Monday 24 October 2016

Coalition's cosmetic 'rent certainty' move will not solve the spiralling housing crisis

Published 19/11/2015 | 02:30

We face a house letting/social housing crisis of epic proportions
We face a house letting/social housing crisis of epic proportions

A homeless summit has revealed that 700 families will be in emergency accommodation this Christmas.

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More people than ever will sleep rough on streets, in garda stations and in hospital A&E departments.

Rents are rising faster now than at any time since 2007. The latest "rent certainty" measures are wholly inadequate. We face a house letting/social housing crisis of epic proportions. Those who can't afford market housing costs will multiply. The two-year rent hike restriction amounts to a cosmetic, quick-fix makeover.

An analysis of residential property transactions reveals an apparent normality returning to middle and upper markets, but we're lurching toward a crisis in the key area of affordable homes.

Total transaction levels have increased since 2011: in 2012 the total was 25,238, in 2013 it was 29,867, and in 2014 it hit 43,241.

This morning, 5,000 houses are for sale in Dublin and 23,000 are available nationwide. If the housing shortage was uniform, they'd all be sold instantly. There would be queues outside show houses and new homes would be pre-sold off construction scheme plans.

None of these symptoms are evident. Government measures to relax restrictions on apartment construction through flexibility on dual aspects, elevator and parking space requirements were overdue.

The proposed abolition of construction levies on houses worth less than €300k in Dublin, and €250k in Cork, is welcome but is belated. And 100pc mortgage interest tax relief to landlords of social housing clients is sensible, though too restrictive.

These measures will increase supply and facilitate capital investment only over the coming years, as the average time-lag is 139 weeks for projects from conception to completion - it's a pity they weren't part of the 'Construction 2020' stimulus package of May 2014.

What is the fundamental issue?

The most acute demand for housing is amongst those who can't afford prevailing rental costs or house prices. The biggest single cause of homelessness is the State rent supplement cap of €900 per month in the greater Dublin area.

Tenants are asked to pay 25pc of their accommodation costs and can't, so they're evicted. Yet the only practical solution, an elastic subsidy limit, remains blindly rejected by Government.

Take Sinead in Dublin 15. She is a mother with two children; one has autism, requiring special needs teaching in their local primary school. Her rent hasn't increased for the past two years and her landlord now raises the rent from €900 to €1,400 per month. This 55pc increase reflects the local market rental rates, probably justifiable to the PRTB. Sinead faces eviction and the prospect of emergency accommodation in a hotel or hostel.

This costs the State more than €2,000 monthly. The blindingly obvious reality for Sinead's family, landlord and the Government is that it's more cost-effective to keep her in her present accommodation until she obtains social housing.

The only way to retain the status quo is to increase rent supplements.

Tánaiste Joan Burton still believes, even after rent control measures, that rent increases can be prevented by freezing rent supplement entitlements.

This defies logic.

Every voluntary housing organisation knows this is unsustainable, patent nonsense.

Housing Assistance Payments (HAP) need to increase urgently if thousands more tenants are not to lose their homes unnecessarily, forcing them into homelessness. Up to 2,500 vacant houses belonging to local authorities are empty, requiring refurbishment. These could be bundled immediately into a joint venture deal right now with a Real Estate Investment Trust (REIT) fund.

With a fast- track commercial repair, they could then be leased back to local authorities for letting.

There is a need for 15,000 new units in the greater Dublin, Cork and Galway areas which are built solely for social housing, private rental with subsidy and student accommodation purposes.

Direct government intervention is the only way to deliver action.

Nama has been nominated by the Government to procure 20,000 new units, yet its clients attest to basic lack of house-building finance. Even the immediate palliative of modular housing, with prospects of instant accommodation within months, is failing to achieve the minimum target of 500 new homes.

The UK government has practical, implementable new schemes, making a significant impact on identical problems. They've provided £500m (€715m) through a Get Britain Building Fund; have established a Builders' Finance Fund to facilitate completion of partly built schemes; put in place loan guarantees for builders to construct solely social housing and created a Build to Rent Fund for investors to build 'buy to let' houses only.

Britain has facilitated a New Buy Guarantee Scheme, whereby 70 housing developers and six lenders facilitate house construction and where only a 5pc deposit is needed from the homebuyer. They've targeted zone development of services through the Large Sites Infrastructure Fund, which is set to deliver 250,000 units within five years. Our taskforces, working groups and agency analysis are no substitute for cranes, scaffolding and cement mixers.

Instead of inducing private investment into housing, we're driving smaller landlords out of the sector.

Of the 50,000 homes expected to be sold over the next year, 45pc of these are likely to be buy-to-let properties from existing investors. This means close to one third of residential units will be unavailable to rent in the future, going off the rental market. The tax treatment of landlords, rather than new rent rules, is the single biggest contributor to lost viability and owner/occupiers.

The Free Legal Advice Centres (FLAC), which is at the coalface of dealing with 38,000 unsustainable legacy mortgages, tells us that the mortgage-to-rent scheme is still not fit for purpose. We were promised prioritisation of "keeping the roof over your head"; instead, 7,000 civil bills for repossessions will be supplemented with a further 4,500 cases pending before the courts.

This Government's inability to prevent a crisis becoming a catastrophe will become self-evident in the New Year - Environment Minister Alan Kelly and colleagues just can't see the scale of the social tsunami that's set to wash them out of power.

Irish Independent

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