‘Whose Interests Are Dictating Our Housing Policy?”

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From top: Dr Rory Hearne; From his paper ‘A home or a Wealth Generator’?

A conference, entitled Solid Foundations? Economic Inequality and the Housing Crisis, will take place in the Croke Park Conference Centre in Dublin, organised by TASC, next Friday (June 16).

One of the speakers will be post-doctoral researcher at Maynooth University Dr Rory Hearne, who will present his research A Home of a Wealth Generator? Inequality, Financialisation and the Irish Housing Crisis.

Ahead of this.

Dr Hearne was interviewed on Today with Seán O’Rourke earlier today.

Rory Hearne: “My analysis is that the Government’s policy and strategy, up to this point, has been inadequate in terms of social housing or even new forms, and what I propose is, and support others, like the Nevin Institute, towards the idea of an affordable rental housing company. That the Government is not doing enough to directly supply itself and what it has done is it’s over-focussed on incentivising private sector.

And by doing this incentivisation, whether that’s reduction in apartment sizes or it’s the Help To Buy scheme to try and introduce demand, that it has in actual fact inflated rents and inflated house prices and contributed to the crisis.

And so my analysis is that, in actual fact, what the Government needs to do and policy and the Department of Environment and the local authorities is to really increase that supply of local authority housing. And that requires a political decision in terms of increasing funding to go in there, capital funding.”

Sean O’Rourke: “What is, in your view, the correct level of social housing that should be brought on stream every year? I mean, and you got to allow for the fact that it takes time to gear up.”

Hearne: “It takes time to gear up. Well, if you look at the figures, they say that the overall requirement, in terms of the analysis, of housing that’s required right now is between 25,000-30,000 housing units per annum are required.

There’s arguments going on about, in terms of how much actual supply is coming at the moment. You know this in terms of the question over ESB connections and whether the housing supply figures are correct. Analysis by Mel Reynolds suggests that the actual supply of private housing is much lower than the figures, the official figures are suggesting.

So you would be talking, in the region, we should probably be talking about in the region, we should probably be talking 10,000 or around 10,000 of what you might call non-market social and affordable units per year. That’s what we should be aiming towards. At the moment…”

O’Rourke: “How does that, yes, sorry, you were going to say…”

Hearne: “So, at the moment, last year the Government built 650 housing, social housing units. That was local authority and housing association units. And I think a big part of the problem has been that, obviously austerity had a massive impact. Like I have calculated: between 2010 and 2016, if austerity cuts hadn’t happened to the capital housing budget, we would have an additional 30,000 social housing units built over that period.

“And really, we’re nowhere near getting to that, in terms of the scale, so there is an increase in capital investment required to increase social housing. But the other thing we need to do is do imaginative, creative things like the affordable, set up an Irish affordable housing company that would be a semi-State body building rental housing for a mix of incomes, outside the market – so it’s got lower rents – and it can do this in terms of, it can access finance, private finance, it can provide a much greater level of supply…”

O’Rourke: “But where, for instance, would it get the sites?”

Hearne: “So the sites are there. So, if we look at the one the government just released in April: 730 local authority or State-owned sites that it’s putting out there, that they say are going to be open for development. We have Dublin City Council at the moment currently putting out three large sites – as they refer to – to the market, to developers, the former regeneration sites that could house up to 4,000. Have 4,000 houses on it. Currently they’re [inaudible] on these sites and build just 30% social housing. Why would that land not be transferred over to an affordable housing, public company that could build a mix of incomes…”

O’Rourke: “You’re talking about a great, big State company now and you’ll have direct labour, as opposed to just relying on the private sector…”

Hearne: “Not necessarily, no, not necessarily, these contractors could build it. What you’re talking about. I think we need to envision the extent of the crisis that is there at the moment. Like the ESB, how it rolled out electricity, that sort of vision, creativity, imagination, we need to be thinking about. A new semi-State company that…the problem is, and you’ve seen yourself in terms of today, the Fiscal Council is warning of an overheating economy, the OECD is just coming in, it’s warning of a bubble in housing. House prices and rents have increased significantly because of a lack of supply from the private sector. But this is, we’ve seen this over decades. Unless the Government provides or a State agency provides housing on a sustainable level or supply, we’ll be following these boom-bust housing crises for decades more to come.”

O’Rourke: “Are you saying it’s possible to significantly increase the output of new housing without causing the bubble in house prices, that the Fiscal Council is warning against.”

Hearne: “Yes, I think it is and the core thing, it needs, the housing that needs to be supplied, because a lot of the discussion that happens around supply, assumes the majority is coming from the private sector, rather than looking to countries like Denmark or Austria which have very large housing, not-for-profit housing bodies. So, if you had, for example, it’s quite logical if you think about it.

“Rents are rising, house prices are rising, because of the lack of supply. If you had 10,000-15,000 non-market, below-cost rent, below market price houses being provided into the housing supply, that would reduce rents, reduce house prices and the fiscal figures show that the consumption, the rise in terms of consumption that’s happening, a lot of that is coming from increasing rents. So that would reduce overheating.

“But of course, we know, Sean, why, who’s interest would that go against? A huge supply of affordable housing into the market? The big investors, the big property developers, the big real estate investment funds who’ve put money into the market. There is an issue of interest here. And I question this: who’s interests are dictating or determining or overly influencing housing and economic policy?

O’Rourke: “What about the observation made by the Chief Executive of Nama last week, Brendan McDonagh, that they had released something like enough land to build 50,000 houses and then only 3,000 had been built and he asked the question about hoarding?”

Hearne: “Yeah and I think that’s a really fundamental point because this has been part of our problem, going back to the Kenny report of 1970. The issue of land, the issue of hoarding and how that inflates prices. Nama’s statement about that provides clear evidence that vultures, private equity funds that have come in here over the last six/seven years have bought up significant amounts of land that they’re holding onto, of course in the anticipation of raising prices. There is also land that was bought during the boom, of course the debt hasn’t been covered on that, so there is this issue of…that’s why I think it’s wrong that the local authorities and the Government, rather than using its land to build affordable housing it’s putting that out to the market as well.”

O’Rourke: “We have some statistics just in [from the CSO]…in the year to April, residential property prices at national level increased by 10.5%, what does that tell you? Is there an element of overheating already?”

Hearne: “The issue is the undersupply, that’s the problem. And you have demand there, significant pent-up demand, from people who want to buy their home, from the lack of, we talk about in terms of new household formation. We’ve had this huge dearth of supply of social housing. And I looked at the figures and I present this in it, there was, in 2010, of houses that were bought, just 5,000 were bought by non-occupiers, that is investors. In 2015, that has gone up to over 20,000, almost 30,000 houses were bought in 2015 as an investment.”

“So what’s pushing up prices is people buying property as an investment, that is a significant factor now that’s pushing up prices. Particularly, the big global equity funds. And this is my argument, that the Government has been focussed on enticing those two – for example the tax exemption and reduction in tax provided for the real estate investment trusts [REITs]. The encouragement, the sale of land and property to Nama by vultures. They’ve used the increase in prices also. The Government, I think, has taken a wrong approach to housing in terms of viewing prices increasing as a positive thing rather than seeing, in actual fact, this is a sign that investors are buying houses and that we don’t have enough supply.

O’Rourke: “Do you think people should be stopped from investing in houses, as an investment, as opposed to live in. Because that’s where a lot of the rental supply comes from?”

Hearne: “No, I don’t, I think that what needs to happen is the Government needs to increase the supply of affordable housing and it can do it way beyond what it’s saying and I think that there is…”

O’Rourke: “But Simon Coveney [Housing Minister] would love to know how. I mean, and you’re accusing him of making the situation worse with his policy Rebuilding Ireland.”

Hearne: “Yeah, I’m saying that the Rebuilding Ireland policy, if you look at it: the majority of social housing that’s outlined in that are to come from either the private rental sector or these Part Vs which have shown they haven’t delivered or as new forms of public private partnerships. It’s overwhelmingly reliant on the private sector so that’s pushing more pressure again for supply to come from the private rent sector which pushes up prices. Canada, states in Canada have introduced a 15% speculation, foreign investor speculation tax, which tries to reduce that speculative investment. There is a problem with speculative investment happening in property that is pushing up prices.”

O’Rourke: “We’ll leave it there for now, thank you indeed for coming in…”

Listen back in full here

Related: Why Government response to housing crisis has failed (Dr Rory Hearne, The Irish Times)

Previously: The Housing Figures Don’t Stack Up

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17 thoughts on “‘Whose Interests Are Dictating Our Housing Policy?”

      1. Mrs S

        Hardly!

        When asked how all these new State-funded mysteriously cheap houses would actually be built, this is his reply:

        “Like the ESB, how it rolled out electricity, that sort of vision, creativity, imagination, we need to be thinking about. A new semi-State company that…”

        1. MoyestWithExcitement

          “Hardly!”

          I was being facetious. You actually think that though. Brilliant.

    1. Topsy

      Mrs S. Because he’s knowledgeable, intelligent, interesting, informative and accurate in his assessment.

  1. Sheik Yahbouti

    I dunno. Let’s all have a good think, and have a great big guess…….. :-(

  2. anne

    The roofs over people’s head is a great way for investors to make a killing all right…people will always need a roof over their heads. Gold, oil..not do much. Baldy Noonan knows this too when he’s been meeting these wheeler dealers in NY.

  3. Fact Checker

    There is a lot of nonsense about the impact of REITs on rents. It is trivial as they hold a tiny fraction of the housing stock. Keeping units vacant would push prices up. But these profit-driven REITS are doing their best to keep units RENTED OUT as much as possible, which should have the opposite effect.

    But otherwise the man has a point.

    There are multiple state agencies with conflicting and overlapping mandates, and some without one at all.

    It would make sense to strip local authorities of most of their planning and housing functions and assign them to a central agency with the funding and legal powers to CPO, build big, and build quick.

    A bit like what we did with Irish Water as it happens:D

    1. anne

      they’re doing their best huh..lol
      they don’t have to try too hard. go way out of it.

  4. anne

    slightly off topic…but where’s mmmmmercille these days?

    Did he quit over the whingebags around here?

  5. Kolmo

    A tiny clique of fortunately placed individuals are benefiting from the ‘chaos’ of the very, very retarded Irish property ‘market’ – it isn’t a conspiracy theory to suggest that the convergence of heavily embedded and not-so-shadowy vested interests are running rings around the donkeys in Dáil Éireann, the situation is so unbelievably anti-social that the only surprise is that street level violent unrest has not emerged. It’s a loudly ticking social timebomb caused by a fully cretinous management class. Think merchant’s quay at 10am, multiply it by 100.

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