Cliff Taylor: Government being pulled deeper into housing market

Land agency may trap State between private and public house provision

With the Land Development Agency, the big winners could be developers and the assorted hangers on in the big advisory companies, who have already milked Nama. Photograph: David Davies/PA

With the Land Development Agency, the big winners could be developers and the assorted hangers on in the big advisory companies, who have already milked Nama. Photograph: David Davies/PA

 

Another crisis, another agency. Creating a new body is one of the traditional Irish political routes to addressing a problem – the Health Service Executive was meant to tackle the health crisis, Irish Water was going to transform our creaking water infrastructure and so on. And so the housing crisis has led to the creation of yet another quango, the Land Development Agency, which is to arrange for the building of houses on State land. Taoiseach Leo Varadkar says it will, in time, be as significant as the ESB or Aer Lingus.

It is yet another sign of the State being pulled in to try to tackle the housing crisis more directly – inevitably involving spending more money. And the latest protests in Dublin show just how politically toxic it is becoming, amid vacant properties, vulture funds, the social housing crisis and affordability issues which now cross the social divide.

I don’t claim to have an answer to the housing crisis in my back pocket. And there is a lot we still have to learn about how the new agency will work. It may well do some very useful work in the planning and development of housing.

However it strikes me that the Government risks getting stuck in the middle between private and public house provision here – and that the big winners could be the developers and the assorted hangers on in the big advisory companies, who have already milked Nama for all that it is worth. Many of the old factors stopping or slowing the development of already-available land remain. Cracking this problem requires the kind of co-ordination across departments and agencies rarely seen here.

The target of providing 50,000 more social houses by 2021 will be challenging

The Government’s problem is the extent and depth of the problem. In terms of overall housing supply, there is certainly a welcome pick-up under way. Completions will probably hit 18,000 this year and there is a strong rise in planning permissions over 2017 levels. But we are going to have a serious shortfall for the next few years before demand and supply come into any kind of balance, bar a shock to the economy which hits demand. We need 30,000-35,000 new completions a year, and ideally more for a year or two to catch up.

Soaring prices

More supply is a vital “fix” with the soaring prices and rents which underlie a lot of the problems. The decision of An Bord Pleanála to block a 100-home scheme in Raheny this week shows that even new fast-track planning rules can be problematic. A lot remains to be done to just get things happening more quickly.

Social housing provision remains a particular challenge. Actual house-completion levels by local authorities remain low. The latest figures show just 31 new social homes coming on to the market in Dublin in the first three months of this year, for example, all in Fingal, with 15 built and 16 purchased from developers. Figures compiled by property analyst and architect Mel Reynolds show only 100 local authority house-builds were actually completed across the State in the period and 75 by approved housing bodies.

Nor is shortage of zoned land a problem, with enough available in State ownership to build more than 140,000 houses, according to Reynolds’s estimates. If the new agency can get building on this land more quickly, then all the better. But with the initial target to provide just 10 per cent of schemes as social housing, the huge gap in availability in this area remains. The target of providing 50,000 more social houses by 2021 will be challenging, to say the least.

Because of shortage of State-owned social housing, many families are accommodated in the private sector, with the assistance of supports, mainly under the Housing Assistance Payments (HAP) scheme. The problem for the State here, as rents rise, is that the bills are shooting up and in more expensive rental areas it would be cheaper in the long term to accommodate people in local authority-owned homes. If only they existed.

Social housing

A recent analysis for the Department of Public Expenditure and Reform by the Irish Government Economic and Evaluation Service showed that, in Fingal, the 20-year cost of housing supports would be about €260,000 in today’s money, while a house could be built for half that cost. If Fine Gael still has some reservations about social housing provision, it had better get over them.

And then there is the issue of affordability for those who are in work. A 1,000-home scheme was delayed in Clondalkin, Dublin 22, this week by councillors due to concerns that the arrangement for building on public land by a developer would not involve a large enough number of affordable houses. Sinn Féin objections focused in particular on affordability for average-income purchasers. Right now, new, privately built housing in Dublin and some other major centres is increasingly moving out of the price range for people on average wages, and in more central areas even for many dual-income couples.

So the State is going to be pulled in here deeper and deeper – to encourage more housebuilding via tax measures such as the vacant sites levy and to fund the provision of social housing. It will also be pushed to deal with the affordability crux through arranging the provision of houses at subsidised prices or helping buyers. The expense of all this – along with demands in areas like health – will leave less to spend in other areas and no room for an overall reduction in the tax burden.

Though did you read the reports of what Bank of England governor Mark Carney told the British cabinet this week, when he said house prices could be 35 per cent lower than they would otherwise be in three years’ time, in the event of a chaotic, no-deal Brexit? As our own central bank governor Philip Lane recently warned – and as we learned from recent experience – house prices can fall as well as rise.

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