Too late, Mr Noonan - this is like using a bucket of water to fight a house fire
Published 12/10/2016 | 02:30
WHEN your house is on fire it's time to call the fire brigade. Most realise that once the flames are rising, the time to upgrade the smoke alarm and hang a mini-extinguisher by the cooker has long since passed.
Yesterday, Michael Noonan handed those affected by the housing crisis a bucket of water. His measures for housing would have been marvellous back in 2012 or 2013, but they do not represent an appropriate response to the developed crisis we have on our hands today.
That said, most of his initiatives will be helpful in a small way towards undoing the hostile environment which has been created towards house building. They will help increase the supply of homes from record low measures not seen here since the early 1970s - the shortage which is at the core of the current crisis.
The property sector believes help-to-buy is the measure which will have most impact - offering 5pc tax relief for first-time buyers of new homes costing under €600,000. This is a roundabout way of easing the Central Bank's deposit requirements for first-time buyers who want to acquire a new dwelling. Giving them €20,000 will essentially change their loan-to-value situation from 85.5pc to 90.5pc.
Sector sources believe help-to-buy could increase the supply of new homes to market by 10pc to 20pc within two to three years - but only in city locations where sites are already active or getting there. So a step which increases new home stock by 20pc in some city locations over three years is nothing to write home about in the thick of a housing crisis - nor a measure befitting an "emergency", which is how Minister Simon Coveney described the situation in July.
For context, 1,976 new homes were sold in Ireland for less than €400,000 in the first half of this year (Sherry FitzGerald). Meanwhile, construction of units in new estates (rather than one-off homes for private use) is falling in Dublin, with 887 estate properties finished in the capital in the first half of this year, compared with 2,151 for all of 2015 (DNG).
By not extending this relief to secondhand homes, Mr Noonan has at least kept the inflationary risks largely out of the equation. As he rightly pointed out, you can't increase the supply of secondhand properties.
Despite the industry's view on help-to-buy looming largest, a rather less obvious tweak could do far more for the crisis in the shorter term.
Tax relief for rent-a-room now applies to two rooms rather than one and the tax-free amount which can be earned now stands at €14,000 per annum rather than €12,000. In average suburban areas, this makes two tenants a realistic option per household for the first time and therefore significantly increases the family home's ability to soak up numbers from the regular letting market.
It also helps those in the 'squeezed middle' to keep up with boom era mortgages and should further decrease the numbers of stressed properties coming to market.
However, increasing mortgage interest relief for landlords by 5pc from 75pc to 80pc - and henceforth by 5pc per year - is piffling. Landlords are leaving the residential sector in droves, and houses which were once renting to five adults are now reverting to couples. The latest figures show that 20pc of current buyers are intended landlords.
In contrast they make up 42pc of vendors - each one likely taking a property out of the rental market. So why didn't Mr Noonan just go straight to 100pc?
There were tweaks to enable the latest (2015) Living Over the Shop scheme to function. It is the fourth such attempt to render this concept workable.
A €1.2bn allocation to housing programmes is good news if this is truly 'new' spending. Overall, though, this Budget is a distraction while we look for the fire brigade to arrive. The action behind Mr Coveney's Rebuilding Ireland plan is eagerly awaited.