Whose pensions could cover the cost of rent post-retirement, asks leading developer

A NEW 'HERD' mentality and political consensus in favour of an Irish house market of 50% rental/social housing, and 50% homes to buy, risks creating a new welfare state, and may leave tenants unable to afford rent when they retire.

That's according to one of the country's longest continuously-developing home builders, Michael O'Flynn: CEO of the O'Flynn Group, with a 40-year development track record, he is a vocal critic of current Government housing policy, saying  "the current crisis needs to be treated as an emergency," as well as being critical of the Central Bank's macro-prudential lending guidelines.

Speaking at a seminar 'The Future of the Property Market' organised by auctioneers' body IPAV, he warned that  current housing strategy is failing the current generation who'd like to buy a home but either can't afford it, or are hindered by the Central Bank's lending multiplier of 3.5 times income: "hardly anyone is looking at how this is inhibiting housing delivery and how it risks the creation of a welfare state," he said.

Mr O'Flynn argued for multipliers of up to 4.5% or even 4.75% if borrowers were in a  position to make repayments and said if necessary a new insurance scheme could be introduced to cover any additional individual borrowing risks.

He argued for moves to control house and inflated land prices, including repeating his calls for a cut in VAT from 13.5% or c €32,000 tax on an average new home cost; he said he would be prepared to open his books and show full transparency if this was granted,  to show the reduction would be passed to home buyers,  and not pocketed as extra profit, as Government suspects some home builders might do.

On tenure, a new drive towards Build to Rent, and other rental models, risks creating a social housing-dependent society," he stated, "we are replacing one macroprudential risk with a far greater one. Over-correcting one problem is having this serious unanticipated consequence," he asserted.

"How many of you could afford the rent that your house would attract if you had to pay rent in your retirement?" Mr O'Flynn asked the receptive Institute of Professional Auctioneers and Valuers' gathering in Mullingar, adding "how many people in this country have sufficient savings,  or a large enough pension to give them enough income to pay rent after they retire?"

With forecasts of a significant drop in the proportion of numbers working, relative to retirees by 2050, that will have an impact on  pension income "and how can a generation herded towards home rental manage to continue to pay rent on their homes, post-retirement, on a pension which is bound to reduce based on these projections?"

In the build-up to the economic and construction crash,  a herd mentality erroneously built up a belief the country needed 90,000 housing units.

"The herd ran towards unsustainable numbers of new housing units then and is starting to run towards a model of home rental now without properly examining how this sits in our overall economic model," argued Mr O'Flynn addressing a recent shift in tenure models, saying some sectors "are now cheerleading for a shift in policy towards prioritising home rental over home ownership."

“Before prioritising Build to Rent we need to consider if this is what people want, and will be able to afford in the long term, or is it just that the vocal few, comfortably living in homes they own themselves, believe that long-term rental should be good enough for others?” he queried.

Michael O'Flynn

Michael O'Flynn said he supported the need to increase the supply of social and rental accommodation, with pent-up demand after years of under-supply, but not at the cost to the private buyer market, calling for a balance of options.

"Promoting the idea that 50% or more of homes should be rented is irresponsible when no assessment whatever has been undertaken as to how this can fit with Ireland’s economic and pension policies or the mind-set of people,” he stated.

The residential and commercial sector developer, who's currently house-building in Cork and Dublin, said more heed should be paid to those active on the frontline of housing delivery: in the context of the housing crisis, a problem not to be underestimated is that there are far too many 'hurlers on the ditch'. The noise they are making sometimes drowns out the voices of those who participate in the actual delivery and who should be heard."

Among the measures proposed by Michael O'Flynn were a shake-up of land zoning and more SLR (Strategic Land Reserves) with a 'use it or lose it' policy to prevent land hoarding; a return to Shared Ownership purchase models; time-limited tax breaks for EU nationals coming to Ireland to work in construction sector, as well as relocation grants for returning Irish tradespersons; freeing up development finance for domestic builders; time-limited reduced CGT on vacant urban site sales; tax deductibility for relocation costs/stamp duty exemptions for those trading down to smaller units; and retention of the Help to Buy scheme (as echoed, separately  to this week by Goodbody,) with Mr O'Flynn noting that one in three of his company home buyers were reliant of this incentive.