Is there an end in sight to Ireland’s intractable problem? – The Irish Times
At first glance, it would have looked like a scene straight from the Celtic Tiger. More than 500 property players gathered on Thursday night for the annual Property Industry Excellence Awards, a black-tie gig over a dinner of beef or salmon, addressed by soon-to-be finance minister Michael McGrath, held in the Convention Centre – a building constructed by boom-time developer Treasury Holdings.
Much of the chatter on the night was downbeat, though, with developers grousing over the viability of building. The mood was in keeping with much of the housing news last week.
On Tuesday, property website Daft.ie reported just 1,087 homes to rent nationwide on its platform. US think tank Demographia said housing in Dublin had become “severely” unaffordable. On Wednesday, the IDA warned that housing was a major capacity constraint affecting the development of the economy. On Thursday, the Residential Tenancies Board said the average new rent in the country was now almost €1,500 a month. And on Friday, new figures showed emergency homelessness at a record level of 11,397.
Whether at tuxedoed dinners or on the streets – where thousands of people marched as part of the Raise the Roof rally on Saturday – pressure is mounting.
The headline figures are encouraging and Government representatives are quick to cite them. Planning permissions are up, first-time buyers are more active than for years and the Government is expected to beat its overall target for house completions. Minister for Housing Darragh O’Brien can dash off statistics in support of Housing for All, the 10-year plan to build more than 300,000 new homes at an average rate of 33,000 per year.
He said there was “sustainability in the delivery of social homes” now, with 10,000 new units this year, and local authorities selling affordable purchase homes for the first time in 15 years. He pointed to 700 approvals for the shared equity First Home Scheme and to progress on affordable rental, with 900 tenancies approved. There are also homes coming on stream from the Land Development Agency, together with 16,000 first homes bought in the past year and 500 applications for grants to refurbish vacant homes.
“The plan is taking hold and it’s building momentum. Lots of people don’t feel that yet, and I fully get that,” he said. O’Brien said he was “starting from zero” in his brief and claims to be making progress.
It’s not hard to see why politicians put such importance on housing. Eurobarometer data showed 48 per cent of Irish people cited housing as one of the two most important issues facing the country, compared with just 6 per cent in the European Union.
Housing is, in the words of one Government source, the issue that “has the capacity to shred the middle ground of Irish politics”. And it is moving beyond the generation immediately affected – prospective buyers – to include their parents and grandparents. “Parents are trying to see their children on a trajectory to get the keys to the house,” said the same source. A second agreed, saying that “emotion and economic reality are colliding”.
Behind the highlights
For all the encouraging stats and graphs produced by the Government, people feel housing is not delivering for them. And, behind the highlights, experts say the picture is less encouraging.
Lorcan Sirr, a lecturer in housing at TU Dublin, said: “The headline figures are great for politicians because it gives them something to peddle, but when you break them down you realise what’s being built isn’t what’s needed and won’t solve the problem.”
There are also concerns over the number of housing commencements – which indicate what will be built in the coming years. Goodbody Stockbrokers put out a note this week saying housing starts were down 31 per cent last month. Housing output “may stall … well short of the Government’s Housing for All target of 33,000 units and even further below estimated need over the medium term”. There is, one senior Government source said last week, “no way we’ll exceed 30,000 new homes next year if we don’t turn that around somehow”.
O’Brien admits that next year’s target will be “challenging” due to the increased cost of funding construction in particular, but insists it is still attainable. He said a “clear year” next year would allow him to do more catching up on the time lost during Covid and to inflation, saying: “I have to keep pushing on this everyday.”
There are questions, also, over whether meeting that target will be enough. John O’Connor, chair of the Housing Commission, appointed by O’Brien, said “they should use the 33,000 and the breakdown of that by each individual local authority as a minimum target as a floor and not a ceiling”.
TCD economist Ronan Lyons, who is also a member of the commission, agreed, saying the assumptions which underpin the target are flawed. Between now and 2050, he said, “the more likely range is between 42,000 and 62,000 – between 50 and 100 per cent higher than the official targets”.
Michelle Norris, professor of social policy in UCD and a board member of the LDA, said the system for providing large-scale affordable housing in the decades leading up to the crash had many flaws – but in a narrow sense, it worked.
“The model of providing affordable housing from [the] 1970s was that the banks lent for development … and it was very effective at providing a lot of housing that was relatively affordable”.
Now, however, she said: “There is just a huge challenge, particularly on the financing bit for private housing supply.”
‘Never been more pessimistic’
The Opposition is waiting in the wings. Sinn Féin housing spokesman Eoin Ó Broin said that “as someone who observes this closely, I have never been more pessimistic”.
The Coalition feels this, and knows it has to get its house in order before the next election rears into view.
“If we’re able to say at the dawn of that election that [we are] building 33,000, that will give us a fair argument to say it is working, you can see the future, maybe don’t change horses,” said one Minister. But for the time being, there are concerns that while the headline target will be exceeded, the target for affordable homes could undershoot by as much as 50 per cent and the social homes target is also likely to be missed.
Minds are concentrating and turning to how to accelerate building this decade and, more pertinently, before the next election.
“The Government only has two years,” said one source on Friday. “There is an intense pressure within the Government from the current Taoiseach down to not leave any stone unturned.”
Part of this will be a greater use of modular housing, something the Taoiseach is keen on. On Monday, the Department of Housing wrote to all local authorities notifying them of a new scheme to tackle legacy debts on their lands – many of them clocked up during the Celtic Tiger. In the letter, the department outlined how O’Brien secured Government agreement to allocate capital this year to tackle the issue.
But there is a catch: the letter outlines that lands where debts will be covered have to be linked to “accelerate delivery” and suitable for the “immediate development” of social housing, with construction in 2023 or “no later than 2024″ with “use of accelerated delivery models, principally off-site construction”. Government sources believe 3,000-5,000 modular-build social houses can be delivered next year using this scheme, with some €225 million put aside to fund it. O’Brien said: “It will be that quid pro quo, I’ll pay down debt on those sites as long as they’re developed, where appropriate with a preference for modular.”
There are also significant planning reforms working their way through the system that will curtail the ability to object to projects, limiting it to those who can display an interest or to groups with a genuine standing on environmental grounds. A new fund is being considered to pay both sides of legal challenges, to limit the cases Government figures blame for costly and lengthy delays. Capped costs would also likely feature under the scheme.
The tax breaks solution
A much more contentious area is that of tax breaks. One of the legacies of the Celtic Tiger is an allergic reaction among officials to using them to drive development. But the idea is gaining currency. O’Brien said tax would be a matter for the whole of Government but “my own view is where we can use activation measures, tax shouldn’t be off the table where it’s focused and targeted”. The Department of Finance is dead set against it, but there are hopes elsewhere in Government that McGrath may not be hostile when he takes the reins.
“All the levers on the expenditure side have been pulled,” said one Government source. “[Tax changes] are something the Government will look at and hopefully when the Ministers switch over, it could be looked at.” Among the steps being considered are tax breaks similar to old Section 23 allowances on rental properties, potentially for those building properties for owner occupiers, and a cut in the 13.5 VAT rate charged on new property transactions. There would be an effort in particular to focus on incentivising apartments in city centres.
Three sources with knowledge of discussions said these ideas were on the table – and could even be considered before the next budget. The pressure, one source said, “does mean that everything is on the table … They’ve been discussed, they are items that have been considered and not discounted.”
A third senior source said there was a “growing realisation” that “if we really want to ramp up delivery, we’re going to need to do something there”.
A fourth source said, geographically, targeted breaks towards areas with pre-existing infrastructure should be considered. “Taxation is the strongest tool at the disposal of any government, so should we not be using it for housing?”
Should the State step in?
There are also calls from developers for the State to step in as a “forward funder” of housing projects, many of which have planning permission but have been stranded as their funders have abandoned them. O’Brien is already working through a second iteration of Project Tosaigh, which aims to fund stranded build-to-rent properties and use them as social housing – some 20,000 units are being considered as part of an initial assessment of options.
But one of the largest builders in the State, speaking privately, said the Government could and should step up even more. “If it has spare capital and can do it in a controlled manner, those apartments aren’t going to get built otherwise.”
Within the Government, there is a growing acceptance that delivery on housing is the factor that will make or break its electoral fortunes. As to whether there are signs of encouragement visible yet, one Coalition figure quipped: “There is light at the end of the tunnel. Whether it’s a train or not is another thing.”