A terrifying prospect lies ahead of us. The housing crisis is set to continue to worsen over the next decade, based on current housing policy actually working. That might seem counterintuitive given that policy is supposed to be solving the crisis.
However, that is what’s forecast in the analysis undertaken by KPMG for the draft Dublin and Cork Council 2022-2028 development plans. Even with current housing policy, rents in Cork are projected to rise by 36% by 2028, and in Dublin, rents are projected to rise by 50% to an average rent of €2,500 a month, for a one-bedroomed apartment.
House prices are also set to rise even further. On top of the 90% increase in house prices since 2013, they are set to rise in Cork City by up to 45% by 2028. The average Cork City home priced at €307,000 now will cost €442,000 in just seven years time. Will wages increase by 45% by 2028? In Dublin, house prices are projected to rise by 30%, from an average of €437,000 to €575,000 in 2028.
Given these phenomenal rates of rising rents and house prices, housing affordability is going to worsen, and housing exclusion and housing need will increase, even beyond current unacceptable levels. The ongoing human impacts of the housing crisis on family and individual instability, poverty, insecurity, mental health and hopelessness will spread.
In Cork the population is set to grow by 40% by 2031, and projected social and affordable housing need is set to increase by 14,000 households who will neither qualify for a mortgage nor be able to afford private rental. In Dublin, the level of projected housing exclusion from the market is truly shocking.
Two thirds of new households formed between now and 2028 in Dublin will not be able to afford to buy or rent their home from the market. Only a third of new households will be able to afford to rent privately (15%) or buy (18%). This includes current housing plans and Build To Rent, delivering as planned.
Alarm bells should be going off. This will have detrimental societal and economic impacts. 37.6% of new households will need social rented homes and 29% face an affordability constraint. In addition there is the housing needs of ‘Generation Stuck at Home’, the 350,000 young adults aged 18-29 still living with their parents.
The KPMG projections undermine the claim that investor fund build-to-rent supply will lead to reduced rents. The Tánaiste, Leo Varadkar, defended build to rent in the Dáil recently as being necessary because “there are so many single people in society now”, we are a country of “three bed roomed homes” and, “we do not have enough one bed roomed homes”.
There actually isn’t data on how many three bed roomed homes there are in this country, because the Census does not measure bedrooms per household, but rather just counts ‘rooms’. There’s no comprehensive profile of the number of bedrooms per dwelling.
The KPMG housing needs assessments do estimate future household size. For Dublin it identified “increased demand for two and three person households and declining demand regarding single person households and one bed units”.
The Dublin draft plan states that “the provision of a mix of quality dwellings of different size, type and mix, that is suitable for citizens throughout their lives and adaptable to people’s changing circumstances (e.g. ageing, disability, growing family) is fundamental to creating a properly functioning city with sustainable neighbourhoods”.
The plan proposes a minimum of 15 % three or more bedroom units and a maximum of 25 to 30 % one bedroom/studio units in developments. In contrast, recent build to rent developments in Dublin have 70% one bedroom or studio units.
In Cork City, projected demand is for 20% 1 bedroom homes, 35% two bedroom, 30% 3 bedrooms, and 14.19% 4 beds. So 65% of projected demand in Cork City is for two or three bedroomed homes. The Cork and Dublin plan both highlight the need for more apartments.
The substantive issue is who will build decent sized, one, two and three bedroomed apartments, midrise duplex, and terraced homes, in cities, towns and villages, that are actually affordable to most people to buy or rent?
Large institutional funds are building only expensive homes to rent, and just in Dublin. Who is building affordable homes in Dublin, Cork, Galway, Limerick or small towns? O Cualann Co-Housing and AHBs are building, and local authorities and the Land Development Agency is planning to. But it is just hundreds, not the tens of thousands of homes needed.
Current policy is clearly inadequate and something radically different is needed. It comes back to the central role of the state to guarantee the supply of affordable homes. For 30 years, dominant thinking in Government in Ireland has been that the state should withdraw from housing provision and instead incentivise and rely on the market. But the market has failed to deliver the basic human necessity of homes.
Yet the Irish State now has the land and it can borrow cheaply. It could be setting up a State home building company, contracting SME builders, funding not-for-profit community and affordable home developers, and building and renovating over 20,000 affordable homes per year, but instead it is hoarding its own and Nama’s land.
In all the talk of supply, there is insufficient focus on the 180,000 untapped supply from vacant homes. There are over 20,000 vacant homes in Cork alone. There’s no visible appetite in Government to really go after vacancy and derelict properties. We await the vacant homes tax, while the Minister for Finance intervened to reduce the vacant site tax from 7% to just 3%, and delayed its introduction to 2023.
The analysis that rents and house prices are set to continue to rise, making housing even more unaffordable, and two thirds of new households will be locked out of the market in Dublin, while there is no building of affordable homes on a large scale in Cork or other regional cities and towns, shows that the current approach in policy is inadequate and ineffective.
It raises the question of whether policy and Government fails to understand solutions that can deliver affordable housing, or intentionally is not providing a greater state supply of affordable housing in order to maintain higher house prices and rents, in the commercial interests of banks, developers and investor funds.
But it is a faulty economic logic. It’s inherently risky, based on a flawed assumption of constant rising prices and rents, with a decline or crash, inevitable. High rents and mortgages suck money out of households and local economies and transfer it to the already wealthy, banks, and international shareholders of investment funds.
It is leading to rising inequality in society, and will push our younger generations to emigrate, a massive loss of human and economic capital.