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

Sunday Independent (Ireland) - - Comment -

‘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’

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