Small landlords are leaving the Irish rental market in their droves while institutional investors ignore it. Why?

Ireland’s housing market has long been shaped by a reliance on small scale landlords, but recent years have witnessed a steady exodus of these owners from the rental sector. At the same time, the expectations that large institutional investors would step in to stabilise has not materialised to the extent policymakers once hoped. The combination is deepening the rental crisis, straining affordability, and raising urgent questions about the sustainability of Ireland’s housing model.

Why are small landlords exiting? For decades individuals and families made up the backbone of the Irish rental market. However, since 2008 financial crisis, the pressures on these landlords have multiplied. A mix of taxation, regulation and financial risk has eroded the viability of small scale letting.

One major risk factor is taxation. Rental income in Ireland is treated as personal income and taxed at marginal rates of up to 52% when USE and PRSI are included. Mortgage interest deductibility, once a relief to landlords, has been gradually restored but still fails to fully offset high borrowing costs. For many landlords, the post-tax return on investment is uncompetitive to alternative asset classes.

Another factor is regulation. The introduction of rent pressure zones, stricter tenancy protections, and greater compliance requirements were designed to safeguard tenants, but many landlords view them as restrictive and overly bureaucratic. While such rules are essential for tenant security, they reduce flexibility and make the sector less attractive to small investors.

Finally, broader market dynamics are contributing to exits. Rising property values have given landlords a strong incentive to sell. Many who bought in the 1990’s or early 2000’s can now realise significant capital gains, particularly in Dublin and Cork. Others are exiting because of age, Ireland’s landlord cohort is disproportionately older, with many simply retiring from the market.

The result is a steady erosion of supply. Central Bank and RTB data show thousands of rental homes being withdrawn annually, worsening the imbalance between supply and demand. For tenants, this translates into soaring rents and intense competition for limited accommodation.

So why are institutional investors staying away? While small landlords are leaving, large institutional players, such as pension funds, real estate investment trusts (REITs), and global asset managers have not rushed to fill the gap in the traditional rental sector. This stands in contrast to other European cities, where institutional landlords play a significant role.

One reason is the relatively small scale of Ireland’s rental market. Unlike Germany or the Netherlands, where renting is the norm and long-term leases are widespread, Ireland has a cultural bias towards homeownership. This limits the potential size and stability of rental yields, making it less attractive for investors seeking scale.

Policy uncertainty also discourages institutional capital. Ireland’s housing market has been marked by frequent policy changes from shifting rent control to varying taxation measures. For investors with long-term horizons, such unpredictability increases risk.

Moreover, institutional players prefer large scale, purpose built developments that offer efficiency and standardised management. Ireland has seen a growth in so called “build-to-rent” schemes in urban areas, but planning restrictions, construction costs, and political resistance have slowed their rollout. These projects often attract criticism for focusing on luxury apartments unaffordable to most renters, further deterring expansion.

Another issue is reputational risk. Global funds that invested heavily in Ireland after the financial crash, often acquiring distressed assets, faced public backlash for being seen as “vulture funds”. For international investors mindful of political and social perception, Ireland presents a more contentious environment than other European countries.

The simultaneous exit of small landlords and hesitancy of institutional players has created a policy dilemma. The government faces pressure to protect tenants, but heavy regulation risks discouraging landlords. It also seeks institutional investment to boost supply, yet is wary of being accused of handing over housing policy to global funds.

Critics argue that Ireland’s overreliance on small landlords has always been unsustainable. A fragmented landlord base struggles to deliver secure, affordable, and professionally managed rental housing. Conversely, others argue that institutional investors are unlikely to ever prioritise affordable housing meaning their involvement would do little to solve the crisis.

In conclusion Ireland’s housing system caught between two unsatisfactory dynamics: the erosion of small scale landlord participation and the reluctance of institutional investors to meaningfully engage in the private rental sector. Without decisive policy shifts, the rental market risks further contraction, worsening affordability, and ongoing instability.

The solution likely lies in a mixed approach, protecting and incentivising small landlords to remain while simultaneously creating the conditions for more sustainable, large scale, and socially balanced investment. This requires greater policy certainty, targeted tax reform, and above all, a long-term vision that balances tenant protection with landlord viability.

Until then, Ireland’s rental market will remain squeezed, with tenants bearing the brunt of a structural imbalance that neither small landlords nor institutional investors appear willing to resolve on their own.

Author: Colm McGrath, Executive Director, Head of Surety Ireland, Howden

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