Housing crisis must be solved to avoid another crash
State’s passivity in addressing housing issues is economically and socially dangerous
‘Prices are increasing rapidly, rents are well in excess of a mortgage repayment and credit for individuals wishing to buy is still severely restricted.’ Photograph: Cyril Byrne
The soon-to-be-published National Planning Framework is using Central Statistics Office population estimates that indicate that there will be a population increase of one million by the end of 2040. On a conservative estimate, this will require Ireland to have 25,000 new housing units per annum up to 2040. Other commentators have recently doubled this estimate.
Achieving 25,000 units per annum may, at a push, deal with the population increase, a decreasing housing occupancy rate, the lack of current housebuilding and the significant number of young people who remain living at home long after they should be out on their own. As we start into 2018, we are a long way off achieving 25,000 completions a year.
We have little or no social housing coming on stream, let alone private housing. Prices are increasing rapidly, rents are well in excess of a mortgage repayment and credit for individuals wishing to buy is still severely restricted. The public stock of housing is as low as it has ever been since the foundation of the State. We are not just facing a housing crisis. More importantly, we are facing a social crisis of a very substantial nature. Perhaps even a crisis of national identity.
There is a shortage of skilled labour in the construction sector, and those that are at work are predominantly engaged in building commercial property or working on other projects. If we are to attract skilled workers back to this country from all sectors, we will have to have houses for them to live in. We are caught in an emerging catch 22 scenario.
Added to this, the issue of Brexit and its set of complex outcome permutations hang over policymakers. This is a conceivable national crisis of its own, and one that has the potential to change the spatial development of the country over a period of time. We have opportunities to take some successes out of Brexit. The IDA and other arms of the State are doing what they can to attract business from the UK as well as developing new markets for Irish goods and services. Yet we have emerging skill shortages in a number of areas, for example the medical and IT sectors.
It is likely that Ireland will once again experience a very painful hard landing
We need to attract skilled labour into the country, but to do so we need to have a strong, stable and affordable housing market. We do not have this and have not had it for many decades. There is seemingly no plan other than a reliance on market forces for this to happen. What we have seen so far in terms of a policy response have been actions that will have limited impact and which ignore the real and substantive issue. Namely, the lack of quality housing units being built in the correct locations.
The non-intervention by the State in the housing market is reckless and dangerous to our economic future and the stability of society. Social solidarity has been jettisoned for the narrow and short-term needs and desires of those who wish to see and maintain increasing and high property prices.
It has been said by many commentators that the price of housing now is out of the reach of ordinary people. It can be argued it is out of the reach of all but the wealthy and those who are both willing and need to condemn themselves to excessive debt for a very significant period of their lives. The policies the Government is pursuing are even more damaging. The price of accommodation to rent, purchase or for the State itself to subsidise through the housing assistance payment or other schemes is so excessive it is destroying the purchasing capacity of individuals and severely impacting on their quality of life.
A person should not expect to pay more than one-quarter of their income on accommodation. For many, it has exceeded 50 per cent. The fruits of a growing economy are being eroded for our citizens.
We must learn from the collapse of the housing market in 2008. When prices reach a level that is no longer sustainable and when people are no longer willing or able to pay, we may once again face a collapse in confidence in the property market. It is likely that Ireland will once again experience a very painful hard landing, causing a significant return to negative equity for many individuals.
Indeed, if we are to solve the housing crisis, the cost of accommodation must be forced down. When people realise this, there will be no incentive to purchase housing until new and affordable accommodation becomes available. What is stopping this from happening, for now, is a massive need for accommodation.
If labour shortages and accommodation shortages continue to converge, we will face a different crisis than 2008, but one that may have similar outcomes. But on this occasion, we may have no one to rescue us.
Odran Reid lectures in planning at DIT and is a member of Dublin City Council’s Planning and Property Development Strategic Policy Committee