The right moves: Has the Government learned nothing from the disastrous crash?
I'm looking forward to acting as MC at the KPMG Irish Independent Property Excellence Awards tonight in the Convention Centre Dublin. But the realisation that another year has already shot by, with the property market racing ahead again into another development phase, has caused me to step back and consider the bigger picture. Professional firms, developers and contractors can only react to the market of the day, but could it really be the case that the Government has learnt nothing from the last disastrous crash?
I was disappointed recently to hear An Taoiseach refer to the failure of the private sector to provide social housing. This was frustrating in that the private sector should never have been expected to provide social housing. The private sector operates in a profit-driven free market and, by definition, there is no market for social housing (houses for people who can't afford to pay the prices dictated by the market). The political decisions (by a previous government) to attempt to outsource the building of social housing, and the control of building standards, have proven disastrous and have caused much of the homelessness crisis.
Furthermore, the depth of the last economic crisis meant that many people who would normally have been outside the social housing sector were forced into needing social housing, exacerbating the huge problems already there. Give a contractor a contract and he will build social housing, but this government has been slow to realise that a thriving private development sector will be key to solving the housing crisis, both socially in the rental sector and in home- ownership.
Instead, we get measures such as 'rent pressure zones' (failing already) and the vacant site levy (which I disagree with), which will only come into operation from January 1, 2019, over two years after it was first announced. And all the while, the Government fails to see the quick and easy solution to the lack of supply. The same dynamic operates as in the social housing sector - if people can't afford to buy the product, nobody will supply it. The easy solution is to reduce the impact of levies and VAT on first-time buyers, which is making house-building unviable. Indeed, reducing VAT is constantly referred to as a tax break for developers. It's not. It's a tax break for first-time buyers.
And the lack of social housing has other effects on the private housing market, in that in Ireland it is practically impossible to repossess a family home. No judge will do that, because there is no social housing for the family to move to. Some will say that's a good thing, but it prevents the mortgage market operating normally, and that's partly why it's so hard to get a mortgage here, and why we pay excessive mortgage rates.
So the housing sector remains depressed by political ideology whilst the commercial property market has recovered strongly.
But what of the bigger economic picture? There was little evidence of the reform-led agenda promised by Enda Kenny's government and this government has continued the long tradition of ignoring the advice of the Fiscal Advisory Council, in failing to adopt counter-cyclical economic policies. The Central Bank's restrictions on mortgage lending were welcome, if long overdue, but one got the impression that they were bullied into allowing the last dilutions of those measures. The Department of Finance may be saying the same things to the Government as the Fiscal Advisory Council, but there's not much sign of that and, overall, one gets the impression that the public service has moved to the right in terms of its ideology.
The draft National Planning Framework, Ireland 2040 - Our Plan, retains much of the old 'hubs-and-spokes' approach but I fear that the whole concept of balanced regional development is flawed. The plan says that Dublin, Cork, Limerick, Galway and Waterford will be targeted to accommodate 50pc of national growth in population, employment and new housing, with the towns and villages of Ireland expected to provide the rest.
I fear that this badly underestimates the worldwide trend of growth in cities. Indeed, if we restrict the availability of land for expansion in our cities, by not zoning for it, we will firstly slow national growth, but also play into the hands of land speculators, who can buy land around cities, unzoned, but comfortable in the knowledge that it will eventually have to be rezoned.
This government has done much to steady the ship but long-term success will depend on a new level of bravery in the public service, far away from the expediencies of the election cycle.