Rory Hearne: The next housing crash will hit even harder than the last
Derelict houses in St Mary's Park, Limerick.
The latest house prices show the disastrous extent of the housing emergency. It is, of course, not an accident, or something that just ‘happened’; it results from policy.
It can be solved with a sea change in policy and sufficient courage and vision. But without radical immediate intervention by Government, the crisis is going to get much, much worse.
Rents are already a third higher than the Celtic Tiger peak, and house prices will reach that 2008 peak within a year or two at this rate of growth.
These house prices and rents are unsustainable and unacceptable. There will be another housing crash. The ESRI has stated that we face a decade of a worsening housing crisis without State intervention.
But this time, it’s different. Investor funds continue to buy up homes because Government measures are ineffective for houses, and they don’t come into effect for years, adding to house and apartment price pressure.
In 2010, investors bought about 10% of property in Ireland. Now they are buying 25% of housing. That is a huge increase.
The private market has utterly failed to deliver affordable housing, and there is no sign of that changing in the coming years.
I am contacted daily by people asking me to highlight the personal impacts of this crisis. From single people in their 50s living in rental housing and terrified about what happens when they retire, to couples doing everything they can to save, then being outbid by investors, to people living in garden sheds, or being made homeless by the landlord selling their property.
The overriding picture is a social catastrophe having a destructive impact on the lives of hundreds of thousands of people, particularly on their mental health, their sense of security and hope. Many are planning to emigrate. Are we going to accept losing another generation of our bright and talented future to emigration?
Impact of Covid
It is likely that there are post-Covid specific contributions to the house price rises, particularly outside Dublin. People are relocating out of the capital because Dublin has simply become unaffordable to rent or buy for average earners. Investors are buying up every apartment. The savings built up over Covid have just added fuel to a fire that has been burning for almost a decade.
The most frustrating aspect of this is that the State has had unprecedented land and finance available to it, and an ability to solve the crisis.
But rather than bringing every fire engine available to us to put out the fire, instead the governments of the last decade have, instead, poured a few buckets here and there such as the small-scale building of social housing, while also stoking the fire by encouraging real estate investors with tax breaks and Nama.
Successive governments started the fire by handing housing over to the private market and investors, and failing to build any affordable housing across the country over the last decade, or tackling problems of vacancy and dereliction that blight our towns and cities.
And still, despite the public pressure and clear acceptance of the crisis as an emergency, there still appears to be a lack of urgency, a lack of vision, and a lack of courage on the part of policy-makers and government to implement the solutions available to them.
The scale of undersupply is estimated to be in the region of 20,000 to 30,000 homes per year. That is the additional number of homes needed. Despite what is being argued about the need for investors to provide this, the State and Government, if it wanted to, could supply those additional 30,000 homes each year for the next decade.
Radical action needed
The State could make a massive contribution to solving the crisis, if Government was prepared to take radical action, if it wanted to. Here’s how.
Firstly, the ESRI, in a game-changing report, outlined that the State should borrow (and this would be financially ‘prudent’) an additional €4bn-€7bn to build housing.
So the first thing the Government could, and should, do is implement an emergency budget in the next two weeks before the Dáil closes for the summer to borrow €4bn for capital investment in housing, and allocate this to local authorities and housing associations. This would facilitate the building of an additional 15,000 social and affordable homes.
Secondly, the Government should direct Nama, which is now completely State-owned, and has paid off its debt, to fast-track the delivery of 15,000 homes per annum over the next five years. Nama has 747 hectares of land, and about 30,000 units under development or planning.
It is currently selling 54 apartments in a development in Finglas in Dublin. The apartments are being sold as a block, most likely to a cuckoo fund investor, and will be rented out at much higher rents, presenting a risk to current tenants. Some 28 of the units are vacant.
The minister should intervene to direct Nama so it does not sell the 54 apartments to investors, but instead retains them for social and affordable housing.
Nama could sell the vacant units to home-buyers, or to a housing association, to be used as cost rental and social housing, and could sell the tenanted units to a housing association to retain the tenants on the cost-rental affordable housing.
Most importantly, Nama should be directed to sell these at actual affordable rates to home-buyers and not-for-profit housing associations, not investor funds.
We have heard in the last few days about the need for restricting State spending, our national debt, and the return of austerity.
But this runs against the growing international economic consensus, and direction of the US and the EU, which is a return of the ‘Big State’, encouraged to borrow now, given low interest rates, to invest in social and environmental issues.
The fiscal orthodoxy of austerity is in decline, and the Government is making a massive mistake bringing us back there.
So in all this discussion of supply, and the market, let this be clear. The Government could make a massive contribution to solving the crisis — building, itself, not relying on the ‘market’, 30,000 affordable rental and purchase homes per year.
There are other measures that could and should be introduced to take the steam out of an overheating market.
- A freeze on house prices like the rent pressure zone caps, for a three-year period;
- An immediate effective and hefty vacant property tax that would bring back in the huge stock of vacant and derelict property to use;
- An increase in the vacant site tax to make it penalise land hoarding.
The rental sector also needs fundamental, immediate reform, including reintroducing a ban on evictions, removing landlords’ ability to evict tenants when selling the property, and freezing rents.
As the private rental sector does not provide a stable, secure, and affordable home, renters see buying as the only way they can get a secure place to live.
Making the rental sector secure and affordable would ease the pressure on house prices while giving renters a home too. While the minister’s new rent caps linked to inflation are welcome, rents should be frozen, particularly in context of probable rises in inflation coming. Furthermore, new rental properties remain exempt from the caps.
The “constitutionally protected property rights of landlords” have been prioritised again over tenants, who have no constitutional protection to housing.
Profound value shift
A profound value shift is under way in Irish people’s attitude to housing. Generation Rent do not want an investment asset. They want a home. Even home-owners, who up until recently might have considered rising prices positively, are now seeing it through the lens of their children.
Many of these people are in their 60s and 70s, and have adult children still living at home. Increasingly they realise that (not so) little Aisling or James has no prospect of finding a home under this current approach of treating housing as a speculative investment asset.
This is where I see the hope in a major change in housing. We have seen this in referenda on repealing the Eighth Amendment and marriage equality, and our attitude to mental health. Younger generations have driven a profound change in values and priorities. And I think we are seeing it now in housing.
That is why it is so important that Generation Rent continue to speak up and highlight the impact of the crisis and their ideas for what should be done. Nothing changes unless people make some noise and put energy into solutions. I hope that, through sharing their personal stories of the crisis, people affected by it feel less stigma and shame and sense of isolation.
Our response to the Covid pandemic has shown what we can do as a country when we come together and put everything we have into addressing a crisis. We need a pandemic response to the housing crisis. We can rebuild our country out of this crisis, and create sustainable affordable homes for all — with communities central to this.
A State home-building company should be set up to attract in the staff, the skills, and expertise, and go around the country and work with local authorities, approved housing bodies, and indeed individual people and communities to build the needed homes, renovate derelict property, and set up community and home-building co-operatives on our huge public land banks.
Why do we not get the hundreds of thousands of people who need homes involved in designing, planning, and delivering, as future tenants and home-owners, and reskilling and training those who want to in building skills? In delivering this, we could harness the wave of community togetherness and support we saw during lockdowns.
We have to do something radically different. This could provide hope to Generation Rent and ‘Generation stuck at home’ that their country wants them, values them, and is giving them a future here.
Referendum
The housing market model is dysfunctional. Holding a referendum on the right to housing is also vital, to enable us to have a national conversation about how the housing crisis is impacting on everyone, about how we need a value shift to treat housing as a home not an investment asset.
There is a lack of courage, a lack of conviction, and I wonder at this point is it a lack of understanding of the crisis and its solutions and even housing policy among Government and some policy makers and State agencies.
An alternative policy path is required, where we develop a new vision for an active and inclusive role for the state in delivering housing.
This would place it central once more to home building, and a involve a re-understanding and reconceptualisation of the fundamental role housing plays in our lives, shown by the pandemic.
The vision must be built upon the recognition that the treatment of housing in policy, public narrative, politics and societal values as a financialised commodity, as an investment asset, produces housing systems in constant crisis and entrenches and amplifies social and economic inequality.
We must revalue and recreate housing into what it was for many years in this State — and what it must become again — as a home. A home that provides a secure base for our children, for families, individuals, and communities to develop and flourish, to be healthy and secure, to fulfill their potential. That is what is possible and necessary.
We must come together to achieve it.
Dr Rory Hearne is Assistant Professor in Social Policy at NUI Maynooth.
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