Sunday 20 August 2017

Home truths: Justification for the State as a developer

There were only 605 social housing units started on-site in Dublin City in 2016
There were only 605 social housing units started on-site in Dublin City in 2016
Mark Keenan

Mark Keenan

A friend recently advertised a room to let in his Dublin house, seeking €500 per month. Among the responses received was an application from a hotel sector professional in his 30s. He had struggled to find a place of any sort over many months since his landlord gave him notice of selling up. In his application - his first point of contact - he unashamedly pleaded to be given a chance to rent the room. He stressed in particular that he was single and would promise not to get into a relationship in the foreseeable future. Therefore, no one would be visiting or staying over.

A working nurse who replied to the same ad stressed she works very long hours, goes home to the country every weekend and "would hardly be in the house at all".

Just how desperate have people become for rented accommodation when mature working professionals (who, in times past, would by now be home owners) are promising to forgo relationships and make themselves scarce simply to secure a roof?

A highly qualified, 30-year-old American scientist I spoke to landed in Ireland to work for an international research foundation. She replied to more than 70 ads online for a room to rent, but got just three replies from landlords. Luckily, one of those three produced a room. Until then, her employers had to pay for her to live in Airbnb accommodation - the refuge of the new 'professional homeless'.

The recent Daft.ie report showed that rents in Dublin rose 14pc since last year, despite the Government 'control zones' introduced to keep a lid on rent inflation.

It highlighted that Dublin rents are now 10pc above the 2008 peak. The average rent paid nationally is now €1,131 per month and there are just 3,100 properties advertised to rent - the lowest ever on record.

This week, a one bedroom apartment in Dublin 8 is being advertised to rent at €2,200 per month. This would equate to almost all of the monthly net income generated by someone on an average wage. We hear about landlords stacking bunk beds wall-to-wall dormitory-style in basements and charging €300 per month per bed. When the authorities shut down one such operator, it was the tenants themselves who complained: "Where will we go?"

This week, TASC - the social justice think tank - further stirred things up by releasing a damning report, asserting that it would take over 40 years at the current pace of provision to sort out permanent housing for those on Dublin City's social housing waiting lists alone.

TASC's Dr Rory Hearne pointed to the fact that between July 2014 and December 2016, the number of homeless families in Dublin increased by 289pc; that 211,600 households - equating to 10pc of all households - now face severe housing unaffordability and insecurity. The insecure category consists of 77,493 mortgages in arrears. And with 1,694 homes repossessed in 2016 -the highest on record - they have every reason to feel insecure.

Dr Hearne predicted a potential further tsunami of homelessness from mortgage arrears and unaffordable rents in the private sector.

TASC asserts that rather than addressing the problems, 'Rebuilding Ireland' - the Government's policy for tackling the housing crisis - is making matters worse.

"Rebuilding Ireland is almost completely reliant on the private sector to deliver 134,000 units of social housing over the period 2016-2021. Almost two-thirds of 'new' social housing - 87,000 units - are to be provided from the private rental sector," stated Dr Hearne.

"Of the 47,000 new builds, only 21,300 will actually be new-builds exclusively for social housing."

Dr Hearne argues that the choice is between supporting housing as a commodity and wealth-generating investment asset for the wealthy or ensuring housing as a universal right for all.

"The first option will enshrine unaffordable rental and house prices into the future, and will guarantee associated poverty and financial stress for large sections of our population. The second approach can deliver and guarantee of the human right to housing for all our citizens."

The TASC report attacked the plan's failure to reach its targets thus far: "While it was stated that 18,000 new social housing 'solutions' were provided in 2016, in fact, there were just 650 actual new-build social housing units. Only 210 of these were built by local authorities, with just 40 in Dublin. This was far below the 2,200 projected new builds for 2016."

It adds that just 1,829 of the 8,300 new social housing 'pipeline' announced in February 2017 are 'on site" right now.

"There are likely to be less than 1,000 new builds in 2017, a third of the projected 3,000 figure outlined in Rebuilding Ireland. In Dublin City, there were only 604 social housing units started on-site in 2016, just five in South Dublin and none in Cork City.

Dr Hearne is just the latest housing expert to weigh in with the notion that the State as developer is not only the most plausible solution to the housing emergency, but it is the only solution. Many would say that, as a representative for a social justice organisation, he would say that anyway.

And while the report is timely, it's unlikely to make much impact on policy - Fine Gael's new leader Leo Varadkar is even more free-market oriented than his predecessor and therefore less likely to countenance the State taking on the roles of developer and landlord.

But what many are missing is that there are sound free-market reasons for the State to take on a housing developer role.

If Fine Gael wants to make housing pay for itself, then what better way to do it then by taking advantage of the free-market conditions in which no one but the State is in a position to wade in and make profit. The free market has done this.

Qualified professionals are sleeping on sofas. Hundreds of families are in hostels. Experienced developers can't get funding.

So let the State take the developers on as sub contractor - make them compete with one another for the contracts and make them earn their money in the delivering.

Fine them heavily if they don't stick to construction deadlines or fail in quality. Bring State-owned lands to the table and acquire lands by CPO. Take land from religious orders which have not paid the compensation agreed for child abuse cases.

Exploit the free-market-created situation - for the benefit of the tax payer. There's no reason why the State has to build social housing and let it out for peanuts - even at 50pc of the current market rates, the State would turn a profit on developing and renting housing.

Another free-market reason to do so is to address the fact that constantly increasing rent is 'dead money' in the wider sense - money lost to the retail sector and economy overall.

A 14pc increase on one person's rent of €1,000 per month is €140 per month drained out of the productive economy. It is two less meals for a restaurant, one less visit to a dentist, two less stays in a B&B, one less set of concert tickets and one less family visit to the zoo.

Why shouldn't the State build thousands of two-bedroom apartments and rent them for €1,500 per month as opposed to €2,500?

With the State as developer - even as an exploitative one - at least the housing we need would start to be provided in the numbers we require.

And the 'dead' money at least goes back to the taxpayer for alternative productive uses, rather than to the landlords and vulture funds.

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