Is there a trade-off between pensions and home ownership? An exploration of the Irish case

It has been argued that, in countries with high levels of owner occupation of housing, home ownership can serve as a substitute for generous pensions for older people. Two possible linking mechanisms have been posited in this context, one focusing on budget constraints (high housing costs associated with home purchase makes the funding of generous pensions unaffordable), the other on needs or incentives (high home ownership gives older people material security and so makes generous pensions unnecessary). This article examines Ireland as a test case in this context. It finds no evidence that either of the posited linking mechanisms were present in Ireland. House purchase costs historically have been too low to constrain pension development, while the distributive benefits for the elderly have been too modest to obviate the need for higher pension income. However, other distributive effects emerge as important, particularly the positive historical consequences of inflation and low real interest rates for home purchasers of all ages and the implicit subsidy to home ownership provided by savers.