A 20% deposit makes it impossible for many to buy a house

I lost count of how many tweets I read last week along the lines of, “I’ll never be able to buy a house now”. Those who managed to escape unscathed from boom time property millstones and had been getting their lives and finances and employment tentatively back on track with a view to purchasing a property were feeling what many people in their late 20s and 30s are quite familiar with now: abandonment, dejection, screwed over once again.

New mortgage rules set by the Central Bank to come into force in January, we were informed, would mean that most people wanting to buy a home will have to come up with a 20 per cent deposit.

For people who aren’t rich, that’s basically impossible. Next year, it’s proposed that no more than 15 per cent of private dwelling homes will be allowed to have a loan-to-value ratio above 80 per cent. So that mythical 20 per cent will have to come from somewhere.

There was a collective slumping back into the couch wherever such would-be house buyers happen to live now – maybe in their parents’ house while they are saving, maybe in a rental property. Wherever they are living now, there’s certainly not enough change underneath the cushions to make up a 20 per cent deposit.

The Central Bank’s intervention is meant to be some kind of tool to stop another housing bubble inflating. If people can’t be trusted to make smart purchases, the fellows on Dame Street have to do something about it.

The Minister for Public Expenditure and Reform, Brendan Howlin, praised the governor of the Central Bank, Patrick Honohan for his proactive initiative. The establishment seems to have a different definition of proactive fr the rest of us.

In Dublin, house prices have already risen 25 per cent in the past year. Being proactive would have been reading the giant flashing neon sign that declared this was going to happen a year ago and doing something about it then, instead of watching the horse bolt into the distance and then setting about fixing the hinges on the stable door.

I have a certain amount of sympathy for the urge to stop people going property crazy again. We are only mad for buying gaffs. We love it. All across the capital, estate agents are dropping handwritten notes through letterboxes wondering if you might part with your home with all the subtlety of a Nigerian prince in your spam folder announcing your recently deceased uncle’s diamond fortune.

But housing isn’t just about the property market, even though that’s the loudest-shouting section of it.

The problem is supply

The problem is not that we pixieheads can’t be trusted when it comes to putting ourselves in financial peril by over-stretching with mortgages and loans, the problem is supply. The Central Bank trundling into the market to fix one element of it and claiming a solution is bizarre.

Karl Deeter, a persistent voice of reason on the property market and housing issues said on the Last Word on Today FM last Tuesday, "You don't use a macro credential tool for a housing supply problem."

When we look back on what the impact of this will be, it is glaringly obvious that the rental market and renters themselves will be the ones who will suffer.

We have a crippling social housing issue. Last week the housing waiting list in Dublin alone hit 19,327. It was just over 16,000 last year. The rate of homelessness in Ireland is utterly shameful, as is the political apathy which greets it, exemplified by Peter McVerry, who seems about to blow a gasket in longterm frustration.

All of this feeds into what will become a renting crisis. Government doesn’t care about renters. And when people who wanted to buy houses but now can’t will be pushed into staying in rented accommodation for longer, when landlords are permitted to write “rent allowance not accepted” with impunity on ads, when student accommodation needs have been ignored for years, when rental prices are increasing so much it gives Daft’s website name a whole new meaning, when renters are viewed as some sort of transient carefree demographic instead of people who can’t afford to buy, or are making the prudent decision not to, when Labour has ruled out rent control, what’s going to happen?

Between 2006 and 2011, the number of people in Ireland living in rented accommodation increased 47 per cent. People who rent aren’t acting irresponsibly, even though that’s the narrative we hear. People who rent aren’t taking giant financial risks, yet are told that it’s “dead money”. People who rent tend to try to live where they want to live, as opposed to people who bought houses in places they’d barely even visited.

Would-be first-time buyers, now penalised for wanting to buy a house, will have to remain in the rental market for a longer period, and anyone with half a brain knows that will push up rents further, put additional pressure on supply, and force people into a living situation that they don’t want to be in.

That’s stressful. I’m all for the market calming down, but steps can’t be taken in isolation. Housing isn’t just “a market”, it’s the basis of how people live.