High time for Government to play its proper part in solving the housing crisis
The State’s reliance on the private sector for new homes is compounding the supply deficit
Herbert Hill in Dundrum while under construction. Much of the scheme is being rented for social housing. Photograph: James Forde
Housing is at a crossroads in Ireland. We can continue lurching from crisis to crisis with “Generation Rent”, the homeless, and future generations locked out of affordable homes; or we can tackle the roots of the problem.
More than a third of people in their 40s here are renting. They are less likely to obtain a mortgage and more likely to be lifetime renters. What will happen to these renters at age 65? Will we see them retiring into homelessness? Ireland has one of the highest rates in the European Union of young adults living at home with their parents.
The economic fallout of coronavirus meanwhile is compounding these trends, exacerbating the growing gap between housing “haves” and “have-nots” that excludes young people, professionals, low- and middle-income earners from home ownership.
So who is going to build the homes to meet this need? The current approach to social housing provision is ineffective as it mainly involves acquiring or leasing units from the private sector. The State is compounding the supply deficit and driving house and rent prices in the process, rather than doing what it should be doing, which is providing significant additional supply.
This is also inefficient spending on the part of the State. Research by the Society of Chartered Surveyors Ireland (SCSI) suggests that social housing can be delivered at €140,000 per unit cheaper than private housing. The €1 billion being spent annually by the State on rental and leasing schemes could instead be used to deliver 40,000 permanent social homes over the next decade.
As of now however, there has been a collapse in social housing building in 2020, beyond what can be attributed to the impact of the virus. In the case of Dublin City Council and Cork City Council for example, neither built any housing in the first six months of this year. Government expenditure on housing currently stands at a paltry 4 per cent of its overall budget.
Yet there has never been a better time for the State to build homes given the fact that it can access borrowing at close to zero cost. There is a growing consensus across both the public and private sectors that the Government should commence a large-scale public sector house-building programme via local authorities to take advantage of low borrowing costs and, as SCSI points out, a likely softening in construction costs over the coming years.
That is why I make the case in my book, Housing Shock, for a new national housing plan. This “Green New Deal for Affordable and Sustainable Homes and Communities” should include a programme of State-funded construction of 200,000 public and affordable homes and the retrofitting of 500,000 existing homes over the next decade. With this plan 10,000 social housing units, 5,000 cost rental, and 5,000 affordable purchase units would be built each year. A regional approach would achieve economies of scale, through, for example, a Dublin regional home and community delivery agency.
This would help bring the stock of public housing here closer to the levels in countries such as Austria and Sweden which meet their citizens’ housing needs much better than Ireland. Currently in Ireland, the social housing stock comprises just 9 per cent of all housing.
But the real potential game changer is the development of an affordable cost-rental sector that provides lifetime rental homes for low- and middle-income households. It is affordable, as the rent is related to the cost of provision, which is heavily subsidised by the State, as is the norm in other European countries. The main elements in ensuring cost rental achieves affordability over time are the use of low-cost land, long-term lower cost finance and funding, and a not-for-profit approach. Thinking long term – 50 years-plus – is key to making this work.
The private sector
This approach is not about removing private sector involvement from housing, but it would provide for a dramatic increase in the role the State and the non-profit sector plays within the housing system.
A sustainable housing system requires more secure and diverse sources of supply, so the not-for-profit sector including approved housing bodies and co-operatives should also be given State support to increase their delivery of cost rental homes.
We need to move beyond short-term crisis responses within electoral cycles to a much longer-term policy approach. Building housing and community infrastructure on the scale needed requires a 20- to 50-year horizon. Unless we make that leap, we will continue in a boom-bust loop.
Dr Rory Hearne is Assistant Professor in Social Policy, Maynooth University, and author of Housing Shock, the Irish Housing Crisis and How to Solve It. He is a keynote speaker at the Society of Chartered Surveyors Ireland national conference which takes place as a virtual event today.