Tuesday 25 October 2016

There is a real danger housing sector will build for needs of 2006

Conor Skehan

Published 08/08/2015 | 02:30

There is growing evidence that buying, building and borrowing are all resuming as the improving economy increases confidence. But are we doomed to make the same mistakes?
There is growing evidence that buying, building and borrowing are all resuming as the improving economy increases confidence. But are we doomed to make the same mistakes?

For older readers, there may have been a déjà vu quality to recent housing headlines. Shortages of supply, increasing rents and prices, the words 'housing' and 'crisis' used in the same headline. Calls for more building, more supports, less rules and red tape.

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We heard it all around the year 2000. That was when we started to make it easier for buyers and builders. That was when we all stopped thinking and started dreaming.

How mad were we really back then? Well, by 2006 we were building over 88,000 houses every year. By 2018 we will have over 470,000 more people than we did in 2006. And now the Housing Agency estimates that we will only need an additional 80,000 houses to meet all our needs for the next four years. That's how mad we were back then.

Clearly, back then, we were building far, far more houses than we needed -often in the wrong places - leading to an excess of over 30,000 houses.

With hindsight we can see that bad fiscal and planning policies as well as bad credit practices stimulated house building as a form of investment - instead of focusing on building homes for the future.

There is growing evidence that buying, building and borrowing are all resuming as the improving economy increases confidence. But are we doomed to make the same mistakes?

Ireland in 2015 is a very different place than it was in 2000. We may have done some stupid things in the past - but we have learned from our mistakes. We now have fully functioning, influential Central Bank oversight.

We have authoritative Housing Agency figures on demand to guide planning, building and lending. We have a government commitment to spend €3.8bn on social housing by 2020.

More importantly, we Irish are becoming different people, with different experiences and values. We are making different choices.

Previous generations aspired to the leafy suburbs or the countryside and our planning and political systems strove to meet that need.

Now Ireland is rapidly urbanising and more and more of the next generation will choose to rent and choose to live downtown for much of their lives.

For the next 10 years, the 15-24 year olds in Leinster will increase by over 50pc while the proportion of 25-65 year olds in the same area will increase threefold - compared to the rest of the country. It'll be a world of younger householders - owning and increasingly renting.

They have travelled a lot, they are internationally connected online. These generations have been raised on a diet of TV programmes ranging from Friends, to Sex in the City - aspirational programmes set in apartments in the city centre.

Ireland is rapidly converging with patterns of living that are common in Europe and the US.

Already over 30pc of accommodation in Dublin is rented. Soon, we are likely to be like the US and the UK where over a third of the population will live alone. This is part of a process that reflects changing preferences, values, and choices.

So, take it with a pinch of salt when your know-it-all friend tells you "Irish people are different, we are obsessed with property" - perhaps we were, but we are changing.

We haven't built much since 2007, now the sector is waking up again. But, like Rip van Winkle, we are sleepers awakening to find the world changed.

There is a real danger that we will try to build for the needs of 2006. There is a danger that builders will build for the semi-d market - that will only supply a fifth of the new need. Auctioneers may advise units for sale - instead of building-to-let.

Policies may require standards that will cause housing to cost more than 30pc of our income. Plans may provide for houses where none, or few, are needed.

The Housing Agency's role is to provide information to all of these groups so that they will wake up to new realities. Previously, information came from groups who 'had skin in the game' - seeking to influence policies, plans and targets to favour housing provision as a profit-making exercise. The agency seeks to give our navigators better and more accurate maps of what will be needed in the future.

Our recent National Statement of Housing Supply and Demand 2014 and Outlook for 2015-2017 has drawn attention to all of these issues.

It also highlights that supply of new housing still needs to increase to meet demand. It describes the scale of the likely annual shortfall and urges all parties to work even faster to restore supply.

We now know how many and what types of homes are needed. We know where and when they are needed. As a result, we have a government who have put together a policy and a budget to pay for all of this.

Now that the scale of the challenge has been identified, we need to find out why Irish housing is so expensive. We need to track down, assess and highlight each factor that contributes to the cost of a housing unit. Ireland's economic competitiveness increasingly depends upon the affordability of our housing. So this is a matter of utmost importance.

We need to make haste, but slowly. Urgency is never an excuse for excess speed. We do need to avoid, and must resist, calls for any ruinous 'quick fix' measures of the type that began to gather pace in the year 2000. Housing need a slow fix - careful, considered and based on facts.

We have to build a new world of housing for ourselves. This time we have to build it patiently. That will need bravery.

Conor Skehan is chairman of the Housing Agency

Irish Independent

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