Gavan Reilly: How cuckoo funds will lead to an awful lot of empty nests

It might be a few weeks before there’s any kind of government initiative to address the actions of so-called cuckoo funds and stop them from buying up entire housing estates. Little can be done overnight, but every minute counts.

Dedicated property funds are always going to chase the highest return, so it was presumed that when they were established in Ireland in 2013 they would build high-end luxury developments in the centres of Dublin and Cork. Nobody ever wondered whether they’d develop a taste for blood and want more; nor did anyone ever wonder whether apartment living in Dublin ought to be only the preserve of the upper classes.

On my Sunday radio show I heard a sobering intervention from a former political advisor, who spent two years in the Department of Housing under Alan Kelly, who said the process of drafting, passing and legally proofing a new planning law could take three years. Even then it would only apply to developments which had not yet sought planning permission – otherwise, a developer could take a legal case saying their project was now unviable through State action. Therefore only a sudden and urgent change to tax law might work.

But in the meantime, where does this stop? When these cuckoo funds clearly have more firepower than any private buyer, what’s to stop them simply buying up every other mass development that appears anywhere in the country? Why wouldn’t they, as one viral tweet last week suggested, simply send an agent to every viewing of a 1-bed apartment for sale and buy it up on behalf of a foreign investment fund? What’s to stop these literally buying every residential property that is ever put on the market in Ireland ever again?

Suddenly you begin to realise why millennials increasingly see little future for them in Ireland, when the cost of rent is so high that they can ill afford a pension, let alone the deposit for a permanent home of their own. Condemned to a lifetime of rent, where do you go when your working days are done? It’s not as if a company focussed on profits will leave a pensioner in situ, paying only a fraction of the rent, when someone else can offer full whack.

Ironically it’s those who do have a pension who’ll do best: REITs are designed so that the company itself doesn’t pay corporate tax, but rather passes on its profits to the shareholders who are then taxed on their dividends… but pension schemes in Ireland, which are generally behind such companies due to the high and predictable return, are exempt from dividend withholding tax. The primary form of taxing property trusts does not apply to their primary owners.

And meanwhile it’s more than cuckoo funds buying up housing estates. It’s local authorities not being able to turn the sod on new developments because political parties obsess over whether it’s the right sort of housing, fretting over the split between private-social-affordable, which is a bit like arguing over what route the fire engine should take on its way to an inferno. It’s co-living where European-style family apartments could have been. It’s hotels shooting up while the natives go homeless. It’s every spare unit inside the canals of Dublin being put on Airbnb instead of Daft. It’s young adults emigrating because the cost of living in Ireland is so high. It’s families for whom inter-county travel doesn’t matter a jot.

And it’s the despairing realisation that these funds were invited in, red carpet rolled out, with no way to turn the clock back.