Home truths: Coveney must look at past mistakes
Published 27/05/2016 | 02:30
The single biggest housing drive that the Irish State ever mounted took place from the 1930s to the 1950s when a construction programme cleared almost all of the slums in Irish cities and provided more than 80,000 people with state-built homes.
Today, the State's social housing lists are heading towards 100,000. This is the extent of the huge task facing new housing minister Simon Coveney, who this month at last declared the housing crisis to be an "emergency". He outlined his intention to launch a Housing Action Plan in August. In building his national emergency strategy, Minister Coveney must not only take into account the positives of the past, but the lessons to be learned from past mistakes. Among these are the following:
1 Government steps that provide more cash to buyers/renters can only lead to inflation
In Britain, the Help to Buy scheme under which the Government provides an equity loan for up to 20pc of the property's value has helped to increase average property values by more than three per cent. Here in Ireland, the property inflation which occurred in the late 1990s was part fuelled by the first-time buyer grant. Later, at the height of the bubble, then Finance Minister Brian Cowen slashed stamp duty. In the process he increased the spending power of every buyer by thousands and within months, property prices had increased to soak up all that extra cash. The same is true of increasing rent allowance. While current levels of rent allowance may not be adequate, increasing the level of payment in a property shortage will only cause rents to hike again.
2 Incentivise building. Go the whole hog - it's an emergency!
The last Government brought in endless minor tweakings such as another useless Living Over The Shop scheme and various nonsense with overpriced 'temporary' modular housing.
We've gone beyond the point of tweaking the VAT rate to a nine per cent preference level. If you want housing built in large numbers, you don't mess around, so cut VAT to zero. Introduce every incentive you can to get building rolling. Abolish local authority charges and Par 5. Even in Dublin, the artificially high price of homes makes it uneconomical in many areas to build homes at high market prices. Last week, the Society of Chartered Surveyors released a study which suggested the average cost of building a three-bed semi in greater Dublin is now €330,000. Under the central bank's lending criteria, this puts most homes out of the range of average families even at cost price.
3 Incentives for construction must be temporary
In the late 1980s, Dublin's city centre was a hollowed out shell with numerous derelict buildings and few people living there. Generous Section 23 tax incentives were introduced to help remedy a situation in which students and singles in the rental market were largely living in sub standard run-down bedsits and the centre was derelict. Section 23 was hugely successful and the city centre was filled with modern apartment blocks. However, successful political lobbying by the construction industry towards, largely, Fianna Fail-led Governments caused Section 23 to be kept on long past its function - to the point where it became an active contributor to the property bubble. Amidst a huge housing surplus, the Irish State was actively incentivising further unnecessary construction and spending to the point we were renting out our brand new apartments to the foreign workers brought in to build them. Incentives must be ended once their intended effects have been achieved.
4 'Declutter' existing regulations
A whole slew of regulations regarding buildings and their uses were introduced over the past 20 years and many have combined to prevent existing buildings being used. Pre 63s stand empty because we introduced regulations to close bedsits. But preservation, fire safety and disabled access rules combine to hamstring other uses.
5 We need to enforce regulations
The shoddy practices of the Tiger years occurred not because regulations were not up to scratch, but because there was almost no enforcement whatsoever. Alongside inspection, we need real penalties. If a restaurant can be shut down for health breaches, so too must developers be shut out if they are at fault.
6 Set up a Government body 'driver' with real power over the supporting players
Numerous plans announced by the past Government have come to nothing because there was no driving body with the power to push the main players involved in the big picture along with the agenda (the builders, housing agencies, local authorities and lenders among them) and to ensure they play ball with the overall plan.