Government officials will no doubt be cheered by the Economic and Social Research Institute’s positive evaluation of the budget.
The think tank’s assessment indicated that – taken together – the measures would see average real household income in the Republic rise by about 2 per cent next year, “with higher gains for low-income compared to high-income households”.
The analysis was based on an assumed rate of inflation of 3.2 per cent next year and on the basis of wages growing by around 5 per cent. Either way, it underscores Minister for Finance Michael McGrath’s stated aim of providing “further support to individuals, families and businesses at a time when the cost of living is high”.
The ESRI’s analysis, however, contained a rather large splinter from the Govermment’s perspective and on the issue that is doing most damage to its standing in the polls: housing.
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On the Coalition’s housing market interventions, the ESRI said the increase in the rate of local property tax on certain vacant residential dwellings would probably increase supply. So far so good.
But the Government’s decision to extend the Help to Buy scheme for another two years, the new tax credit for landlords, the extension to the rental tax credit and the temporary mortgage interest relief policy would all probably increase demand for housing, “putting pressure on house prices”, it said. Not good.
We’ve had dozens of policies and strategies all feeding into a steadily worsening problem characterised by a widening affordability gap, declining rates of home ownership and greater numbers availing of rent supports.
As of 2020, there were almost 300,000 households, or 54 per cent of households that are renting, in receipt of some kind of State support to help with the cost of housing in 2020, the main one being HAP (Housing Assistance Payment).
Arguably, Government measures to address the crisis have – directly and inadvertently – widened the affordability gap.
