An end to negative equity, flipside of housing crisis, plays into Leo’s hands
Middle Ireland’s concern over the value of their homes is an election opportunity for Fine Gael, writes Liam Weeks
‘WHEN written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.”
John F Kennedy used these words in a pre-presidential speech in 1959 to indicate his preparedness to take on the challenges posed by China and the Soviet Union.
It’s not difficult to imagine this quote being framed in the office of Leo Varadkar’s Strategic Communications Unit before it was disbanded earlier this year.
One crisis in particular the SCU would have been concerned about was that of housing.
There was despondency in some quarters last week that Fine Gael did not do more in the Budget to remedy this crisis.
But those critical of the Government are missing a crucial point, namely how the housing crisis has followed the law of unintended consequences by helping to remedy a key issue that has been affecting middle Ireland — negative equity.
For much of the lifetime of the last government, the primary concern for thirtysomething couples was the collapsing value of their house bought during the boom years. The national airwaves and newspaper columns were rife with stories of people stuck in houses they did not want, in areas they wanted to move away from.
Negative equity was like a millstone around their necks, tying these people to a residence they thought would be a temporary stop on their ascent up the property ladder.
The anger of those stuck in this situation was directed at a number of institutions, the banks and political parties in particular; the banks for giving them the easy money that pushed up property prices, and the parties for not providing greater regulation of the banks to stop them from lending the money in the first place.
But what could the government do to help these people?
Fine Gael in the past had sought to bail out those who gambled with Eircom shares. In 2002, Jim Mitchell proposed that Eircom shareholders would be able to claim tax relief on their losses — and it was just one of a number of policies that contributed to the near meltdown of the party at that year’s election.
Michael Noonan, having been Fine Gael leader then, learned his lesson, and as Minister for Finance was not willing to propose any similar policy to compensate those who gambled with property during the Celtic Tiger years. But he didn’t have to, as the housing crisis proved an unforeseen fillip for those in negative equity.
Remember, property is a commodity, and when any commodity gets scarce, its value increases. So once the crisis kicked off, house prices began to steadily creep up.
House owners who had previously been on the phone to Joe Duffy complaining about negative equity were now instead busy scanning the re-emerging newspaper property supplements.
It sounds such a simple remedy. Were the crisis not so disastrous for some, you could be forgiven for attributing it to a Machiavellian plot by government spin doctors.
You’d almost think Fine Gael had hired Malcolm Tucker, the foul-mouthed and unscrupulous government spin-doctor from the brilliant television satire The Thick of It.
It is remarkable how the issue of negative equity has so suddenly disappeared as the de rigueur topic of Sunday chat shows. In this light, why would we expect Fine Gael to do anything about housing?
In political science we often talk about parties racing to converge on the median voter, the person smack bang in the middle of the electorate.
This is exactly what is going on in Irish politics, as the mainstream parties are competing with one another for that middle voter. Focusing on this person allows parties to maximise their electoral rewards, because moving left or right of the median risks alienating the party.
To all intents and purposes the median voter in Ireland is located in the so-called squeezed middle. Their family income is middle to average, they probably shop in Lidl or Aldi, and they live on a suburban estate of semi-detached houses.
This voter is who Labour apparatchiks christened ‘Ashbourne Annie’ as a part of its campaign for the 2016 election. Although a strategy much vilified in some quarters at the time, Labour was simply replicating the tactic of most centrist parties in most other democracies. Its only mistake was admitting this.
This much-desired middle or median voter has few party loyalties, and is willing to vote for whoever they deem to be most competent in dealing with issues of importance to them.
Academics call these valence issues, which comprise issues where most voters have similar goals, such as economic growth or good healthcare.
A key valence issue for our middle voter in recent years has been negative equity. It has contributed to their having to live in houses no longer fit for purpose, having to put up with a longer commute as traffic increases, and generally contributing to poorer quality of life.
In the past, this middle Ireland voted for Bertie Ahern and Fianna Fail, who were seen to provide the economic circumstances to allow them buy the house in the first place. But, following the property crash, there was no clear option at the ballot box for these voters, with no party providing an obvious solution to negative equity.
Then along came the housing crisis. Although not deliberately intending it, I am sure, Fine Gael is reaping its benefits.
It is the only party that has had sustained growth in the polls since the 2016 election.
Despite the controversies over cervical screening, police whistleblowers and, indeed, the housing crisis, the Opposition has not been able to make any inroads on the Government. Fine Gael now has the support of more than a third of the electorate, and has been almost 10 percentage points ahead of Fianna Fail, and 15 ahead of Sinn Fein.
So, while the housing crisis has had dreadful consequences for many, it has not been so for our median voter. While middle Ireland may well be upset about those in crisis accommodation, their first priority is their own accommodation.
Where many of them thought they were confined to these properties for the long-term, they now see a way out of negative equity.
Bearing in mind the importance of the middle voter, why would we expect Fine Gael to upset them by introducing measures that threaten this departure from negative equity? After all, this is exactly what would result from the building of more houses.
It is not as if the homeless or those on social housing lists vote for Fine Gael.
Leo Varadkar and his advisers know the key to winning the next election is winning the hearts and minds of middle Ireland.
A dominant theory in political science and economics is rational choice, which says the behaviour of actors can best be understood as a means to maximise their own interests. If appeasing the median voter is the most efficient way to maximise electoral rewards, this is exactly what Fine Gael, or indeed any party, will do.
These voters were the source of electoral success for Garret FitzGerald in the 1980s, Labour in the early 1990s, and Fianna Fail in the 2000s.
The housing crisis has afforded Fine Gael an opportunity it does not wish to waste. Those concerned about the dangers posed by this crisis shouldn’t hold their breath. Dr Liam Weeks is director of the MSc in government and politics in University College Cork
‘It is not as if the homeless or those on social housing lists vote for Fine Gael’