The representatives of capital and of labour were of one mind. Interviewed on Morning Ireland on Tuesday after the previous day’s windbagging at the National Economic Dialogue, they agreed that house prices need to come down.
Owen Reidy of the Irish Congress of Trade Unions and Danny McCoy of the Irish Business and Employers Confederation didn’t agree on everything. But they did agree on that. So does the Government. So does everyone. Delenda est Carthago.
Or do they? I suspect that while a lot of them do want to see more houses available for people to buy and be affordable to those on middle incomes, they wouldn’t be that keen on seeing a slump in house prices. We’ve had that before, remember? After years of complaints that houses prices had gone crazy, they became a lot more affordable very quickly when the economy fell off a cliff in 2008. Not many people were happy.
One of the striking – to me at least – results of the census released in recent weeks related to “dwelling characteristics”, as the Central Statistics Office boffins call it. The largest cohort of households are those who are “owner occupied without a loan or mortgage” – almost 680,000 of them. That is a lot of wealth, stability and resistance to any dramatic changes in the housing market right there.
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The next biggest cohort are those households who are “owner occupied with a loan or mortgage” – there’s 531,000 of them. Again – a bunch of people not exactly cheering for a house price collapse.
The rest of the households are made up by those rented from a private landlord (330,000), those rented from a local authority or voluntary body (about 183,000) and about 110,000 which are either occupied free of rent or “not stated”.
So of the 1.84 million or so permanent private households in the country, more than 1.21 million have a very direct economic interest in house prices not nosediving.
You can work out the political implications of that yourself. It certainly suggests that Government policy is walking what may be an impossible tightrope – trying to make houses more affordable, without seeing prices fall. In fact, maybe it’s more than a tightrope – maybe it’s an outright contradiction. Which would also mean that the Government’s entire housing policy is doomed to fail.
Preserving house prices is hardwired into the planning decision-making process
As economist Dan O’Brien has pointed out, house prices have actually levelled off and cooled a little in Dublin. But does the Government really want to see them fall much further in the year before an election? With interest rates going up and the squeezed middle – or whatever you want to call them – with mortgages paying more with every ECB rate hike? With all those promises to look out for middle Ireland?
It’s not just in housing policy. Protection of the value of existing houses is baked into the planning system too. A developer recently sent me a copy of a planning refusal he received from a local authority. One of the reasons for the refusal of a medium-sized development was that it would adversely affect the values of the surrounding houses, which were incidentally in one of the tonier addresses in town. It would, the decision said, “depreciate the value of property in the vicinity.”
I can understand how this might be a very real concern for the neighbours. But I find it difficult to understand why it is a concern for the planners. And in the midst of a housing crisis, it’s bonkers.
The reason, my friend suggests, is that preserving house prices is hard-wired into the planning decision-making process.
“It isn’t just bureaucratic interference,” he says. “It’s protection of existing homeowners.”
It’s hard to argue with that. It certainly explains a lot about the failure to get to grips with what is – after all – a problem of supply in the housing system.
Back on Morning Ireland, the representatives of capital and labour did not agree about how to increase supply. Reidy’s idea was the one also proposed by Rory Hearne and Phil Murphy in an opinion piece for The Irish Times the following day. They want to see a new State body set up to build public housing and reckon it could – by attracting thousands of construction workers who would jump at the chance to become public servants – deliver an additional 10,000 social and affordable houses and apartments within three years. This, they say, would be in addition to the existing planned provision by local authorities and approved housing bodies, meaning we could have 24,000 social and affordable units every year by 2026.
A radical plan to solve the housing crisis
A couple of things might be said about this, not least the danger of double counting – if all the construction workers have biffed off to join the public service, the existing builders of social and affordable housing might find it hard to get staff. The lads’ faith in the public sector’s ability to deliver results quickly is also touching; and I wonder if there isn’t a hint of “is there anything to be said for another quango?” about it all. The proposers reckon that the new agency would be like the ESB. Maybe it would. Or maybe it would be like the HSE.
McCoy’s idea was hardly without its faults, either. He’s right that incentivising the construction industry through tax breaks saw us build 90,000 houses a year in the early 2000s. That did not, however, end well. Any such scheme would have to be very carefully managed and shut down as soon it began to overheat.
Both ideas have very significant flaws. But at least they promise to upset the market a bit. Current housing policy doesn’t seem to want to do that – probably because the political fallout would be unbearable. We may be stuck here for some time.