Michelle Norris: Action plan must deliver on social housing targets
Subsidies for renters and first-time buyers will push up prices if new houses not built
Resolving the housing shortage is one of the most important and also most difficult challenges which face the Government. Both private- and social-sector housing supply collapsed in the wake of the economic crisis and failed to recover as the economy and population started to grow again and to drive up demand for housing. Yet the capacity of a largely bust construction industry and a government subject to EU limits on spending and borrowing to address the housing shortage is severely constrained.
In view of this challenging context, the Rebuilding Ireland – Action Plan for Housing and Homelessness launched by Minister for Housing Simon Coveney yesterday does a good job of using public funding available to best effect. It focuses spending on those in most acute need such as homeless households, and introduces measures to increase housing with the objective of delivering 25,000 new homes per annum between 2017 and 2021.
However, delivering this level of additional housing supply will be challenging and the plan also proposes increasing subsidies for low-income private renting households and for first-time buyers. If these additional homes are not constructed, these “demand side’” subsidies will further fuel house-price and rent inflation and ultimately be of little benefit.
The Rebuilding Ireland plan sets out comprehensive and innovative plans for preventing homelessness and improving the supports available to the homeless population. It envisages that reliance on hotel and bed and breakfast accommodation to house homeless families will be radically reduced.
This objective is a crucial one since bed and breakfasts are a poor quality and expensive option for housing homeless families, but achieving this will require these families have permanent homes to move to which, in many cases, will be in the social housing sector.
The plan’s commitment to deliver 47,000 additional social rented homes by 2021 is to be welcomed as is the fact many of these will be provided by local authorities. Councils did most social house building prior to the crisis but funding for this sector has fallen by 90 per cent since then. The funding available was concentrated on non-profit-sector housing associations. Funding for council-provided social housing must be increased because the shortage of these dwellings cannot be resolved without them.
Construction scaleThe plan commits to funding these homes using a mix of government grants and government borrowing which is the only realistic and affordable way to fund building on the scale required. However, I am sceptical about Rebuilding Ireland’s proposal to fund 5,000 of the planned social rented homes using “off-balance-sheet borrowing” because EU national accounting rules mean it is extremely difficult to achieve. Our neighbours in England learned this lesson last year when the status of their social housing debt was changed from private to public by the EU statistical office. The Irish Government can borrow at historically low interest rates, and therefore there is a strong argument for borrowing to build social housing on-balance sheet.
The numbers of social rented homes which the plan envisages will be built from scratch is low – it ranges from 2,500 units in 2018 to just over 5,000 in 2021 and a large number of additional social houses planned will be bought or leased from existing stock.
This approach will not resolve the undersupply of new housing which is the fundamental cause of our housing crisis. Building a larger proportion of social rented homes would be better use of investment and would provide a stimulus for the construction industry.
The housing problem is in large part related to the unprecedented collapse in new private house building, particularly in cities. The construction industry had lobbied hard for reductions in VAT and local authority development charged to promote more building. However, there is no guarantee these changes would promote more house building or the savings would be passed to buyers. Instead, the plan proposes increasing funding for the servicing of land for new house building, which is likely to be a more effective approach.
However, it also proposes fast-tracking planning permissions for large housing developments straight to An Board Pleanála. This is likely to prove a nasty shock to residents of neighbourhoods which border these fast-track developments and is unlikely to resolve the cause of low private building which is developers’ difficulty in raising finance. It is important to remember the planning system has not changed since the early 2000s.
Many households can’t afford to buy a house or at least are having trouble saving the deposit or accessing the credit. The proportion living in private rented homes has doubled over the last two decades but rent inflation is currently high and is creating severe affordability difficulties.
Tenants and landlordsTo address these problems, the Rebuilding Ireland plan proposes a policy statement be drawn up by the end of the year which will strengthen the rights of tenants while increasing the incentives for landlords to invest. In addition, subsidies for renters and homebuyers will be also increased to improve affordability by raising rent supplement and introducing a “help to buy” scheme. Significant risks are inherent in the second of these proposals because, if these additional demand-side subsidies are not accompanied by more housing supply, they will simply feed further house price and rent inflation.
The first of these proposals is to be welcomed, particularly if the supports for landlords encourage the building of dwellings specifically for rent. This balanced approach of subsiding landlords to provide private rented housing in return for greater security of tenure and rent certainty for tenants has worked well in countries such as Germany where it has promoted good housing supply and a stable housing market.
Michelle Norris is head of the school of social policy, social work and social justice at UCD and chair of the Housing Finance Agency