Why we are in the grip of another property crisis – and how to solve it

ANEW TV series paints a grim and moving picture of modern Ireland. Homeless Trinity graduate, 45-year-old Colin McSweeney, who lost his job at Christmas, wanders the streets of Dublin searching for a hostel, night after night. He frequents an allnight Starbucks café in the former HQ of Anglo Irish Bank. ‘It’s kind of ironic that it’s now popular with the homeless,’ he observes ruefully.

In the series, Ireland’s Property Crisis (RTÉ1, Mondays), hordes of would-be renters queue up for the slim chance of renting a small flat – and walk away disappointed.

A couple with a young family, Ciara and Maurice, get stressed over paying €1,650 rent for a home in Dublin’s Donnycarney – plus the mortgage on an apartment they bought in the boom that’s now too small to live in.

There’s a sense of everincreasing frustration with a hopeless situation, but how did we get into this mess?

We are the fastest-growing economy in Europe. Yet in the past five years, we’ve built just 55,403 homes, despite a crying need for accommodation.

The Government has launched one grandiose building plan after another but we still didn’t manage to reach 15,000 newbuilds last year – 10,000 short of the minimum target.

The number of homes for sale has fallen 17% to 22,100 in January compared to last year – and in Dublin the drop was 30%.

There is some sign of progress. The 14,932 new homes completed during 2016 was up 18% on the previous year. And planning permissions were granted for 16,000 homes in the year to end September 2016, up 45% on the previous year. But with only one home built for every 10 needed in the past five years, it’s nowhere near enough.

Our growing economy means an extra half a million people will be living here by 2031. Another quarter of a million will need homes in cities and adjoining counties due to increased urbanisation and the trend towards smaller households, as per European norms. That tots up to three-quarters of a million people.

Our boomtime building industry would be able to meet that demand. But not the feeble construction output that we manage at the moment. Add in State ineptitude and the failure to build social homes, and we complete the mess.

MOSTLY the State has made things worse. Our housing policy in the past was to spend a lot of money putting up well-built schemes that became ghettoes because we shoved all sorts of social problems into one place with no facilities and poor management. Now what should be valuable social housing stock is practically worthless because nobody wants to live there.

There are 2,751 vacant council housing units, many boarded up because tenants don’t want them.

That number of homes would house everyone in need of emergency accommodation – or all of our rough sleepers many times over.

We are finally getting the message the rest of Europe learned ages ago – that social and private housing should be mixed.

Our social housing policies rightly shifted from councilbuilt estates to rent-support schemes. Alas, this sensible policy came at the wrong time and added to housing woes because councils, as well as builders, stopped producing badlyneeded homes.

Councillors also object to what they call ‘high-rise’ – ie. fivestorey buildings that would be dwarfish in most cities – and have also imposed onerous restrictions on the size and design of apartment schemes.

They mean well but have succeeded in practically choking off the supply of new apartments at a time when we need them most. This also means older people can’t trade down and free up family homes in sought-after areas.

Construction costs have practically doubled in 10 years – again due to admittedly well-intentioned State interference. Extra costs were added for fire safety, disabled access and downstairs toilets, professional sign-off fees, minimum size (of apartments) and council levies, for example.

A three-bed semi now costs €330,000 to build, according to the Society of Chartered Surveyors Ireland. It says this makes building houses unviable in most parts of the country despite rising property prices.

If we want to kick-start a massive nationwide construction drive, we need to bring down the costs. With most of the cost of building a house coming from taxes and levies, Government and local authorities are wellplaced to cut them.

Councils levy an average of €12,000 on every new threebedroom home for ‘services’, although the bill can be many times higher depending on the area. In reality, this is a stealth tax to fund the higher-thanaverage wages enjoyed by council staff.

After all, wasn’t property tax brought in to fund local authorities? Cutting this levy would help ease the ongoing plight of people like Colin, Ciara and Maurice who we’ll be watching again on RTÉ tomorrow night.

Industry bodies are calling for the reduction of taxes on new homes. VAT, for instance, adds €39,000 to the cost of a threebed, according to the Society of Chartered Surveyors.

However, we should be sceptical about such demands. Wouldn’t builders just pocket the tax savings and leave the price unchanged?

Perhaps, but the Society of Chartered Surveyors’ claim that building homes isn’t viable does stack up. And the housing crisis is so severe that a temporary reduction in VAT is worth a shot.

THE surveyors group adds that access to finance is the biggest problem for builders. And when they do manage to squeeze loans out of banks, it adds €20,000 to the cost of building a three-bed. Loan funds are set up for farmers, so why don’t we have a special agency for cashstrapped builders, three years into our biggest housing crisis yet? Banks’ high loan rates for builders could be halved by a State-backed lending agency at no cost to the Exchequer – potentially knocking €10,000 off the price of an average home.

WE ALSO need to rethink social housing. A whopping €5bn is earmarked for new social homes, although few have been built. If they ever are, those who qualify should be sorted out – but what about the hard-working couples who earn a little too much to qualify for the housing list but far too little to get a mortgage? Those families should be looked after with Scandinavian-style social housing that’s available to all.

The man responsible for solving this crisis is Simon Coveney. He at least seems to understand the issues highlighted here. But whether he can crank local government into effective action – or whether he’ll be around long enough to do so – is another matter.