Share

A roof over your head

Posted on November 22, 2014 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

A roof over your head is a fundamental human need and right. Purchasing or renting a place to live typically takes a big chunk of lifetime earnings or income. It is the biggest single cost facing most workers or households.  Recent decades have seen a significant change in the way people live, work and save over a lifetime.  Ireland and the UK tend to have higher shares of home ownership compared to many European countries and this has not changed over time. 

Whereas, in the past, many individuals and families aspired to owning their own home and worked to pay off a mortgage it was possible for many families to reconcile different goals while remaining close to their chosen neighbourhood. Nowadays, people travel longer distances to work because of varying house prices from one location to another. Also, it seems necessary for two adults to earn a full salary or wage, if they can, to pay for a mortgage.  Where individuals and families rent it is typically in the private sector where costs have been rising steeply in very recent times and conditions and quality of accommodation varies a lot.

Sometime in the 1980s, Ireland like the UK moved from a culture of residential houses or apartments being primarily ‘homes’ to a situation where an increased number of houses/apartments were seen as investment assets. Escalating prices in the 1995-2007 period  brought large capital gains to a great many home owners just as collapsing house prices in 2008-2012 wiped some of those gains and placed recent borrowers in positions of ‘negative equity’ or extreme financial pressure (which is not necessarily the same as being in negative equity).

The impact of fiscal austerity in the 1980s was such as to greatly reduce the proportion of local authority housing as a proportion of housing stock or new housing units. The traditional ratio of public to private dwellings shifted once and for all in the late 1980s and has never recovered. The acute accommodation shortages and escalating rental prices of recent years is not unrelated to this. The total of local authority and housing association house-building construction in housing output went from 28% in 1985 to 6% in 2012.

The quantity & composition of additional housing units: 5 year averages, '73-'13

Public Private House Completions, '74-'13

 The insertion of housing into a competitive and partly speculative market in asset investment has undermined its social role and purpose. Rising prices interspersed with a collapse in 2008-2012, shortages in some areas and a skewed private rental market has put enormous pressure on families.

A recent Irish Times feature ( Dublin’s Homeless Children ) has drawn attention to the plight of children among the ‘new homeless’ in Dublin. The problem is surely not unique to Dublin.  Fr Peter McVerry has been highlighting the growing crisis in the sector for many years but especially since the first half of this year.  If the homeless were among those in positions of power, influence and means the problem might have been resolved long ago at a very small fraction of the cost, to date, of bailing out those who lent unwisely and recklessly to Irish banks in the pre-Crash years.

The upward pressure in house prices especially in the large cities together with the chronic lack of suitable accommodation especially for families with children illustrates the imbalanced approach in Irish public policy which has relied on a develop-led model to the neglect of social need. The absence of suitable social housing and quality public accommodation has left a large supply gap. The almost complete removal of investment in these areas in the years following the crash of 2008 has left a legacy that will take years to address. At the same time rising house prices prior to 2008 put housing out of the reach of many workers (see NERI Research InBrief ‘ Housing and Ireland’s Economic Recovery ).

The lack of implementation of proper regulation and cost controls in relation to development land over recent decades has exacted a heavy cost on those facing high levels of rent or mortgage repayments.

In a paper entitled Discussion Paper on Ireland’s Housing Crisis released earlier this year by Marie Sherlock, economist with the SIPTU trade union the idea of a Land Value Tax is endorsed differentiating zoned and rezoned land. In the document, the case is made for off-balance sheet funding through funds from the Council of Europe and the European Investment Bank and through the establishment of a social housing real estate investment trust (REIT) while using NTMA guaranteed funds facility (REITs stands for Real Estate Investment Trust and as applied to social housing is a tax beneficial fund enabling investment of pension and other funds in long-term social housing needs).

A youth advocacy group (We’re Not Leaving) has drawn attention to the problem in a research report launched last week which contains detailed statistical analysis of trends and cross-country comparisons as well as an overview of aspects of public policy on rent control in other countries. They have highlighted widespread problems of illegal deposit retention along with poor standards and conditions. They have called for rent controls based on a ‘points system’ linked to size and nature of a rented property. Among their proposals is a ‘certificate of minimum standards’ for rental accommodation similar to the NCT (MOT) for a car.

The scale of investment needed is huge. A start has been made at least in terms of policy intention and planning as outlined in the recent Budget (October 2014). it remains to be seen how quickly this will be implemented and what impact it will have on homelessness as well as the numbers of persons on the housing waiting list.

My colleagues Daragh McCarthy and Micheál Collins in a recent Research InBrief ( Ireland’s Housing Crises : The Case for an Affordable Housing Provision Agency ’) have suggested that the establishment and funding of ‘an affordable housing agency would draw on the capital assets, experience and knowledge of existing state agencies and should aim to provide 25 percent of new or renovated housing units as social housing each year.’

A Report earlier this year by the National Economic and Social Council (NESC) in Dublin entitled Possibilities for Investment, Provision and Cost Rental point to

Experience shows that in housing there are limits to reliance on passive, arm’s-length incentives, however smartly designed. If, as Government wishes, housing provision is no longer to be developer-led, it will have to be led by some other identifiable actor or actors.

As we proceed through the ‘decade of centenaries’ SIPTU General President, Jack O’Connor has recently s aid that:

“the task of resolving the housing crisis over the period between now and 2019 should be embraced as the major societal project in the context of commemorating the centenary of 1916.”

Vindication of social and economic rights would be the most fitting tribute to those who strove for social liberation and equality a hundred years ago.

As in many other areas of social and economic policy, there is no shortage of statistical analysis, reports and committees that have been tasked with finding solutions.

The time for action is now as this social crisis gathers momentum.

Posted in: Government SpendingInvestment

Digital Revolutionaries