Wednesday 28 September 2016

Coalition's grand plan won't fix housing crisis if there are no homes to sell

Published 08/10/2015 | 02:30

'There's little or no houses being built, and few - if any - developers have spare, unsold stock they're sitting on in the hope that prices will rise'
'There's little or no houses being built, and few - if any - developers have spare, unsold stock they're sitting on in the hope that prices will rise'

Plans for the taxpayer to subsidise the cost of a new home may appear a quick win for a coalition desperately seeking to address the housing crisis in the run-up to an election.

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But there's a snag. There's little or no houses being built, and few - if any - developers have spare, unsold stock they're sitting on in the hope that prices will rise. The most recent figures show that just 5,625 units have been built so far this year, half of which are one-off homes.

The prospect of an upsurge in delivery in the short-term is even gloomier, at least before the General Election, as work has started on fewer than 3,000 units so far in 2015 which will be available for sale on the open market.

While delivery is being ramped up in areas of high demand - 80pc of all starts are across the Greater Dublin Area - it's nowhere near enough. At least 18,000 homes a year are needed, without which prices continue to spiral.

The coalition's grand plan to spend €180m to subsidise the cost of providing 8,650 units may seem to some hoping to buy a home as a sensible, and speedy, solution to ramping up delivery.

It equates to a subsidy of almost €21,000 per unit.

But it will provoke fury among those who received no such subsidy when they purchased a property, who will correctly ask why they are paying for this largesse.

There are also so many questions about how it might work. Will it only apply to particular parts of Dublin and Cork? How can the taxpayer be assured that the property is being sold at a loss? Will the mantra be 'build and they will come' without regard to quality and proper planning?

How do you justify the decision to those who bought homes in other areas - are they not as deserving of State support? Will the allegation not be that once again, developers are being bailed-out? Is it right for the State to subsidise house prices? Could it not be done in another way, for example by reducing the tax-take on construction to benefit all homebuyers?

The rent proposals provoke fewer concerns. It's well-known and documented that the market is a mess, beset with problems for tenants and landlords alike. Average payments continue to spiral - the most recent figures show they are up €58 per month - and, embarrassingly, just last week Paypal revealed that it is asking staff to house their colleagues, such is the lack of available accommodation.

Many of these proposals appear sensible, as they not only provide tax incentives for residential landlords - who are not treated as favourably as commercial ones - but also protect tenants.

Linking rent payments to inflation is sensible, but there must be measures in place so if the cost of living falls, so too does the cost of renting.

Moves to extend the amount of notice a tenant must receive before being forced to leave are also welcomed. And while rents will return to the market rate at the beginning of a new tenancy, protections must be put in place so tenants are not turfed out of their homes by unscrupulous landlords keen to cash in.

Irish Independent

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