outstanding debts. housing agency ( 2014 ). as do private households that invest in property for purposes such as additional income in retirement. in germany, where many people rent for extended periods, a large share of landlords are individuals, however, they do so for retirement purposes rather than capital gains, and are therefore interested in a steady income stream from long - term tenants ( see ecb ( 2009 ), particularly box 3 ). to this end, budget 2013 introduced real estate investment trusts ( reits ) to ireland. to date, approximately 1, 500 residential units have been acquired by reits. bis central bankers ’ speeches there is a wide variety of government intervention in rental market, from the direct provision of social housing to the regulation of the private rented sector. 22 because moving is costly and disruptive, the tenant - landlord relationship is inherently asymmetric. regulation, if designed well, can therefore improve outcomes. that said, poorly thought out regulation, in particular rent controls, can have adverse effects by reducing the supply of rental properties and discouraging new construction and the maintenance of existing rental properties. getting housing regulation “ right ” – a task outside the central bank ’ s remit – is important. 5. 3 policies favouring home - ownership home - ownership brings many benefits, and it is understandable that there are policies in place to enable house purchase ; i have already outlined the potential benefits in terms of asset accumulation and social advantages associated with home - ownership. however, some policies aimed at enabling people to gain from the benefits of home - ownership have the effect of worsening the situation of those who either choose not to be homeowners, or cannot afford to be so. one important issue that influences households ’ choices between buying and renting property is tax policy. in many countries it is generally favourable towards homeownership. examples of favourable taxation treatment of housing include the exemption of imputed rental income on principal homes from income tax calculations, tax relief of mortgage interest payments, exemptions of capital gains from the sale of principal homes, and the use of outdated housing values for property taxes. a favourable tax treatment of homeownership risks encouraging excessive leverage and housing investment, leading to the development of macroeconomic and financial imbalances. 23 it can also tempt households that are worried about the risks inherent in mortgage borrowing into house ownership. overall, it seems desirable for tax policy to be neutral between homeownership and renting. to this end, it

, changes to tax credits and bands, increase in excise duties, a 2 percentage point increase in the vat and the introduction of a property tax in 2013. on the spending side, current savings achieved to date include paybill reductions, covering pay rates and headcount, a public sector pension levy, and reductions in social welfare rates. despite these significant adjustments, however, the budget deficit remains very large. the most recent forecasts suggest that the deficit in 2012 will be somewhat below 8 per cent of gdp. although this is less than the target of 8. 6 per cent, public debt is continuing to accumulate rapidly and is expected to peak in 2013 at 121 per cent of gdp. 4. the current situation but while many measures have been taken by the irish authorities to overcome the crisis and to prepare for the exit from the programme, concerns remain. two are readily apparent. the first arises from the high level of mortgage arrears ; the second is the risk to sovereign debt sustainability arising from the high debt - to - gdp ratio. 4. 1 mortgage arrears as a consequence of the crisis, mortgage arrears have risen sharply, with some 15. 1 per cent of mortgages now in arrears for more than 90 days. a key determinant of mortgage arrears is the unemployment rate which stands at just under 15 per cent, three times the level at the start of 2007. mortgage borrowers who become unemployed may rely on savings to meet debt repayments for some period of time. however, the long - term unemployment rate has increased more than six - fold, with the effect that large numbers of people have experienced sharply reduced incomes for more than a year, raising arrears rates. for the banking sector, the combination of mortgage arrears and negative equity is major determinant of loss rates. while borrowers that become unemployed and therefore are unable to service their mortgages but who are not in negative equity can in principle sell their houses and repay the loans, those that are in negative equity cannot. moreover, it is difficult for banks to assess the repayment capacity of distressed borrowers. some borrowers may be experiencing temporary financial difficulties, from which they will recover relatively quickly. these borrowers may need some breathing space until they, for instance, find a new job. other borrowers may be experiencing a permanent decline in income, and require a more extensive modification of their mortgages, while others still may never be able to service