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Coming months will tell us if Government has the will to deliver on housing plan

  • 31 Aug 2016

Enduring problems such as rents and vacant properties must be faced up to

31st August 2016

The Irish Times

Opinion

The Government’s housing action plan, Rebuilding Ireland, marked a step forward. It brought together a broad spectrum of stakeholders in a single overarching plan with many positive elements. Yet, it must be acknowledged that the enduring issues that continue to give rise to our broken housing system have yet to be solved. The risk is that should we fail to take the decisions necessary to tackle these issues we may simply end up managing the symptoms rather than curing the underlying illness.

As the action plan enters a critical phase the coming months, we should see important strategies on vacant housing re-use and the rental system published in the coming months. These two strategies, together with the establishment of the Housing Delivery Office, which has among its critical tasks, land management supply and affordability, leaves us on course to tackle three areas which have traditionally proved difficult for those in Government.

The National Vacant Housing Re-use Strategy will bring issue of private property rights to the fore. A topic that is traditionally a red line issue in political circles. A full and proper debate on private property rights must take place to create an effective Housing Re-use Strategy.

An incentive based model to realise vacant housing units is set out in the action plan. This avoids more assertive actions or any implicit support for a major scheme to compulsorily purchase empty homes in private ownership. The incentive based model rewards the owners of these vacant properties by allowing them retain the asset, secure a guaranteed income and get a grant for works needed. This implies that policy makers remain unwilling to move to favour measures for the common good. This is highly problematic because an incentive model offers no guarantees of the return to use of these units in any great numbers, in a coordinated or timely manner and in no way addresses how the stockpile of so many vacant properties arises.

It is, or it was until recently, the view of the Housing Agency that the equivalent of two years’ worth of housing could be delivered through assertive action on empty private properties. However, in the Housing Action Plan the Housing Agency has only been given a firm commitment that it can purchase 1,600 repossessed, vacant former buy-to-let units held by financial institutions. That is 0.8% of all the 198,000 vacant residential units in Ireland (excluding holiday homes).

In Dublin, vacant properties are concentrated in the urban core and re-using them offers a chance to revitalise the city, and match housing need with housing availability. With just over 1,000 properties to rent in the capital, and rents for accommodation rising rapidly, making a major dent on vacant stock could ease pressure on those dependant on the rental system.

The rental sector will have a new strategy by year end and one critical factor that needs to be addressed is how to achieve affordability, something that is not controlled by supply alone. Achieving affordability is crucial because it impacts upon everyone from those who are forced to sleep rough through to senior executives of multinational companies. Affordable rents would offer tenants greater security of tenure because it would mean they would have the capacity to meet modest increases, and not as many now are a rent increase away from losing their accommodation. It can also make the rental system a realistic long term option. Affordable rents are also crucial in limiting increases in public expenditure year on year as the State pays for housing supports for those relying on the private rental market. Ultimately, making sure that rents are affordable is for the common good because more money is then available to be spent by tenants in other areas of the economy. It would also prevent the creation of a barrier to economic growth that could arise should FDI companies choose not to invest in a country that can neither provide affordable nor enough housing for its workforce.

To achieve affordability there are two critical issues, more of the type that Governments do not like to address, land speculation and rent regulation. Rooting out and preventing land speculation, which drives up the cost and impacts on the availability of land for housing, is a critical cost control factor. Land costs are dispporopriantely high in Ireland and set in motion a chain that ultimately delivers overpriced units of accommodation for owner occupiers, investors and tenants. The Housing Delivery Office will need to ensure frameworks are in place to prevent speculation. If not a relative few will gain at nearly everyone else’s expense and we will see more overpriced units of accommodation being produced.

Overpriced units undermine affordability both in the new affordable rental system and the traditional private rental market. In the private rental market investors would either be put off by the poor value for money that the overpriced units represent or, should they invest, are investing larger sums of money to buy the units. This means higher initial rents for tenants. The proposed affordable rent system, (an Irish variant of cost rental systems where rents charged are equal to the cost of the housing unit plus maintenance cost and do not include a profit yield) would be fundamentally undermined as rents are pushed higher than the capacity of low and middle income households. If the affordable rents are not affordable then the scheme fails.

In the absence of effective regulation, rent increases for new rental properties coming on the market and those properties between tenancies, are likely to continue to increase at a rate well beyond the Consumer Price Index removing any semblance of affordability. Landlords and investors will be free to secure quicker returns and higher yields in a market where they hold all the control.

These enduring problems mean that the foundations of Ireland’s dysfunctional housing system must be addressed. The political will and power that brought about Rebuilding Ireland remain and now in the coming weeks and months we hope to finally see these fundamental issues tackled head on.

Pat Doyle is the chief executive of the Peter McVerry Trust