If the Government wants to solve the housing crisis it has to get building

WITH every passing week the housing crisis in Ireland continues to worsen with more and more f amilies joining housing lists as the prices of the few available homes continues to soar. To date, the Government’s response to the growing crisis has been woefully inadequate and has failed to deal with the root causes of the steadily worsening problem.

Measures like the failed Help to Buy scheme have done little more than pour fuel on the fire and there isn’t any sign of innovation or bravery from those tasked with finding a solution to the current quandary.

At the moment Leo Varadkar’s Fine Gael – who appear to be in full election mode despite the fact that a trip to the polls seems unlikely to happen anytime soon – are all about tax cuts as they desperately try to court the country’s famous ‘squeezed middle’.

Doubtless many thousands of hard pressed families would welcome a cut in their taxes but any move to lower taxes would probably cause more problems than it would solve.

One of the most basic tenets of modern economics – as was advocated during the Great Depression – is that governments should save during a boom and spend in a recession.

This is precisely what the Government needs to do now if we are to find a way out of our current predicament.

While Dublin may be booming, the rest of the country – particularly rural areas – remains mired in the economic doldrums.

The property market was the motor that drove Ireland’s boom and while we certainly don’t want to return to the lunatic excesses of that period we need to get the property sector back on track.

At the moment, despite phenomenal demand for homes, there is very little activity in the building sector. This has to change.

A major factor in this lack of supply is the Government’s core policy on dealing with the social housing crisis.

Rather than building homes the Government’s policy relies mainly on buying or renting existing properties to add to its social housing stock. This unfortunate policy has had a number of disastrous side effects.

It has helped artificially inflate prices while curtailing supply to private buyers and renters. This in turn means that people who cannot find or afford a home to buy or rent – as a result of Government interference in the market – are themselves forced onto the housing lists, making the problem even worse.

Put very simply, Ireland needs more houses. Lots of them, both private and social.

The Government needs to forget about tax cuts, get its wallet out and start building. If tax incentives are to be introduced they should be used to encourage builders back into the market.

Income tax cuts are unlikely to result in any great spending splurge as most people would probably use the extra cash to pay off debt. By contrast, building social housing and encouraging builders can not only help solve the housing crisis it can help get the whole economy back on track.

Tax cuts are politically attractive but they’ ll do little good in the long run. What money we have can be far better spent.