Abolishing domestic rates in 1978, and stopping water charges a decade ago were mistakes. And now if you can’t get on the housing ladder or find yourself paying the average national rent of over €2,000 per month, you are collateral damage for these acts of fiscal stupidity and political opportunism. Paying up would have been cheap at twice the price.
Nearly all public investment in housing is from central exchequer funds that rely on too narrow a tax base. Water charges could have collected money that would have been an income stream to be borrowed against off the national balance sheet. Resources could have been multiplied, investment fast-tracked, and the uncertainty of the annual budget process avoided. What was too smart by half then looks maliciously stupid now. Lack of underlying infrastructure, including water, is a key part of the housing problem. Uisce Éireann can’t go to the market for money unlike ESB and Bord Gáis Energy because it was hobbled at the start.
Telling local authorities to build more houses has become a kind of political sport. It is a matter of public record that we built vast estates in the 1940s and 1950s. Planning permission was not required, and local authorities raised funds through rates, and borrowed off the back of them. They could also make decisions without having to navigate the obstacle course of administrative permissions required by the central government. Reform the administrative system instantly, and what remains is local Government that cannot raise the resources required to do the job it is told it should. That is supposing local authorities wanted to take on the task, which largely they don’t. Incapacity has made a comfortable career in local Government.
We spend ever more on social housing, but the rents collected are inadequate to maintain the stock. Top-line investment is drained from the bottom because councillors won’t raise rents to the modest levels required to maintain an expensive public investment. That deficit is an opportunity cost for the growing numbers on the waiting list.
Renters forking out €2,000 per month are paying the price for water charges debacle
James Browne has little power to fix the housing crisis. The status quo is in charge
Micheál Martin would be a more credible leader of Fine Gael than Simon Harris
The general election campaign was a raucous wake for an era that was already over
As the housing shortage cuts deeper into economic competitiveness and social solidarity, the consequences of bad decisions become more apparent. In some ways, housing is more challenging than regaining international confidence after the financial crash because it is more operational with more moving parts. The decisions to cut off streams of sustainable funding for political advantage are chickens coming home to roost now. Homeowners need not worry too much – the greater the scarcity, and the longer the crisis lasts, the more homes are worth. From the point of view of wealthy homeowners, our system works.
When the war on water charges was raging over a decade ago, we spent €300 million a year on water. Now it’s €1.3 billion. That is big money, but the challenge is even bigger. In the Greater Dublin Area, water infrastructure developed for 500,000 people must meet the needs of a population that is three times the size and growing. We need investment of €55 billion to €60 billion up to 2050 to address known needs nationally. Nearly all of that depends on central exchequer funds. It is debatable whether water charges and borrowing off the back of them could carry that expenditure. But it is certain that all of it, on the balance sheet, is an opportunity cost that could have been substantially avoided. We are pursuing an agenda for spending more to get less.
It is also more complex than that. Up to 2029, €10.2 billion is allocated to Uisce Éireann. Notionally, that services 30,000 new houses annually. But the target of 50,000 houses require another €2 billion over four years. Businesses pay water charges and rates. Households have a negligible property tax, but no water charge. That may qualify as successful politics but it sabotages those not already homeowners.
Money allocated by the State over future years may be delivered on, but could also turn out to be a mirage. Funding is not what is promised, it is what is delivered in the annual budget. That highly political process is always more tactical than strategic. There is an element of uncertainty that inhibits long-term planning. Because of our planning system, more complex projects can take seven to 10 years to deliver.
On housing, we subverted non-exchequer national funding sources locally and nationally, and undermined delivery. Adequate supply of housing will take years longer, therefore. Politically we are so phobic that the Taoiseach insisted during his St Patrick’s Day visit to the United States that “there will be no return to water charges”, quashing a story that even excess use would be charged for.
The Government returned to office without a housing policy. Politically, this Government is less a Coalition than a cohabitation and lacks the internal cohesion or political will to take the risks required to exercise the authority only available at the centre to realign the administrative apparatus. Solutions abound, but on housing, the centre is now a vacant site.
