Housing crisis - Incentives needed for key workers

IT is a frightening scenario that key groups like the gardaí, primary school teachers, nurses, and firefighters cannot afford to buy an average house in most Irish cities.

Perhaps it should not come as a surprise given the scale of the housing crisis, but the findings engender a sense of shock nevertheless. At one stage, the phenomenon of ‘unaffordability’ was confined to Dublin, but it is now spreading inexorably across the country.

That much is borne out by the Halifax survey of house prices, between March 2003 and March 2006, which shows how crucial public sector workers are being priced out of the market in the cities of Galway, Cork, Waterford and Dublin.

Meantime, according to the analysis from the retail arm of Bank of Scotland (Ireland), nurses and primary school teachers were also unable to afford the average house in Limerick city, in 2006, which effectively means that Ireland’s five biggest cities are deemed unaffordable for those occupations.

The situation has deteriorated since 2003, when Dublin and Galway were named as the sole cities where an average house was outside the reach of key workers.

The sense of shock is compounded because teachers, gardaí, nurses and firefighters are perceived in the popular mind as part of the fabric of middle-class Ireland. Now they can’t afford to buy the house next door.

Nationally, according to the survey, house prices rose by 43% against an average increase of 17% in key worker salaries. Unfortunately, nurses and firefighters are the worst affected of the various groups. Halifax estimates that average house prices in Dublin are more than 13 times the average salary of either a nurse or a fire fighter.

No doubt, if such bleak statistics were produced by the opposition, or the media for that matter, they would be dismissed out of hand by Government. But the Coalition cannot evade the findings of a study based on rock-hard calculations. Simply put, the problem is that earnings growth in key occupations is continuing to lag far behind the inexorable growth of house prices.

While it remains to be seen if property prices are beginning to flatten off, as some commentators suggest, the staggering reality is that in the mad race to gain a foothold on the property ladder, Irish people are taking out new mortgages at the rate of 800 a day.

Despite the Taoiseach’s denial of any rift, the mortgage scenario explains why Fianna Fáil instantly rejected the plan of PD leader Michael McDowell to review, and possibly abolish, stamp duties on house sales. In the current year alone, this form of taxation, rated among the highest in Europe, will bring a whopping €2.7 billion into the Exchequer coffers.

While wages and pensions in the public service have increased sharply since benchmarking, the prospect of an index-linked State pension in later years is cold comfort for people who can’t afford to buy a house today.

Significantly, the Halifax survey echoes the latest Irish Examiner/Lansdowne Market Research poll, which identified house prices and the cost of living as decisive election issues for people in the crucial 25-49 age group. Significantly, that age group forms the largest block of swing voters.

If anything, the housing crisis is going to get worse, as escalating prices continue to outstrip wage increases. There is now a compelling case for Government to look at other countries where incentives are provided to ensure that crucial workers can afford to live in key locations.