Homes for All
Posted on April 07, 2019: by PJ Drudy
Purchasing or renting a home on the market is an impossible dream for many. It would be foolish to rely on the private sector to reduce the current inflated house prices or rents. The government, Local Authorities, Housing Associations and Co-operastives must play a much more active role in increasing supply. In order to avoid the problems of the past, Governments must also carefully evaluate any existing or planned incentives. Tax holidays for multinational or Irish landlords cannot be justified. The Government’s “Help to Buy Scheme” while no doubt well intentioned, did little to increase supply but did increase demand and hence prices for new homes which are now far more expensive than during the peak in 2007. Last year the Scheme cost about €150 million. Nevertheless, various vested interets have persistently lobbied to retain this scheme over recent months. Many will recall that the £1,000 grant of old also increased demand and was simply built into the house price. Such schemes makes no economic sense and should abandoned. Similarly, the purchase of homes by Local Authorities means that they are in competition with young purchasers and again result in increased house prices. Rent regulation, now introduced in Rent Pressure Zones, works relatively well. However, it should be expanded throughout the country as recommended by Threshold. There is a strong case for introducing a “rent register” similar to the Residential Property Price Register.
Unfortunately, our record on the construction of social housing is poor. In 1975 Local Authorities and Housing Associations built almost 8,800 homes. This had fallen to 5,500 by 2005 and to 4,251 in 2018 including almost 850 Part V and 769 “turnkey” new homes purchased by Local Authorities often at inflated prices. This has little impact on an enormous waiting list.
A radical change of policy is required to reverse the alarming reduction in the direct provision of public housing. The analysis and recommendations in a recent study The Future of Council Housing by Michelle Norris and Aideen Hayden should be required reading for all of us. The self-financing “cost-rental model” of mixed income housing on state land, now common in other European countries and being piloted in Dublin, should be expanded significantly. This could be called “community housing”. With a long-term mortgage and low interest secured on behalf of the state from a range of secure sources, this not-for-profit model would link rents to the actual cost of construction and maintenance. It would provide homes at affordable rents for thousands above the social housing threshold as well as homes at reduced subsidies (due to lower rents) for those on waiting lists. This would provide much-needed competition with private property developers and landlords and would reduce house prices and rents. Properly managed, the result would be an increase in the state’s long-term housing stock, affordable homes, more employment in the building industry and significant savings on rent supplement, the Residential Accommodation Scheme and the Housing Assistance Payment.
Are houses a market commodity or comfortable shelter from the storm?
What kind of society do we want? We need to ask ourselves whether the first priority of the Irish housing system should be the realisation of investment and speculative or capital gains by those with the necessary resources, or the provision of an affordable, secure, good-quality home as the right of every citizen? Simply put, are houses a market commodity or comfortable shelter from the storm. The changes required are not revolutionary. Secure, affordable homes are still out of reach for many. It should not and need not be so.
P.J. Drudy is Emeritus Professor of Economics in Trinity College, Dublin