Housing crisis: Has the Government delivered on rebuilding Ireland?

There was a time when the only career-damaging promotion for an ambitious politician was to be appointed Minister for Health. But since 2014 another government department has shown itself capable of scorching reputations. That’s the Department of Housing.

Three Ministers – Alan Kelly, Simon Coveney and now Eoghan Murphy – have tried to come to grips with the complex crisis, and all have been bruised by the experience.

The recession ravaged the construction sector. Few homes were built in the immediate aftermath of the crash. Tens of thousands of construction workers left the industry or emigrated. Some 320,000 mortgages went into negative equity. There were hundreds of “ghost estates”. Banks were not lending. Social housing was non-existent.

With an improving economy, rent and purchase prices rose sharply. Poorer families were forced into homelessness.

Brexit explained: Three ways the UK can (maybe) avoid no-deal

---

May hears opposing Brexit views in talks with NI parties

---

Miriam Lord: Government knows value of everything but cost of nothing

---

The main political response was Rebuilding Ireland, unveiled in 2016. It is a €6 billion plan with the aim of increasing home builds to 25,000 per annum by 2020, providing 50,000 new social housing units by 2021, and accommodating 87,000 families and individuals in the private rented sector through Housing Assistance Payment (HAP) or the Rental Accommodation Scheme.

There are five “pillars” in the plan. They are: homelessness; social housing; building more homes; the rental sector; and vacant housing. But within each there are dozens of potential “solutions”.

The results have been mixed. The Government is close to meeting its targets on social housing and new builds. However, on vacant homes, the rental market and – particularly – homelessness, the outcomes have been hugely disappointing. As of December almost 10,000 people were living in emergency accommodation, including 3,500 children. Back in 2016 the government promised no child would be living in emergency conditions by July 2017.

Supply targets

The Government will argue it has turned a corner. The Opposition says some headway is being made but structural problems remain.

“Rebuilding Ireland is hitting its supply targets,” says Murphy. “Sure, the Opposition can pull out individual areas that are not doing well like repair and lease. But if you look at new home builds we will be between 18,000 and 20,000 for 2018, a nine-year high, and we are confident we will reach 25,000 by 2020.

“The root of everything is supply. We know that new home builds are going in the right direction. To a family in a hub now, or to a homeless person, that is not much consolation, and I understand that. We have to continue to get people into new homes as they are built.”

The Opposition sees it differently. At the heart of the debate is a row over policy direction. The Government tends towards private sector involvement and mixes of private, affordable and social. That said, it’s not a reworking of Thatcherism for Ireland – the State retains a large footprint.

Sinn Féin’s housing spokesman Eoin Ó Broin complains that the thrust of the Government approach is to get private sector involvement. “Instead of saying the only way we are doing it is by public housing, they say how can we assist people getting access to private housing?”

For Fianna Fáil’s Darragh O’Brien, the State needs to be involved in construction. “Fianna Fáil believes the State should be involved in building houses, unlike Fine Gael. We also believe in home ownership, unlike Sinn Féin.”

Affordability

Orla Hegarty of the school of architecture in UCD says affordability and increasing construction capacity are the key issues. She says there is a lack of coherent thinking and no proper risk-assessment of the major policies being pursued.

Her view of some of the affordable schemes is that they are a high-risk strategy, subject to the vagaries of mortgage rates, Central Bank rules, and the property markets.

“For me the approach constantly seems to be, go back to recreating the conditions of 2003, and hope the construction sector ramps up to meet the need. We need to be aiming for affordability so that perhaps 70 per cent of the population can meet their own housing needs whether buying or renting.

“It’s increasingly more expensive and it’s not sustainable to put public monies into schemes that subsidise market prices where instead the State co-operatives and other mechanisms could be building houses for €200,000.”

THE FIVE PILLARS OF REBUILDING IRELAND

1. Vacant homes

This seemed like the quickest win. The Census in 2016 identified over 180,000 vacant homes. Some of the schemes to repurpose the houses have bellyflopped.

The Repair and Lease Scheme gave a grant to a landlord to repair homes as long as they leased them. Expected take-up was 3,500 in the period to 2021. To date the scheme has unlocked just 48 homes.

The news was a bit better with “buy and renew”, where councils would repair and refurbish vacant homes. Sinn Féin’s Ó Broin obtained figures to show that 250 homes were acquired that way to 2108, about half the target for those years. Over 140 of those were in Co Louth, which had a very proactive campaign.

The department says that when it drilled into the headline figures for vacant properties the total was much less, no more than 20,000, many not habitable or in unsuitable areas.

“Under further interrogation it was not the low-hanging fruit everybody thought it would be, but we are still pursing vacant homes,” says Murphy.

Others, including the CSO, have disputed these low figures and stand by higher figures.

For an academic like Hegarty,this is a missed opportunity, and she believes there is a high level of vacancies in urban areas. She instances the “Living over the Shop” initiative the could work if there was regulatory change to remove barriers to conversions while safeguarding standards.

“A planning exemption has been introduced but the obstacle is the uncertainty and complexity of the building control system.”

Instead, she says, there are opportunities to convert upstairs rooms with pragmatic solutions to fire safety, disabled access, energy efficiency and protecting heritage.

She says the administrative burden and the high costs of approvals make it not worthwhile, but a widely supported Fianna Fáil Bill – now in perma-freeze at committee stage – actually addressed all those issues.

“Personally I can’t understand why up to €100,000 is being spent to put a family in a temporary hub while a family could be permanently housed in an apartment for about €50,000 in many areas.”

2. Rental sector

The thrust of the Government’s rent policies is affordability. That’s why it introduced the rent pressure zones (RPZ), which confined rent increases to 4 per cent per annum in the zones.

“RPZs are working,” the Minister insists. “We are confident RPZ zones have helped stabilise rents, and data from the Rent Tenancies Board shows this. But it also shows they can be strengthened, and that’s what we are doing with the new rent Bill.”

In January, Murphy published a new Residential Tenancies Act that increased the notice period and also introduced stronger rules for what constituted “improvements” in a property (landlords were using this as an excuse to end leases).

The Opposition says landlords have continued to jack up prices, which are 27 per cent above 2008 levels. Ó Broin believes a combination of buy-to-let landlords selling up and the growth of Airbnb has reduced the rental stock by 9,000. Sinn Féin tried to introduce a Bill that would have allowed tenants to remain in situ when a buy-to-let was sold. However, the two major parties opposed it on ideological grounds.

There is broad agreement on the cost-rental model where the tenant pays the cost of the build and maintenance, which is below market value. They then take out a long-term lease over decades, which makes it affordable. Four projects are earmarked for St Michael’s in Inchicore, Dún Laoghaire, Ballymun and Cork.

While opponents say the Government is tepid about it, Murphy himself has been a strong advocate of this model.

Targets of 7,000 have easily been surpassed in student accommodation buildings, which have sprung up everywhere.

Another phenomenon that has changed the rental landscape are Real Estate Investment Trusts (REIT). They have bought up many thousands of apartments in Dublin and bought up entire new developments, working on high rental yields. Their leases tend to be long-term and they fit into the Government plans of a professional landlord sector, renting out of scale. On the downside, the incentives are so lucrative the tax-take from the trusts can be close to zero, and some investors are so-called “vulture funds”.

When new developments are built the social housing element is often parcelled off many kilometres away, as Labour Senator Kevin Humphreys discovered. The social apartments of a Dublin Dockside development were provided in Rialto. “It means that young working-class families with connections with the south inner city for generations have no prospect of living here,” he says.

The upshot of these changes is that the rate of home ownership in Ireland, traditionally above 80 per cent, will fall in future years. Government will argue it gives a better balance, and is standard in the continent. Humphreys argues that without equity in their properties, people retiring will struggle in future to stay in their homes.

3. More homes

The department has introduced a plethora of initiatives to stimulate the housing market. This includes a help-to-buy scheme which makes a tax rebate of up to €20,000 available to first-time buyers.

There is also the affordable purchase scheme, yet to be implemented, using (free) local authority land to build private affordable housing for couples earning less than €75,000. Already, purchasers have been told “affordable” homes in Dublin will come in north of €300,000, making them, well, unaffordable.

There have been other stick-and-carrot approaches. The Vacant Site Levy has identified a modest 140 sites in the State but its potency will improve when the levy increases from 3 per cent of site value to 7 per cent next year. A similar vacant home levy was floated but was dropped by the Government last year on the back of a report by economic analysts Indecon.

There have been initiatives to help small builders get finance (many had difficulty getting loans from the bank after the crash) which has made some inroads.

The big policy initiative has been the Land Development Agency with a plan to build up to 15,000 new houses in the short term, and an extraordinary 150,000 homes over the next 20 years. Its idea is to use State land banks and pool other land banks with the purpose of addressing volatility in land prices. Some critics of this approach argue the exact opposite will happen and it could fall prey to a dip in the property sector.

4. Social housing

There is no doubt that progress has been made in social housing, with 12,700 newly built, or long-term leased, homes since 2016.

“There is an eight-fold increase in new build social homes since the year before Rebuilding Ireland – that is not a coincidence,” says Murphy.

“At the moment between one in four and one in five of all houses being built are social houses, and these new homes are making a big difference to people in emergency accommodation or on waiting lists.”

Then again, over 32,000 people who qualify for social housing are in the private rented sector getting HAP or RAS. While not in permanent homes, all those families are removed from the council waiting lists for social housing, which now stands at about 70,000 nationwide.

Ó Broin says the approach is all wrong. “There’s an over-reliance on the private rented sector and HAP. In 2½ years we will be putting €1 billion into HAP. That’s far too much and no solution.”

5. Homelessness

Everybody accepts this remains the Achilles heel, with the numbers of homeless people close to 10,000.

“As long as landlords are leaving the market, we will have a challenge in homelessness. New supply will bring new opportunities. But we also have to protect renters and the rental market, and that’s what we are doing with the new reforms,” says Murphy

The family hubs were controversial but the Government says they have fulfilled a useful function. “We are still rolling out the hub programme. The average waiting time [to move to more permanent accommodation] is six months, and the supports are far superior to what was there before.

“We are under no illusion it’s a permanent solution. It’s a temporary solution.

“We get families from there into a tenancy. We receive a lot of criticism for spending a lot of money on HAP but where are people to live while new houses are built. In any case more new families will be accommodated through new social housing homes, than through HAP supports in 2021. Already that is turning, with less new people to be accommodated through HAP this year than last year.”

For Ó Broin, not enough is being done to reduce the flow of families from rent to homelessness, and he instances the reality that only 325 of the 1,500 promised rapid-build homes (another silver-bullet solution) have been delivered to date.

“We need to ramp up supply,” says Fianna Fáil’s Darragh O’Brien. “There are more people coming into homelessness than going out. In the last six years we have done nothing about increasing supply.”