You don’t need to be an ideological-wing nut to accept that during the last boom, an overenthusiastic embrace of liberal economic values – or right-wing if you want to disparage their standard bearers – led directly to the construction collapse. That then laid the foundations for our current housing crisis.
That shouldn’t be a controversial statement. It is simply a truism. There is a straight line that leads directly from our obsequious, uncritical acceptance of the past pronouncements of bank and stockbroker economists, all the way to our current mess.
Privately-paid financial industry analysts told us everything was grand, those of us with the job of scrutinising them were too enraptured to do it properly, and then we all got a shock when the construction sector blew up and took the banks with it. That meant nothing was built for years and today’s house hunters are paying the price for it. So-called right-wingers must shoulder their fair share of the blame for this.
Not that the traditional left-wingers fared any better. As the last boom came to a frothy head before the crash, they were indistinguishable from the right. Party animals, one and all. Who could forget that the Labour Party, that champion of the working classes, campaigned for huge, pro-cyclical income tax cuts as late as the summer of 2007 when the die was already cast. That's how mad it all was back then.
Supporters of the left now suffer from selective amnesia about such matters, and who could blame them. It must be mortifying for them. But because it is accepted that snotty-nosed right-wingers caused much of the mess which, in turn, helped to cause our current housing crisis, the left in Ireland now believes it has all the answers.
Fallacy
Look at the trade union-backed Raise the Roof housing campaign. However well-intentioned it may be, it nurtures the fallacy that if only housing was designated a legal right, enough houses and apartments would magically spring from the turf like daffodils. Somebody would still need to physically build them.
That requires the right resources to be put in the right hands, and an army of construction workers to do it, no matter who pays the bill. It doesn’t matter if it’s some mass State-financed social building programme, or a private market-led solution, or a hybrid. The building industry needs capacity to put enough bricks on top of bricks.
It is becoming increasingly obvious that the most passable road out of our housing crisis will be paved with measures upon which the left will chafe. There will be more vacant land taxes, which the left will love. There will also be more big institutional funds buying whole apartment blocks, which the left will hate, though it is needed.
Then there is the pressing need to keep a lid on soaring building costs, and that includes labour costs. The left will lose its marbles over that one. Central Bank lending caps will anchor prices, and builders will not build houses unless it is profitable. Costs, including builders wages, need to be brought under control to allow industry expand to meet the crisis. Battalions of workers will also have to be recruited from far afield to help keep a lid on wages, and also to physically meet demand.
Will the trade unionists who back the Raise the Roof campaign be prepared to bang that drum? Hold your breath if you want to, but I’m sure I need oxygen to live.
Trimmed forecast
This week, Goodbody stockbrokers trimmed its forecast for new housing completions for this year from 22,000 to 21,000. Most forecasters seem to accept that about 35,000 per year is what is needed. To play catch-up with the crisis, some think it might even need to be closer to 40,000 for a while. Yet the forecasts are going backwards.
Think about how hard it is now to find a carpenter or electrician or plumber to do a small job for you at home, and how expensive it has become. The building industry said in 2016 it needs a further 112,000 construction workers in the next couple of years to produce the number of houses that crisis watchers say are required to meet demand. But since then, the industry has apparently only managed to procure another 39,000.
Where are those extra workers supposed to come from? The Government has only just lifted a ban on visas for bricklayers and plasterers, for example, from outside the European Union. But inexplicably it decided to cap their numbers at 250.
More than two years ago, the Society of Chartered Surveyors Ireland (SCSI) estimated that the cost of delivering a brand-new three-bed family semi-d in the Dublin area averaged about €330,000. The figures will be updated later this year, and they have surely risen since. But let’s work with the old figure for now.
Labour costs
About 45 per cent of the €330,000 is so-called “hard” building costs, including materials and labour. Builders say that about 40 per cent of that hard portion is made up of labour costs. So for every average three-bed semi built in Dublin, where they are most needed, it costs close to €60,000 in trade wages.
What will a hiring dogfight do to wage inflation in the sector, and with it, the challenge of profitably building a house, especially when set against a landscape of lending cap-constrained prices? The €60,000 will balloon.
Yes, land prices need to be brought under control to address the housing crisis. But no matter who doesn’t want to hear it, builders’ wages may need stringent controlling too. That will require more competition for their jobs.
***********
FOOTNOTE
- It isn’t just some on the left who get the occasional bout of amnesia. Some on the other side of the ideological fence are prone to it, too.
No matter how often he goes jogging with leftist heroes such as Canada's leader, Justin Trudeau, most people accept that the Taoiseach, Leo Varadkar, inhabits the right side of the equation.
Cue a recent touch of forgetfulness, this time over the negative effects on the environment of high intensity agriculture in some parts of the world.
The Taoiseach has in recent months been criticised from farming quarters for saying we will all have to eat less meat to save the planet. Beef and dairy farming has also weathered a storm in recent times following debate over agriculture’s role in producing carbon emissions. A fall in the national herd was implied in the figures contained in the Government’s shiny new climate action plan, announced this week.
Yet, when Varadkar signed a letter this week to Jean Claude Juncker, the European Commission president, expressing concern over the agricultural components of a possible trade deal for the so-called Mercosur countries of Latin America, the issue of the environment was barely mentioned at all.
The letter, leaked in an apparent effort to show that the greenish government hasn’t turned its back on Irish farmers, expresses “deep concerns” over a proposal to give Mercosur countries a European Union beef quota of 99,000 tonnes. How much rainforest will they have to chop down to make way for that?
“Just days after Ireland launched its own Climate Change Plan, how are we meant to take our plan and the science that underpins it seriously when the EU is considering concluding an agreement that could – and probably will – result in a catastrophic escalation in the forest clearance that is the basis of South American beef production?” complained Pat McCormack, the president of the ISMCA farming lobby.
The man has a point.
