A dysfunctional housing market
Sir, – Late last week you went big, as the American cousins would say, on housing. I read every word.
There are more than 10,000 people homeless in Ireland.
Fiona Cassim (Opinion & Analysis, April 5th) is a young woman facing her 26th home move. She and her husband are in full-time employment. They cannot get a mortgage, and two of 71 properties for rent in Co Wicklow are in their price range.
The IMF placed Dublin first in a list of 22 cities in advanced economies ranked on the basis of real house price growth over the past five years (Business, April 5th).
Jack Horgan-Jones had an excellent piece in Saturday’s paper (“The changing face of Irish home ownership: who wins and who loses?”, April 6th). He points out that Irish home ownership, which peaked at 79.3 per cent in 1991, was 67.6 per cent at the last census, below the EU average of 69.2 per cent. He reports that there is an estimated €7 billion of institutional capital chasing apartment stock in Ireland. He quotes a piece of industry analysis to the effect that a builder could expect to make about €17 million in sales from a notional development of 50 apartments in Dublin but that an investor in a position to charge a monthly rent of €2,000 could afford to pay €24 million for the same development. For the builder that represents an additional profit of €140,000 per unit without factoring in the convenience of making a single sale to a major institution rather than 50 separate sales to Peter, Paul and Mary.
David McWilliams brought all this together in his superb piece on Saturday which should be the only required reading for a Cabinet meeting with one item on the agenda (Opinion & Analysis, April 6th). He comments that inflated land and property prices are by a country mile the single biggest threat to Irish prosperity. He points out that artificially high prices for building land are supported by restrictive planning and by the intersection of planning, finance, political expediency and vested interests. The result is crisis – at one extreme we have shameful homelessness and at the other working people paying up to 60 per cent of their income on rent and who cannot afford to buy.
I believe that the Government is taking this problem seriously, and I accept that there is no one simple solution. But it should not be difficult to deal with that part of the problem highlighted by David McWilliams. The Kenny report offered us the solution 45 years ago. In proposing that building land could be acquired by local authorities for 125 per cent of its agricultural value, it was working from a self-evident truth – there is no reason why the huge increase in the value of a privately owned asset arising from a public decision, the rezoning of land, should accrue to private and not public benefit.
Had we acted on Kenny nearly half a century ago we would have avoided the problem identified by David McWilliams and the property-based corruption scandals which have besmirched Irish public life since.
An objection frequently heard to the implementation of Kenny is that to do so would be in conflict with the property rights enshrined in our Constitution. That position is not convincing. The issue could have been tested in the courts. Better still, given that we now hold referenda at the drop of a hat, let’s put the question to the people.
The Taoiseach is 40 years old. The Minister for Housing is approaching his 37th birthday. The Minister for Health is thirty two. The Tánaiste and the Minister for Finance are in their forties. These senior Ministers are young enough to understand the effect which our dysfunctional housing market is having on their generation even if their predecessors did not or feigned not to. They may be surprised to discover that actions which are morally justified are also politically expedient. – Yours, etc,