Friday 28 October 2016

Housing shortage is now putting the recovery at risk

Published 02/07/2015 | 02:30

Our builders are back in business
but not in Ireland
Our builders are back in business but not in Ireland

The Taoiseach felt obliged to "give the benefit" to Europe's leaders of his experience of how to handle a bailout. He unburdened himself of yet another homily on his economic miracle.

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It was the usual guff about the fastest-growing economy in Europe and record job creation. He's impervious to any awareness of the single greatest domestic emerging economic and social disaster under his watch. Each week, more misery is apparent with the growing lists of homeless; already more than 2,000 are in emergency accommodation in Dublin, with a further 1,000 elsewhere; 90,000 queue for social housing nationally. We've a double whammy of evictions: 8,000 civil bills for repossessions of houses with unsustainable mortgages; separately landlords can turf out tenants who can't pay market rents.

The maximum rent subsidy payable to a couple with two children in Dublin is €975 per month. This ceiling was reduced in 2012 by Joan Burton to reflect market conditions. Rents are now up 30pc, between €300 to €400 per month on average. Yet, housing benefit remains frozen.

Both Focus Ireland and the Simon Community note that the greatest single factor triggering homelessness is failure to increase rent supplement rates. Where it was once mostly single men on the streets, there are now 450 families with 1,100 children.

Our Government sticks it to the Greeks, but refuses to hear NGOs at home.

Affordable housing isn't just a social problem; it represents the greatest domestic downside economic risk we face. ESRI and Private Rented Tenancy Board statistics reveal through quarterly indexes double-digit annual increases of apartment costs in the greater Dublin area, which are now extending into commuter belt zones.

Incomes only rise by one-fifth of the rate of housing cost increases in the areas where there are jobs. This is because house capital values extend beyond the reach of first-time homebuyers, creating a generation of 700,000 renters who can no longer aspire to home-ownership. We're now only 7pc off the peak rental costs in 2007. In the most desirable areas of Dublin 2 and 4, houses that could be rented for €3,000 then, now have asking monthly rentals of €4,000.

Rocketing rents are countered best by building more houses. We need 25,000 new units per year. The number built in 2014 was 11,200 and 13,000 will be added this year. Fundamental blockages in provision of new residential development are actually getting worse. The average number of weeks it takes from lodging a planning application to actually starting work on site is now 79 weeks - that's more than a year-and-a-half delay between conception and construction. No new development can occur without basic infrastructural provision of water and sanitary services.

Meanwhile, Irish Water cannot fund or borrow for their €660m yearly capital investment requirement, amounting to €25bn over the next two decades. The Exchequer cannot step in as it will breach Eurostat rules of public financing.

The latest National Building Index reveals residential house construction expenditures for the first quarter of 2015 were €600m, relative to €874m for the same period last year. While this can be partially explained by a once-off spike due to new building regulations, most of the new 6,300 construction jobs are in the building of new industrial manufacturing facilities, office blocks, etc.

Meanwhile, our top builders of yesteryear like Sean Mulryan of Ballymore are back in business, not in Ireland - but London, where he's signed up with Malaysian investors Eco World in a deal worth £2.8bn. Those with know-how and expertise have departed, while Nama (with no track record) promises they'll build 4,500 units by the end of next year.

The Government has promised a social housing strategy of €4bn to deliver 35,000 housing units by 2020. The initial specific announcements are 1,700 housing units to be delivered over a three-year period. On closer scrutiny, one shouldn't hold one's breath. Of 100 projects, 69 of them don't yet have planning permission.

So they won't be delivered prior to the end of 2017; in fact, it's impossible to predict when this initial tranche of €312m will be spent. The housing departments of local authorities have to be recreated from scratch, as they were disbanded due to the lack of demand over recent years.

The paradox of all this struck me on a recent visit to Wexford. Local newspapers advertised an old terraced house in Enniscorthy for sale at €17,500; while a three-bedroom semi-detached ex-council house was up for €55,000; anecdotally, a vendor of a mansion on more than four acres with an indoor heated swimming pool couldn't obtain a bid for reserve price of less than €700k.

Outside of our largest cities, there isn't a real housing market because construction costs alone exceed existing house prices. The minimal costs of building a new detached house are €150,000, while attractive homes are available for much less.

There's obviously a real need to review building costs and house sale prices.

Where apartments are mostly needed is in Dublin, but builders are forbidden to have East facing blocks and there's a mandatory requirement for two-car parking spaces, although they may be on a Dart, Luas or Dublin Bus line. There's no official appreciation of the impediments in the way of building projects.

The National Risk Assessment group has drafted a list of impending threats facing the country.

The most urgent is the need to avert a housing bubble.

A residential catastrophe beckons, as an endemic housing shortage is set to cause an epidemic of homelessness, displacement and higher living costs.

Enda, please stop preaching, and start listening.

Irish Independent

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