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At the Mercy of the Markets

Posted on March 31, 2019: by PJ Drudy

PJ-Drudy

If we are serious about providing homes for all our people, we need to first ask ourselves - and answer – one key question. What is the main purpose of housing?  Is housing yet another market commodity subject to the “market” forces of supply and demand to be traded like other commodities such as cars, racehorses or stocks and shares? This view sees housing primarily as a means of speculation, profit-making and procuring capital gain and wealth by property developers, investors, speculators and home owners.   

Those without money or the ability to borrow simply cannot participate in this market game. The aspiration to own a home is entirely reasonable. However, in recent decades we have presided over the “commodification” and “financialisation” of housing where access to a home, whether to buy or to rent, depends entirely on ability to pay – and pay a great deal.  With escalating house prices and rents this is only possible for the privileged few.  Inflated house prices and rents may benefit some but result in an overall distortion rather than an improvement to the economy.  The argument that rising house prices and rents are a good indicator of economic recovery is misguided and must ring hollow with an entire generation of young people.

 

The primary objective of housing is, and should be, to provide homes appropriate to need, to provide shelter, places to live, feel secure and participate in a community and society at an affordable price or rent. This view sees housing as a public good like health and education to be provided for all irrespective of ability to pay.  This also refects the fact that housing has been given the status of a right by the international community and Ireland has signed and ratified various Covenants which include housing as a right. The clear implication is that Governments cannot leave a neccessity like housing largely to the private sector and to the mercy of the market. Yet that is precisely what is happening.

In 1975 the private sector built 18,098 homes for sale on the market.  By 2005 in the middle of the mis-named Celtic Tiger the private sector had built over 75,000 – many of them in “ghost estates” where they were not required – a clear  example of market failure. In 2018 the private sector built only 13,800 homes at a time when there is a demand for at least 30,000 per annum.  Massive volatility - market failure again. Therefore, we cannot rely almost exclusively on the private sector to provide much-needed homes. There is now clear evidence that some property developers are  hoarding land and drip-feeding homes slowly on the the market to maintain high prices.  Housing is now significantly over-priced and the prices are simply unaffordable even for those with relatively good jobs.

 

What of private rented as an alternative? Housing provided by private landlords, including international property investors, is expensive, insecure and often sub-standard. These difficulties have been highlighted by Threshold over many years. There are of course many decent, responsible landlords. However, many individuals and families pay high rents for accommodation, much of which is in breach of health and safety regulations and with virtually no security of tenure. The Residential Tenancies (Amendment No. 2) Bill, 2018 proposes a number of helpful changes in relation “unlawful rent increases” and “non-compliance” with rent regulation. However, a number of other key changes are required including those recommended by Threshold. The government is currently spending almost €900 million per annum on subsidies (rent supplement, Residential Accommodation Scheme and Housing Assistance Payment) to private landords in order to accommodate homeless families and social housing tenants.  The Government’s Rebuilding Ireland plan proposes to continue with this approach. Yet not a single home with long-term security will be gained from this large expenditure. We need to think again.

 

Part 2 of Prof. PJ Drudy's blog will be posted on April 7th