones will struggle to have any impact on the vast majority of tenants.
This is primarily because the system does nothing to address the lack of new rental homes that are needed – and indeed may make things worse by encouraging existing landlords to sell up.
However, the other reason RPZs are unlikely to work is that they require policing by tenants. Given how difficult it is for a tenant to get “shortlisted” by a landlord currently, it seems very unlikely that one lucky enough to get a home is going to then try to pick a fight with their landlord.
I suspect, though, that we will not see Rent Pressure Zones scrapped in the lifetime of this government. Thus, policymakers should be concerned with how to make them work as best as possible in minimising rent increases both tenants, old and new.
One thing that could help, at least in part, is to do as is done in the sales market: make publicly available information about all rents paid, by address. Some landlords would baulk, I am sure, but many more would be keen themselves to see if they are charging the right amount.
Such a change requires very little new work on anyone’s part: the Residential Tenancies Bureau already collects this information when the tenancy is registered, together with information on the type and size of the property. The one major tweak would be that landlords are required to notify the RTB when they change the rent, as the RTB currently only captures rents when the lease starts.
Again, Eircodes would come in handy here. If they were mandatory on RTB forms, this would allow a published register of rents to be linked up, by address, to online listings. This would bring an element of self-policing into the market. Anyone viewing the property online, on a site like daft.ie, would be able to see the rents paid by the tenant leaving, and previous tenants.
Doing this will not level the playing field. The rental market will still be an insider-outsider one, where sitting tenants are unlikely to move because of the benefits and cheaper rents or staying put. But it will make things a little less unfair, as it would use public information – that is already collected – to establish a common ground for negotiating a rent.
An edited version of this post was originally published in my column in the Sunday Independent.