What can be done about the housing crisis?
It helps to use some numbers to describe the recent state of the Irish housing market. Current estimates for the required housing supply range from 35,000 to 50,000 new units each year. The housing Minister Eoghan Murphy thinks 20,000 units will be built in the state in 2018. The government will be doing well, perhaps just 11,000 new builds were completed in 2017, fewer than 2,100 were built in 2016 according to the Irish Times. 99,555 households were on the housing list as of September 2017, approximately 25,000 of which would be non-irish applicant households according to a Rebuilding Ireland (2016) finding. Let’s remind ourselves that Fine Gael have been in power since 2011.
Ronan Lyons, economist at property site Daft.ie, thinks that due to urbanisation, Ireland will move from 65% to 85% urbanised over the coming few decades. The National Planning Framework estimates that we will have a million extra people in the state by 2040. That’s a lot of extra demand coming.
After the property bubble burst, 2014 mortgage drawdowns collapsed to just 10% of 2005 levels; these have recovered somewhat but the Irish youth have voted with their feet. Net migration since the bust of over 100,000 Irish has shown the failure of the media-touted “economic recovery”. But since we are told Ireland is for everyone that doesn’t matter. Irish emigration as former Minister Noonan has said previously is merely a “lifestyle choice”. Such an attitude is common among a certain generation of Irish leadership.
To fix any issue you need to know where the ground is –poor measurement of the problem has been discussed by some commentators. The government website environ.ie, the website of the Housing Minister has some data on housing but this data is disputed. The minister is meant to have assembled a reporting team to examine this and let’s hope he succeeds . As with anything you want to fix, you can’t know if you’re improving things if you’re not measuring the issue at hand.
Other effects of the housing crisis like high rents and homelessness could be mitigated by simply dealing with the supply and demand issues. There are other reasons for homelessness of course which should be addressed, particularly addiction and the consequences of familial breakdown.
Other issues seen are that Irish banking competition is poor, saving is disincentivised by the crushing 39% DIRT tax on savings. Large numbers of people with Buy-to-Let properties are being granted –impacting bank (taxpayer-owned in large part) profitability and causing extra charges on customers by the banks. 14,000 Buy-to-Let mortgages were in arrears of more than 2 years in the third quarter of 2017. All this is a cost to the taxpayer and the proper functioning of the housing market due to the opportunity cost to people who want to move out of the rental market. A further 32,000 Primary residence mortgage holders haven’t paid two-years’ worth of mortgage payments. Professor Gregory Connor of the National University of Ireland estimated that 35% of mortgages are strategically defaulting –with individuals knowing the banks will have a tough time being dragged through the courts to attempt a repossession.
A free market for housing is a good insofar as it will under normal circumstances aid the nation’s interest, people must incur risk when purchasing property but shouldn’t be bounced into taking on too much debt or be priced out of local markets distorted by foreign buyers and REITs (who have at times made up half of cash purchasers in Ireland).
We need to capture the societal impact of the crisis too.
As of 2016 the average age of marriage had increased again to 34 years, people in many cases tend to put off family formation until they have a secure roof over their head. Coincidently the age of first time home purchasers is almost the same. It is not a stretch to conclude that the two have a link. The increasing average age of first-time Irish mothers is apparently correlated with this too. Housing our people is vital to the future prosperity of the nation.
… So what can be done?
One can recognise a number of solutions in relation to housing and planning in Ireland.
A number of measures need to be considered to reduce costs, especially for younger working people looking to start families and trying to acquire their own home. Reducing housing costs of course is a complex problem with many inputs; from population trends and migration to our own regulatory laws and various bureaucratic processes.
- A consultancy period with An Bord Pleanála & other interested stakeholders would begin to determine methods to reduce costs and length of time for approval, building and construction. Greater centralisation of planning decisions would be part of this as it seems that local county councils find it difficult to act in the national strategic interest regarding national planning, (e.g. introducing arbitrary height limits on construction within Dublin proper, squabbling over city boundaries etc).
- Identify geographic areas of stress in housing market.
- Developmental land tax moved forward as quickly as possible. If you are holding prime land in a high stress area you will be taxed for not developing that land until you build or sell.
- Land Use Commission to examine moving or removal by compulsory purchase of certain areas of inappropriate-use land around capita, e.g. bus depots, golf courses, sink estates. For example, Broadstone and Donnybrook Bus Depot in Dublin have significant lands at prime locations. Rebuilding a few sheds out on the M50 is a relatively-inexpensive exercise and rezoning the land ought to be very quick to do.
- Medium term measures introduced so that an Irish citizen can only buy maximum one Buy-to-Let within identified stressed housing areas. This measure would not affect existing owners but would affect inheritance.
- REITS, foreign buyers –excluded for a period on acquiring properties unless they are building them themselves. REITs have increased hugely in recent years due to Fine Gael’s continuation of policies to keep property prices high (NAMA). REITs of course also pay little tax.
- Differential corporate tax rates for SEZs outside stressed housing areas to counteract the longer term trend of Dublin pulling population from the rest of the Island of Ireland is in the interest of both people living in Dublin and those living elsewhere in the country. In 1900, County Cork had about the same population as County Dublin; in 2016 Dublin had about 2.5 Times the population of Cork, the next-biggest county of the Republic in terms of population.
- Reducing Overseas Aid spend, half the budget, €300 million, could be spent acquiring lands in central urban areas for redevelopment. The 0.7% ODA GDP commitment shouldn’t be relevant to Ireland as its GDP is grossly overstated. Economically we have to face the fact that a people with an average gross government debt per head of €40,000 shouldn’t be compelled to give to charity via the taxation system before it gets its own house in order.
- Certain industries and thus their employees could be lured to certain areas to create hub effects by having sectoral corporate tax rates by region. Corporation tax in stressed areas could be risen to 13% and lowered in others –47% of IDA 2015 job announcements were for Dublin. While companies want to be in the capital, extra tools to reduce the overheated housing sector in Dublin are needed.
- Re-establishing the Wide Streets Commission. The NTA would be tasked to plan a long term schedule to re-grid parts of greater Dublin to remove the significant gridlock experienced by commuters due to a century of poor planning decisions and underinvestment. The European Investment Agency described Dublin as a worst case scenario in urban sprawl over a decade ago and as a warning to other countries. The Irish government paid no heed of course.
- Newly married couples with a least one proven breadwinner could apply for a grant of up to €30,000 for the purpose of building a new home; buying a new home or enlarging their existing home. Sustainable family formation should be the future of Ireland not importing the world.
- Removing the deposit savings (DIRT) tax, as it disincentives saving for a housing deposit and paying into private pensions.
- The Garda National Immigration Bureau would be resourced and tasked with examining and scrutinising in more detail –language schools, slumlords in the rental sector and removing the perhaps 30,000 undocumented migrants residing here.
- Asylum seeker/Leave to Remain voluntary resettlement grants. Countries do not stay at war forever. Helping migrants rebuild their countries is a vital help Ireland can provide in supporting international peace and domestic security.
- Rural resettlement (which is already being pitched by the government) is a good idea –but care must be taken not to damage the character of local communities in rural Ireland.
- Reducing red tape for the planning-and-objection process and enabling Ministerial Executive Orders to arrest the crisis.
- Finally we must consider our relationship with the EU. The EU is a core factor in the increase in housing demand. Low interest rates fueled the bubble and bust. Free movement is not often mentioned but is a factor in housing demand. It is claimed that free movement is a pillar of the EU but experience is showing us that it should be confined to regions with similar socio-economic development to prevent drains and bubbles forming which have distortive effects on local labour markets (Lithuania lost 12% of its population in a decade and we have seen in Ireland and in London huge housing demand. The free movement of goods has many qualifiers already (e.g. try get a mortgage from a German bank) which shows there is existing flexibility as a precedent. Brexit has shown that the intransigent nature of the EU is resulting in countries leaving the bloc due to the leadership’s inflexibility.
Housing our people is an issue of national importance that has been managed incompetently for far too long. Solving this problem requires addressing core drivers that are ignored by Irish economists and politicians. Measurable and accountable leadership is needed to address the current crisis too. The Irish people expect more than short term initiatives (like the latest taxpayer backed subprime borrower scheme), photo opportunities in hard hats are not good enough either.
This article was submitted by a National Party member. If you would like to submit an article for publication on the National Party website, follow this link.