How to make sense of Ireland’s housing crisis: the defining social, political and economic issue of our times? Although many quick fixes are being promised in the run-up to the election, it is a complex problem that defies easy solutions. Afterwards, whoever is in power will face the real and long-term challenge of getting things done.
Articles in this series look at key areas – house provision, rental, the industry’s proposals, the promises of the political parties and what Ireland can learn internationally. Having read them all, and consulted with experts at home and abroad, here is my summary of 12 key actions for the next government.
1. Build more homes
It’s easy to say, but very difficult to deliver. New housing supply has increased to about 21,000 last year, up from less than 10,000 in 2016 and could edge higher again in 2020.Supply has risen but is still short of target.
And from trying to focus on what had been done already in the early days of the campaign, now Taoiseach Leo Varadkar says 40,000 per annum should be the new target. But while overall building levels need to rise, targeting this alone is not enough. Just building 40,000 a year, or even 50,000 won’t, on its own, solve this. Like most things in housing, it is not straightforward.
2. Build in the right places, at the right cost
Some parts of the market may already be not far off balance, certainly given the Central Bank’s – necessary – lending rules and their impact on demand. Some pricier houses in Dublin are now slow to sell, and rising supply is one factor behind rapidly slowing house price growth. But the phrase “the housing market” is misleading – there are several markets, differentiated by price, accommodation type and geography.
For first-time buyers, lack of affordability in the capital has pushed development – and new buyers – out of Dublin and into Cos Meath, Kildare,Wicklow and Louth. Home completions in the commuter counties shot up by 22 per cent last year, Goodbody Stockbroker estimates, compared with 2 per cent in Dublin. Supply has risen in Dublin too, but there is a shortage of affordable apartments and cheaper homes.
3. Build more social housing
The other big gap is an adequate supply of what are called social and affordable housing, generally involving some public subsidy for those wishing to buy or rent. The National Economic and Social Council, the think tank, has estimated that between one-quarter and one-third of the population will not be able to rent or buy on fully commercial terms.
The homelessness crisis is the clearest evidence of the accommodation shortage, but it is not the only one. Social housing provision has increased – there is a fierce debate about how to count the number of units – but all parties accept much more is needed. We need to be clear that provision here is a separate element of the market. And that this won’t change.
4. Solve the affordability puzzle
Overall building costs here are on a par with more expensive big EU countries. And there is a particular problem in apartment building costs in Dublin. Economist Ronan Lyons says a priority for the new government must be to work out exactly why that is the case– and it is worth noting that some experts argue that, left at it, local authorities can actually deliver at affordable prices.
We need to get to the bottom of this, in particular in relation to apartment building in Dublin, where the debate just seems to go around in circles. Some way is needed to mediate this. Property Industry Ireland has suggested a national forum on housing.
5. Create a better social housing model
All parties agree billions more must be spend on building social houses. All agree that public land is a vital resource that should be used for social housing, and the Government has established the Land Development Agency to accelerate this. All also agree that local authorities have a key role, though opinions vary on precisely what this should be. It is vital to find the best model – or models – of delivery. It is a central issue.
One of the key differences between the parties is in how the new building programme should be organised – how much local authorities deliver and how much is reliant on models involving private sector provision, often via joint ventures with State or housing bodies. The voluntary sector also has a key role. Housing associations such as Clúid have pioneered new models of delivering affordable housing.
We are likely to try a mix of approaches, as policymakers discover what works and what doesn’t. Practicality, not ideology, needs to lead this.
6. Assist the building industry
We must accept that the building and property industry needs a lot more capacity – and the right incentives. It is builders who build houses, and the industry was torn down by the post-2008 financial crisis. All plans and models are reliant on a big increase in capacity in the building industry.
Industry figures highlight the need for a massive increase in the supply of skilled labour – between 80,000 and 100,000. The industry has a few big players, but a large number of smaller ones, many with limited capacities. New approaches to building and design – more standardisation and different building methods – may be needed.
Huge resources have been put into student accommodation by tax breaks, but we need the industry to build more houses and apartments. And there is a strong case to revamp and enforce the taxation of vacant land to end land hoarding and lower land prices.
The Irish Home Builders Association, a respresentative body, argues that cutting the cost of taxation, levies and VAT, and engaging with utilities is vital to increase the viability of adding supply.
7. Help the excluded
Those who can’t afford to get into the market – to buy or rent – are currently supported by a range of schemes, notably the housing assistance payment scheme, which subsides people unable to afford market rents, and other rental support schemes. The cost of subsidising rental in the private sector is now more than €800 million, as schemes designed to provide transitional solutions to people become long-term. Settling those people into more permanent homes would be a much better solution for them and would also free up the places they are currently occupying.
A common approach is needed to support lower-income groups on a longer-term basis. Ronan Lyons believes a “cost rental” model – whereby a rent payment is made on the basis of the cost of provision rather than on market value – is the most likely route forward. Some cost rental models are being trialled in Ireland.
Any new models must also support the group in the middle – those who can’t afford to buy or rent in the market, but currently don’t qualify for social supports.
8. Find some quick fixes
There are thousands of vacant properties around the country. And lots of people in emergency accommodation or on rent supports. Local authorities, says UCD lecturer and architect Orla Hegarty, must take a much more active approach to the redevelopment of vacant properties – including the spaces above retail units – and must avail of EU supports for green upgrades.
Tom Gilligan of Mayo County Council spotted a mention in Census 2016 of 183,000 vacant properties nationwide. The council launched vacant homes.ie, a website allowing people to log vacant sites they are aware of, for council follow-up. Over 3,500 properties are now logged and over 300 are back in use, with many more being assessed or worked on.
9. Get serious about rental
All the parties are trying to help renters – but most are ultimately still selling the idea of home ownership. We need to decide if we want to develop a long-term rental model and, if so, to act on it. This means more supply – rents are currently at record averages.
Tenants need more certainty – and some political parties address this in their manifestos. But if we want to develop a long-term rental market, we can’t keep vilifying landlords. Private landlords are leaving the market in droves – more than 35,000 in recent years according to some estimates. Fund purchasers or buy-to-rent buyers are written off as “vultures”. Some are. And some are longer-term pension fund investors.
We need clarity on our goals for the rental market. And if part of this is to open up the option of long-term renting, this has implications for policy. It also has implications for the normal financial life-cycle of Irish families.
10. Become more European
In short we must live more like mainland Europeans.The Government’s strategy is to develop much more accommodation closer to city centres. This saves on commuting time and cuts the necessity to own a car. But it also requires people to live in smaller units, either apartments or smaller houses. In the jargon it is called “densification”, and it is typical of the way people live in many big European cities.
Some areas of our city centres – think of Dublin’s Stoneybatter – are already densely populated. To achieve this, the outgoing government plans involved the development of a lot of State-owned and “brownfield” – former commercial – land close to city centres.
According to Orla Hegarty, the current choice facing those who can afford to buy – between a small apartment and a decent-sized house further out, is often a no-brainer for young buyers: the house always wins. Bigger and better city centre options, with proper standards, will be needed if people are to accept new ways of living. Also crucial to this will be infrastructure, particularly transport links, which are vital to the sustainability agenda.
Abandoning the traditional goal of a semi-D and a back garden would represent a big cultural shift. A convincing sell job is needed to persuade Irish people to live like Europeans.
11. Avoid gimmicks
It is election season, of course. And already we are seeing promises of vast numbers of new houses, new homes to help first-time buyers and proposals aimed at renters. The law of unintended consequences may apply to many of these. And some may just keep prices higher. But the Irish political system can’t resist a new “scheme”or the expansion of an existing one.
12. Accept that house prices may stall – or fall
The affordability problem could be solved by higher earnings or by lower house prices and rents, or more likely a combination of these. This may upset the banks, whose mortgage security would be worth less, and some existing homeowners, particularly those in negative equity. But we can’t base the future on ever-higher subsidies for ever-more expensive homes.
At worst we need a long period of flat prices as wages rise. If all of the above could be tackled, we might even experience a gradual reduction in housing prices for citizens: renters, buyers and homeless families.
And that would be a truly positive contribution to the quality of Irish life.