The Irish Times view on the housing crisis: supply remains the key problem
The Government needs to act to limit investment funds from buying up chunks of new suburban estates
New homes at Mullen Park, Maynooth, Co Kildare. Round Hill, a multinational investment company, is in discussions to buy 115 homes at the development. Photograph: Dara Mac Dónaill
Is normal politics resuming? Much has remained on hold as the country grappled with the Covid-19 pandemic, but now housing is back in the headlines. There is legitimate debate to be had about the new Bill put forward by Minister for Housing Darragh O’Brien and also about the impact of investment funds on the market. But the central problem remains the same – chronic lack of supply.
Nor is it certain that rising demand and the reopening of construction will solve this. A key issue in the Irish market in recent years is that supply has not responded to rising demand – at least not by providing enough affordable properties where they are most needed. There is a long-standing problem with the cost of building here, the precise reasons for which remain unclear. In some cases housing bodies have managed to deliver at affordable cost on local authority land, but in many areas – for example, apartment buildings – the cost of building remains prohibitive in relation to incomes.
In all the talk over recent years, we have never really got to the bottom of this problem. And not only is building expensive, but it is also still often bedevilled by delays caused by planning objections. To combat this, the Government is looking at intervening more actively in a number of ways. The Affordable Housing Bill looks at ways to improve the supply of social and affordable housing and at the provision of cost-rental accommodation. These are all different interventions using State tools to try to make housing more affordable. To the extent that they can improve supply and help families in a cost-effective manner, they are welcome. There is room for debate on the way the new proposals will operate as the Bill progresses through the Oireachtas.
The Bill also includes a Shared Equity Scheme in which the State would take a stake, usually of a maximum of 20 per cent, to make a property more affordable. This has proved controversial, due to warnings from the Central Bank and ESRI that it could push up houses prices. The scheme has been amended in a number of ways – including a price cap and other restrictions which are designed to limit the inflationary impact. Nonetheless, the supply response in the Irish market has been so sluggish that it may well still prove inflationary.
To make matters more difficult for the Government, it is now clear that investment funds, benefiting from tax breaks, are becoming more aggressive in buying properties, including parts of – and in some cases entire – housing estates. There is a room for investment funds in the market, but it does not involve buying up chunks of new suburban estates. The Government needs to act to limit this. But as with all other problems in the market, the fundamental reason this is causing problems is the lack of affordable supply in the right places.