Cantillon: Risks built into compromise housing plan

Potential difficulty with Government’s plan is it could fall between all relevant stools

The Government’s conundrum in relation to housing remains the level of construction of new properties by developers. Photograph: Frank Miller
The Government’s conundrum in relation to housing remains the level of construction of new properties by developers. Photograph: Frank Miller

Let’s hope the law of unintended consequences does not apply with the Government’s housing plan, due to be discussed at next week’s cabinet. The difficulty with compromise plans such as this are that they can fall between all the relevant stools – and create other problems.

On the face of it the idea of allowing rents to be reviewed only every two years – as opposed to just every year as it is now – has a certain sense to it. The compromise here seems to be that this measure will apply for around the next four years. As John McCartney, head of research at Savills, pointed out, there are immediate winners and losers here. The winners are those who have just taken up a new lease; the losers are those who are just about to, and may well see their rent bills rise as landlords adjust for the fact that no increase will be possible for two years. That is how markets work – and with strong demand there is little to stop this happening in the private rental sector.

The measures do not seem likely to limit new extra supply coming on stream, despite complaints from landlords. Stricter measures, along the lines of “rent certainty” sought by Minister for the Environment Alan Kelly might indeed have limited landlord enthusiasm. However, as actual rent levels will not be subject to significant controls, the “pitch” for landlords has not altered a lot.

The real conundrum remains the level of construction of new properties by developers – and the level of social house-building by the State. Figures suggest that building levels in Dublin remain too low. Yet again it appears as if developers have to be enticed with various “goodies” and promises of a relaxation of standards. But will this do it?

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Some sources believe there is a fundamental problem here, with many developers still financially stretched and banks having much tougher approaches to giving out finance. Michael O’Flynn’s financing, and his plans to build 10,000 homes, remain very much the exception. There is building activity, but much of it for higher-priced “ family” homes rather than the higher-density developments. For as long as there aren’t enough properties, then the policies being put in place will only be sticking plasters.