Politics being what it is, much of housing policy has been reduced to a numbers game. Ministers do not hesitate to refer to government spending and the number of houses “delivered”. Embarrassing questions about value for money for the taxpayer, or whether it goes to the people who need it most, or the potential impacts it can have, are dismissed.
This is the nature of politics.
The nature of reality is somewhat different. In the real world, we know that renting social houses on 25-year leases at 95% of market rent is a waste of money; we know that over 60% of those who received a Purchasing Assistance Grant (HTB) did not need it; and we know that even then the average subsidy of 15pc HTB went straight into the pockets of the developers.
Two can play the numbers game.
Irish government policy has a dogmatic ideological and political preference for fiscal responsibility over the efficient provision of housing. Somewhat illogically, this has led to a preference for current spending (leasing) over investment spending (construction) and a housing policy conducted with a sizeable credit card.
To keep the expenses out of the state books, the policy is determined to get the market to do what it did so well, which is the housekeepers. But if you go to the market, you are going to pay market prices. This usually means a lower quality product at a higher cost.
Housing production figures have also been a bone of contention. Claims about the number of building permits and house completions each quarter are used to highlight government policy performance.
These claims ignore the fact that building permits are not an indicator that anything will ever be built, and whether the housing that was built is the right type. Do we really need more small apartments or cohabitation developments, both to rent naturally, more than we need homes to buy? Of course not.
Housing policy is actively working against itself. The move towards renting social housing has pushed up rents, crowding out tenants from non-social housing. In the new housing market, too, the government is such an important player that it is forcing households that really need housing to buy.
Many people are unaware that the State, through the municipalities and the Authorized Housing Organizations (AHB), buys a considerable part of the new homes sold each year. For example, boards and AHBs bought 29% of all new homes sold in 2020. For every new home they built, they bought two brand new ones.
Thousands more are bought by investment funds, and another quarter are unique homes that never hit the market in the first place.
All of this typically leaves only 7,000 to 8,000 new homes each year for ordinary people to buy. It’s no wonder prices are rising as housing supply is constrained by the government’s own policies of buying instead of building and letting investors run wild. The price hike is in turn used by the government to justify subsidy programs like HTB and shared equity. It is politics that eats itself.
The abandonment of apartment building to investment funds also restricts a significant part of the potential supply. This in turn drives households to the sprawling suburban belt right where national planning policy does not want them.
Poor planning regulation shares center stage with housing in creating a circular self-digesting policy.
Lowered standards, very dense planning requirements, and funding issues with phasing (you can’t sell apartments floor by floor) made building 20-100 apartments financially unsustainable for mainstream builders. They also made what should be affordable regional sites unprofitable to develop. In the much-needed bracket of 20 to 100 apartments, SME builders cannot obtain financing, and the market is then left to the funds, which can use the argument: without us, these apartments would not be built.
It may be true, but it is not necessary. Even a shift in unrealistic density demands would see more SME builders in the game, more competition, and maybe even more homes for ownership – something the government would be interested in.
The number of houses Ireland needs per year is also an often misunderstood number. Expert estimates range from less than 20,000 to almost 50,000 new homes per year. ESRI says we need 28,000 new homes a year, and the Housing Department says 33,000 (why don’t they agree?). The development industry tends to have higher estimates, more likely to cause political panic.
There is, however, a difference between the market demand – how many people can afford to buy a house – and the demographic demand for the number of households we will need to house. The gap between the two is considerable.
Before Covid, house prices were starting to stabilize with annual completions of just 20,000 homes per year, with around 7,000 listed on the market. Economists tell us that means supply met demand, and therefore all was well in the world. Demographic experts will highlight migration, immigration, births, deaths and marriages, and will disagree.
They’re probably both right, but on different things. The reality is that the market will never supply more than enough homes to satisfy the number of potential buyers. Supply will never drive down house prices because supply only occurs when prices rise or is heavily subsidized.
The job of the state is to bridge the gap between what the market will provide and what our people need.
Good housing policy is good social policy, good economic policy, good transport policy, good health policy, etc. Current policy responses tend to tackle the symptoms rather than the causes of our problems. The results are more people commuting, poorer health outcomes, more unnecessary expenses, etc.
The current housing policy is very much designed to maintain the status quo.
Until that changes, expect more of the same.
Dr Lorcan Sirr is Senior Lecturer in Housing at Technological University Dublin