The Government's new housing plan: how to make an omelette without breaking any eggs
The Housing Agency has announced a plan to buy up 1,000 housing units over the next two years and sell them on to local authorities for social housing. To use the words of a well-known football pundit, "it is a good plan but not a great plan". Everyone agrees that more houses need to be built in Ireland as a means of tackling a social housing need and addressing market bottlenecks driving up rents.
It takes far too long to get houses built so Housing Minister Simon Coveney came up with a five-year plan which includes more immediate, speedier measures. This is one of them.
The agency will use €70m to buy vacant previously rented properties in bundles or portfolios from banks and receivers. It will then sell those on to local authorities at cost which can make them available for social housing.
The money recouped from selling them on will go back into the fund which will keep rolling over.
Back in the heady days of the Celtic Tiger boom, one of the social partnership agreements came up with a plan to establish the Affordable Homes Partnership. The idea was the partnership would organise land swaps where prime state land would be swapped with developers, in return for affordable housing.
The plan aimed to make a certain number of houses available to qualifying first-time buyers at cost and therefore cheaper than the exorbitant market prices of the time. It didn't really work. And then at Christmas 2006, at the height of the boom and just months before the crash, the Affordable Homes Partnership spent an estimated €120m buying 500 houses. It could have bought them for half that price just 24 months later.
In order to avoid a repeat situation where the agency might end up competing with ordinary individual buyers or simply drive up prices by paying too much, it will only buy vacant buy-to-let properties.
This is a good way of containing the application of the new fund.
It is hard to believe there are an estimated 230,000 vacant homes in Ireland. Yet that is the figure produced by the Central Statistics Office.
The question is how many vacant previously buy-to-let properties are there which are suitable for habitation? The Housing Agency has done a lot of work on the question of vacant properties. But on the specific question of vacant buy-to-lets available for sale, its chairman admitted during the week that it doesn't know for sure.
He said we have a "very general idea" about it. From talking to the banks it appears there are portfolios of empty houses held by banks.
Those in small villages or unfinished estates might not be attractive for the Housing Agency because the real need to combat homelessness is a lot more concentrated in severe pressure points in Dublin, Cork, Galway and a few others.
So how many vacant former rented but not currently on the open market properties are there, in areas of high accommodation demand? That is the €70m question for this scheme.
The obvious thing might be for local authorities to buy these houses directly and cut out the agency. But the agency has pointed out that some portfolios of houses include properties spread over several counties. Clare County Council or a housing group in Clare would only want the few houses in the portfolio that are in its region.
There is a reason why banks are bundling up these houses into portfolios spread across different regions. And it isn't just that the developer or landlord who owned them all saw investment opportunities in eight counties. The banks are bundling these up in order to land a better price and avoid getting stuck with some properties in counties that they cannot shift.
So, if the bank bundles up 80 properties spread across eight counties, it is because it knows how difficult it would be to get a price for the ones in towns with less demand.
The same problem could arise with the Housing Agency plan as it tries to shift some of these properties on to local authorities.
This new scheme has the advantage of taking on modest targets and with a capped cost of €70m. It should also be able to deliver social housing to some families pretty quickly as long as the stock that meets its criteria is there to buy. So there are real pluses with the scheme.
But the agency has hit on a more fundamental point about the housing market crisis in Ireland. It has repeatedly pointed out the number of vacant properties in the country. Yet in Simon Coveney's five-year 'Rebuilding Ireland' housing plan, the agency has only been given the green light for this very confined, modest, yet workable plan.
It has not been given a raft of powers or promises of new legislation to make a make a very large number of properties available for social housing or to the wider market.
The Housing Agency has examined measures in other countries aimed at tackling the wasted resource that vacant properties represent.
In England there are just 600,000 empty houses out of a housing stock of 23.5m. The government incentivised local authorities to bring empty houses back into use. Councils can charge up to 50pc extra Council Tax on property that is left unoccupied and unfurnished for two years or more.
In Holland they have 190,000 vacant homes or just 2.5pc of the stock. They introduced initiatives to turn empty offices into residential homes.
In the US, some local jurisdictions have a vacant property registration law that requires owners to register their vacant property and pay a fee. The longer you are on the list, the more you pay.
In Scotland they can increase council tax by 100pc on certain properties which have been empty for one year or more.
In Ireland there are too many scattered vested interests which must be protected when it comes to solving the housing crisis. Property owners are one. Any initiative aimed at forcing a property owner to do anything is politically scuppered amid cries about how it would be unconstitutional.
We saw it with the ridiculous argument about upward-only rents on commercial properties at a time when small businesses were on their knees and the dole queues were full.
The problem with trying to solve the housing crisis in Ireland is the Government wants to do it without inconveniencing or alienating any particular group. You cannot make an omelette without cracking a few eggs.
The Government housing plan contains many useful and long overdue measures but it is presented as a win/win for everybody. Usually, that means a lose/lose for the taxpayer.
The overall new plan will deliver on new housing numbers or it won't. But even if it does, will anybody be able to judge whether it represented the best value for money? I doubt it.