Generations of Irish people were told by sensible parents that they should "buy a house - rent is dead money". This isn't always good advice, but overall it probably makes sense. So why then could successive governments not heed it?

Government policy in relation to social housing needs has been marked by financial illiteracy for about 15 years.

Since the early years of the Celtic Tiger, governments have been reducing the amount of housing the state has available to provide homes for families in need.

There are around 90,000 families on the social housing list. There are over 1,500 adults in emergency accommodation in Dublin. Rents have shot up by 30pc in Dublin in the last two years. Rents in the capital are now just less than 10pc below their peak levels of 2007.

The government has allowed the rental crisis to explode under its very nose. The most surprising thing about this is that the state is the biggest customer for private landlords in Ireland. Its contribution of "dead money" is over €500m per year.

Put another way, each year over 50pc of all rents received by private landlords is provided by the state in Rent Supplement, Rental Accommodation Scheme or other state funded schemes. Add in other indirect costs like tax reliefs and opportunity cost, the bill is even higher.

Most of this money goes to amateur landlords, given that 70pc of Irish landlords own no more than two properties.

Traditionally local authorities used government funding to build and provide social housing. The high level of funding began to decline in the 1980s. The Netherlands has one of the highest social housing sectors, with one third of the housing stock and three quarters of the rental stock made up of social housing. In Ireland the figures are 8pc and 30pc.

Instead of building social houses, during the boom years, the government started buying houses. Remember the Affordable Housing Partnership, which splashed out tens of millions of euro buying 500 houses at the top of the market, just before it collapsed.

It set up the famous Part V of the Planning Act 2000 where 20pc of developments were set aside for social and affordable housing. Amendments meant developers could buy their way out of it. Between 2002 and 2011 just 3,757 new units became local authority housing and 1,964 became the property of approved housing bodies or trusts. This represented just 4pc of all the houses built during the period.

During the boom Bernard McNamara did a deal to build hundreds of houses on state sites as part of a social housing scheme for Dublin. He would get the land, build the houses and then allocate one third for social housing, one third for affordable housing and one third for himself. The deals collapsed in 2008 as prices plunged.

Since then the emphasis has been on helping people to pay their rent to private landlords. Rent supplement payments hit €530m in 2007.

When rents fell in the recession, so too did the bill. But it is rising again. Last year rent supplement payments hit €372m. This year it is running at €14m per week in Dublin alone.

The Rent Assistance Scheme (RAS), where local authorities reach deals with landlords directly, is another €125m. The leasing scheme which provides longer term arrangements is another €67m.

This money is helping keep 109,000 individuals and families with a roof over their heads. The homelessness provisions are costing another €75m for those who have lost that roof.

Now that is a lot of dead money. This arrangement isn't working for the recipients because in most cases they have little long term security of tenancy.

They are restricted in how many hours they can work per week while still receiving the benefits.

It isn't working for the state because some landlords know they can get more rent by avoiding those on rent supplements while others are leaving the RAS scheme for the same reason.

The other big issue for the state is exposure to rising rents, plus the dead money argument means it has nothing to show for the half a billion at the end of the year.

This is a kind of madness. Ironically, the Government is opposed to capping rents, because of the implications for house prices, while it is covering over half of the cost of rent paid in Ireland.

Last month Minister for the Environment Alan Kelly announced a new strategy. His document declared that there is "now a major reliance on the private rented sector to an extent that is no longer sustainable."

The new plan envisages 35,000 new social housing units by 2020. It isn't clear how many will be built and how many will be bought or how. It also envisages moving 75,000 people from rent supplement to Housing Assistance Payment (HAP).

This means they can have much longer tenancy agreements, work more hours and still qualify for the payment. It is a better scheme but requires more administration, sourcing of willing landlords and still doesn't increase the supply of government-controlled social housing.

There is another problem with the current rent supplement concept. The state is incentivised to locate more social housing clients in poorer areas which have cheaper rents. This is a recipe for even bigger social problems further down the road.

Alan Kelly is emphasising a return to state-owned social housing in his new plan but it is very hard to see exactly how the government will wean itself off simply forking out hundreds of millions per year to private landlords.

The Kelly plan includes a greater role for housing bodies or agencies and with greater "funding options". This is code speak for finding ways of borrowing the money to build or buy houses that won't go directly on the exchequer books.

All of the money going to landlords is a steady, state-backed income.

It looks as if it is working for landlords, who have two captive markets for their properties - the highest bidder from the private sector with or without rent supplement or the local authority itself.

Landlords provide an increasingly important role in the Irish housing market. Some 320,000 households are rented, accounting for 20pc of the national total. This figure is up from 195,000 in 2006.

Landlords benefit from tax relief on 75pc of the mortgage interest they pay, management letting fees, insurance costs, service charges etc.

However, it is not as much as it used to be. Up to 2009 it was 100pc tax relief on mortgage interest for investors. PRSI now has to be paid on rental income over €3,174. The property tax has also been introduced. Lots of landlords are still stuck in mortgage arrears.

Nevertheless, they have the upper hand when bidding against first-time buyers to buy a property and many of them who bought during the downturn are hiking rents to make very substantial profits.

One possible new direction suggested in a recent National Economic and Social Council paper was to get a Real Estate Investment Trust (REIT) to put up some of the cash to build houses exclusively earmarked for social housing.

The REIT would have to accept a steady, long term (but lower) return in the form of rent payments from the state. For the REIT the income would be guaranteed. For the state, its money would go to professional large scale landlords and be index-linked instead of leaving the state exposed to massive rises in market rents.

The Kelly plan might work but it will be a long time before we find out. In the meantime, landlords will continue to be big winners.

Indo Business