It’s taken awhile, but politicians have finally woken up to Ireland’s housing crisis.
The new Minister for Housing, Simon Coveney, admitted as much this week when promising to introduce a "comprehensive response" to what he deemed a "national emergency".
While trouble has long been brewing, the previous government’s response to the crisis was lacklustre, piecemeal and largely ineffective. With a new Government comes the promise of decisive action. Coveney says the issue is urgent, but has warned the public to be patient: the results that can be achieved won’t be immediate.
Recognition of the housing crisis is one thing; coming up with effective solutions is another. And there is little consensus. Indeed, outside of accepting that there is a crisis, perhaps the only other element on which all sides agree is that a shortage of supply is at the root of the problem.
The appointment of Coveney has been broadly welcomed, as have some of the comments he has made since taking up the new post.
The Ibec-affiliated Property Industry Ireland (PII) represents some 90 businesses operating across the sector, from architects to surveyors to building material suppliers. PII said the creation of a Minister with a mandate to produce a comprehensive action plan for housing delivery – and a Cabinet committee to oversee its implementation – was "a very positive step in ending the housing crisis".
"What has happened in the past is that the profile and remit of the Department of the Environment was so huge that housing competed with a lot of other issues for ministerial time," said PII director Peter Stafford.
Aligned issues
“Simon Coveney has a lot on his plate,” he added, “but what puts him in a better position than many of his predecessors is that housing, planning and local government are now more closely aligned. If he tackles all three areas together, he can successfully unpick the knots that are holding things back.”
With technology companies such as Apple and PayPal expressing recent concerns about the housing situation and its impact in terms of attracting employees, it's not surprising that industry bodies also welcomed Coveney's appointment.
"As it stands, there are approximately 12 Government departments and agencies whose work must be co-ordinated for the housing system to work," said Paul Sweetman, director of ICT Ireland and the Irish Software Association. "It is welcome news that the Government has created a full ministerial position for housing. This has the potential to provide a real focal point to discuss and solve the social and economic challenges that exist."
Stafford said Coveney has much to resolve, even with the advantage of a better-aligned portfolio than some former housing ministers have had.
“Part of the challenge is that there isn’t just one problem to resolve, but rather a series of them,” he said. “There’s a crisis in social housing because local authorities haven’t been spending money on building as they would have done in the past. There is also one in the rental sector because there are more people renting while also a lot of landlords leaving the market.
“And, lastly, there is the owner-occupied space where a lot of people are struggling to buy homes because of the Central Bank rule.”
Given the scale of the housing crisis, Stafford said, “it can feel as though this is a completely intractable problem because there’s always another issue that needs to be addressed. This means there are no immediate wins, and the Minister has to accept that things can’t be sorted with just one policy.”
Stephen Large, Dublin services manager for the housing charity Threshold, agrees.
“The key thing is that you can’t look at one section of the housing market in isolation,” he said. “Obviously the issue of supply is the common denominator that impacts on all sections, but you can’t tackle one element of the problem without looking at the effect it will have on other elements.”
Plain to see
One thing Coveney doesn’t have to do is search hard for evidence that things are amiss. In the last week alone we have seen new figures from the property website Daft.ie, which show that average monthly rent in Ireland rose to €1,006 in March, the first time since May 2008 that it has gone above €1,000.
Rents in Dublin are now higher than at the peak of the property bubble.
The Daft.ie report follows recently published data from the Banking and Payments Federation, which reveals that lending to first-time buyers fell from €501 million in the first quarter of last year to €462 million in the same period of 2016.
Meanwhile, the Minister himself confirmed on Wednesday that €46 million a year is being spent on hotels for homeless families, and new Government figures show that fewer residential housing units were completed in March than in the same month a year earlier.
Of course, one possible solution is simply to wait for the market to sort itself out. Conall Mac Coille, chief economist at Davy and author of the quarterly MyHome.ie property report, says it may only be a matter of time before the issue is resolved, given that planning and completion numbers have generally been heading upwards.
However, Stafford warns that the sit and wait approach is deeply flawed because “it ignores the fact that the planning process can be extremely bureaucratic”.
Planning reform
“The difficulty is understanding when indicators translate into real houses,” he said. He did say that the new Government’s promise of root-and-branch reform of the planning process should help resolve this issue.
As Rory Hearne, a senior policy analyst with the think tank Tasc, noted in The Irish Times earlier this week, plenty of policy measures in the programme for partnership aim to improve the situation generally. These include raising the level of rent supplement, increasing the delivery of social housing units. and tackling the mortgage arrears issue.
However, as Hearne noted, there is also a focus on reviving what he describes as “the failed developer-led property market approach to housing”.
He is not alone in questioning the wisdom of relying on those who got us into a mess to get us out of it. Many analysts are also suspicious of claims that developers are keen to build new homes, but won’t because there’s no profit in it.
Mac Coille said part of the problem with this argument is that nobody agrees on one single estimate of the cost of building a home.
“Those who say house building isn’t viable point to cost estimates from quantity surveyors on relatively small projects of 100 to 150 houses, he said. “However, larger companies building thousands of homes could realise economies of scale, pushing down on costs.
“In the UK,” he added, “six or seven house builders are listed on the equity market and building tens of thousands of houses each year, whereas in Ireland many houses are one-off, or are built by smaller, relatively inefficient building companies, so the costs are so high.”
Mac Coille believes the National Asset Management Agency (Nama), which has been roped in to fund affordable housing, could have a positive impact on supply. But he said there isn't enough clarity on how Ireland's construction sector should evolve in the context of Nama as a large public home builder.
Better call Nama
Stafford agrees that Nama may be able to help supply, but is concerned the agency is continually seen as the solution to every problem.
“When there was a problem with the office market a few years ago,” he said, “the then-government said Nama would provide additional space. Now it is being tasked with providing social housing and privately-owned housing too.
“If the Government wants to change Nama’s purpose, then the legislation underpinning it needs to change. If it’s seen to be acting beyond its terms of reference, I can see disputes arising between private developers and Nama.”
Meanwhile, recently introduced measures to calm the housing market continue to attract criticism.
Stafford, for example, is concerned about the vacuum that exists following the introduction of rent control measures late last year. Rather than resolving the issue of skyrocketing rents, he said, the new rules have just delayed inevitable increases next year.
“The new measures were supposed to create a breathing space in which more concrete actions could be considered,” he said, “but the problem is that everyone is holding their breath and waiting to see what happens next. The lack of action means we are going to end up in exactly the same place we were next year,” he said.
The other major measure introduced in recent times was the Central Bank’s mortgage lending restrictions, introduced in January 2015. After significant cooling of the market, there have been calls for the measures to be eased.
Mac Coille said the rules have succeed in stopping borrowers from taking out big loans. There should be no dilution of the measures: “Not surprisingly, builders and estate agents often believe the solution to the problem is to allow mortgage borrowers to take on debt. I don’t agree.”
He is equally as scathing about plans to raise rent supplement. “Increasing rent supplement is not a solution to the lack of housing and should not be implemented.”
Coveney has been applauded for asking to take on the housing brief. But while good will may help him build firm foundations, it alone won’t result in long-term solutions.
Rather, it is the prospect of even higher rents, worsening homelessness and an ever more stagnant property market that will likely prove the most effective spur for the Minister – and all involved in delivering effective solutions
.
Build up, not out: secret to meeting housing crisis in metropolitan areas
Is the secret to improving housing supply in metropolitan areas up in the air? Some commentators think so.
"We need to consider high- density housing , with building heights well beyond the current limits put in place by Dublin City Council. This is the norm in many well-planned European cities," said Conall Mac Coille of Davy.
“More broadly,” he added, “we do not appear to have anything approaching a coherent spatial strategy.”
Gina Quin, chief executive of the Dublin Chamber of Commerce, also in favours building upwards.
“The demand for one- and two-person households is forecast to grow significantly in the coming years,” she said. “ If Dublin is to combat urban sprawl and provide good transport infrastructure to a growing population, the council will need to revise its housing plans favouring higher density developments.”
A good start, Ms Quin said, would be to “prioritise sites close to good existing infrastructure. For example, we should look to build and increase densities along the Dart line, which has spare capacity. Opportunities for growth are also presented along the new Luas Cross City line, which will come on stream in 2017.”
Dublin Chamber has also called for more effort to be made in maximising the potential from vacant land.
“The vast majority of vacant sites in the city centre are already serviced and close to good transport links and amenities,” she said.
“Maximising the potential of these vacant sites will also require both local and central Government to get serious about densities and heights in the city centre – something that hasn’t happened up until now and something that has ultimately contributed to the housing problems we now face.”
Renting: revolution required
A sea-change in attitudes towards renting is required, according to those advocating for better rights for tenants.
Research conducted by the Private Residential Tenancies Board in October 2014 found that only 17 per cent of tenants were happy renting and could see themselves doing it long-term.
It’s not surprising to find so many unhappy tenants, given that recent figures show rents continuing to rise while the number of properties available to let declines.
“The crisis is as bad at it is being portrayed, with the key issues being substantial rent increases, limited stock and a lack of security,” said Stephen Large, Threshold’s Dublin services manager.
The private rental sector doubled in size between 2006 and 2011, and one in five homes are now rented. Given this, he says, we need to rethink how we consider tenants and the rented sector as a whole.
“We need to stop thinking of home ownership as the be-all and end-all, and of rent as being ‘dead money’,” he said.
“Some measures have been introduced to tighten up the sector, but we need to go further, particularly in terms of rent certainty. We’re dealing with people every day who are facing increases of up to 40 per cent, and often there’s no basis for it. The property certainly hasn’t improved by that percentage.”
