Dermot O'Leary: Pandemic is opportune time to start solving dysfunctional Irish housing

A lack of a long-term housing policy that goes well beyond the five-year electoral cycle has been a contributory factor in the housing crisis
Dermot O'Leary: Pandemic is opportune time to start solving dysfunctional Irish housing

An enormous construction boom and bust occurred in the 1995-2010 period when home completions grew to 90,000 and then collapsed to less than 5,000 in 2011. Picture: Larry Cummins

Ireland has experienced a rolling series of housing boom and bust episodes since the foundation of the State.

It is not alone in this regard, but it is suffered more than most from the consequences of it being unable to maintain stable supply and demand. 

A lack of a long-term housing policy that goes well beyond the five-year electoral cycle has been a contributory factor in this volatility.

The frequency and scale of the booms and busts are well illustrated in a paper published last year by Richard Keely and Ronan Lyons. 

Using a novel dataset based on newspaper listings of homes in Dublin, the authors identify three very distinct price boom periods, in the late 1940s, the 1958 to 1979 period, and between 1995 and 2006. 

These were followed by large-scale slumps, between 1948 and 1958; the 1979 to 1987 period, and between 2006 and 2012 where real prices fell by between 38% and 56%.

Prices play a vitally important role in supply through viability and credit provision; it is no surprise that the trends in home construction largely follow these house price cycles, with similar levels of volatility. 

Home completions grew from close to zero during the Second World War to above 10,000 homes in the early 1950s before falling by 50% in the late 1950s.

Annual completions subsequently grew to close to 30,000 by the early 1980s but then fell well below 20,000 by the end of that decade. 

The enormous construction boom and bust then followed in the 1995-2010 period when completions grew to 90,000 and then collapsed to less than 5,000 in 2011. 

One would think that the public sector would have been able to smooth these cycles due to more consistent funding streams and an absence of a profit motive, but, in fact, it has contributed to it.

The knock-on implications of these housing cycles for the economy, jobs, government finances, the banking system, society and politics are enormous.

Alongside the cyclical elements of the Irish housing market, there are also other features that suggest that it is dysfunctional. These are manifested in urban sprawl, inefficiencies in public transport and utilities, social housing waiting lists and high construction costs.

There are numerous explanations for all of these features, but a key contributory factor has been Irish policymakers’ inclination to focus on short-term solutions to address the immediate problems. 

In a system where politicians are accountable to the electorate at least every five years, one can see why this may occur. But to bring about stability and optimum outcomes in housing requires a longer-term policy focus that goes beyond the electoral cycle. Many views must be considered.

A Commission for Housing, promised in the programme for government last year, has the potential to address this failing. 

Its goal would be to put political ideology to the side to develop a coherent long-term vision and enabling policies that will “deliver, on a sustainable basis, good quality, secure, affordable homes”. 

This would require broad consultation, have regard to best international practice, and be appropriately staffed with a strict deadline for completing its work. 

The Government has pledged to examine issues such as tenure, standards, sustainability, and quality of life issues. Given the change in living patterns brought about by the pandemic, now is an opportune time to consider how we address these issues.

Such a commission would not solve the problems that the Irish housing market is experiencing today but instead would suggest solutions that should reduce the chances of the mistakes of the past century being repeated. That would be a substantial contribution.

  • Dermot O’Leary is chief economist at Goodbody. He is involved with the Dublin Economic Workshop which is hosting a webinar on the topic of 'A Housing Commission for Ireland – What should it look like?' on Thursday, January 14, where Minister Darragh O’Brien is one of the speakers. Free registration is available at dublineconomics.com

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