‘Fatal flaws’ in Government housing policy highlighted

The director of the Nevin Economic Research Institute has pointed to three “fatal flaws” in the Government’s approach to solving the housing crisis and warns the problem “may very well get worse before it gets better”.

Tom Healy’s comments come after another leading economist, Alan McQuaid of Merrion, warned politicians appear “not to have learned the lessons from the property crash and financial crisis” in relation to lack of housing supply which, CSO figures confirmed yesterday, is continuing to drive up prices.

Mr Healy said there has been a “government failure” due to conscious decisions over three decades to outsource activity more and more to the private sector, to fail to get to grips with the price of development land and to under-invest “by huge amounts” in necessary social housing.

He pointed to the Department of Housing’s own statistics on property development as a classic example of the “government failure”.

For example, these show that when housing development peaked in 2006, as well as the 88,211 private homes built in that year, there were 3,968 local authority social houses and 1,240 voluntary and cooperative houses.

That contrasts to 75 social houses, 401 voluntary and cooperative houses, as well as 12,190 private homes in 2015.

In his NERI blog, Mr Healy said: “Just when the market pulled back from building too many houses...what did the State do? It reinforced the slump and laid the basis for a storm in terms of a housing crisis. Put another way, this housing crisis was entirely man-made due to a combination of market failure and ideological capture of the political space. The current government is long on promises and short on delivery.”

The NERI director said that while the Government was “at last” undertaking steps to address the crisis, “it is striking that the approach is characterised by three fatal flaws”.

• An ideological clinging to the market as the key driver and supplier of housing need with the State playing an entirely secondary role by way of regulatory provision, tax incentives and modest outlays of grant assistance;
• The scale of ambition, let alone delivery, is wholly inadequate to the extent of need;
• A reluctance to deal with the urgency problem and cross-government drive to get to grips with this. Lost somewhere in fiscal space” is the bean-counting that confuses short-term cost with long-term investment that will save the State, the market and society much by way of hidden costs and social damage.

“In the meantime, the housing crisis will not go away. It may very well get worse before it gets better,” he said. Mr Healy said he agrees with a key message in a 2015 National Economic and Social Council report on Housing Supply which said: “The public system should use its authority, capacities and resources to take the lead on the resumption of housing supply.”