19 simple steps to finally getting the housing crisis under control
Mark Keenan has reported on the property market for 27 years, a period in which it went from downturn to boom, to crash and back to boom again. Here's his view on the steps to solve the crisis quickly
Solving the housing crisis is not difficult. It's a simple matter of building enough affordable homes in the right locations, and to keep building them until all who need a home are housed. Yes it is that simple.
To do this, we need to make quality housing as cheap and affordable as possible, and as easy/attractive to build as possible. The solutions lie in how we manage land, how we manage taxation on housing, how easy we make it for the construction sector and how willing we are to invest in State built and owned social housing.
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So for 2019 here are the most important measures that I believe the Government can address to grab the crisis by the scruff of the neck.
1. Resume the State's Normal Role As Developer and Landlord of Social Housing
With 100,000 families on the housing lists, the only serious approach begins with a resumption of the State's normal role as a dedicated builder of social houses. Indeed much of the housing problem we have today stems from a general cessation of this role by the State through the past 20 years.
To make this resumption possible, we first need this Government to ditch its outmoded Victorian/Thatcherite liberal style free-market ideology on social housing provision. There have been only token numbers of social homes built annually (councils built just 364 in the first half of 2018).
The Dickensian laissez faire approach looks set to continue, having manifested itself in the stated objectives of Rebuilding Ireland, which stipulates 85pc private sector housing provision going forward and is echoed in the mission statement of the new Land Development Agency (LDA) which seeks to build just 10pc social housing on State-owned lands.
By continuing to push for almost total private sector provision, the Government is sleepwalking the Irish taxpayer into a future in which the taxpayer will become the biggest and most profitable tenant for the private landlord and fund sector, in particular the 'super landlord' funds.
2. Create A Dedicated State Agency For Constructing Social Housing
Forget the local authorities, unless you want to bog down housing provision needlessly for years. They long ago red-taped themselves into uselessness when it comes to a rapid response to housing problems.
Establishing a building agency to roll out dedicated social housing only is the way forward in a true emergency. It should be staffed with go-ahead experts and drivers with qualifications and proven ability in large-scale project planning.
The State housing agency would be required to start out building at least 5,000 social homes per annum and increase that to 15,000 per annum until the job is done. The land is there - agricultural land still remains unzoned within the M50. Use CPOs to get it.
While we already have a new house-building body through the recently launched LDA, its mission statement has assured us that it is private development led, and is bizarrely expecting to build 90pc private homes for the private sales market on State taxpayer-owned land. This is nothing less than another giveaway of taxpayer-owned assets.
3. Devise the Right Home Types
The right house types are as important as anything else, as proven by the farce at Poppintree in Dublin when "temporary" homes took longer to deliver and costed as much as regular build housing. We must come up with a handful of good designs for "standard models".
Consider that few will find much wrong today with the former "Corpo" houses and flats developed in the 1930s and 1940s. After visiting other countries to see what they were doing, a small palette of reliable cookie-cutter options was devised by the then-Dublin City housing architect Herbie Simms. His houses included corner models, two beds, three beds and flats of two and three bedrooms in standard scheme designs.
Rolling out thousands of these rapid-build homes, Dublin Corporation cleared half of the city's then notorious slums in 15 years.
Private housing too could benefit from an architectural competition with real rewards to produce a palette of similarly affordable private homes which can be constructed at speed, perhaps mostly modular or factory produced.
4. Devise the Right Social Housing Tenancies
Social housing in not a meal ticket. Latter decades before the boom saw social housing units handed over to families for life for peppercorn rents. Essentially many people got housing for almost free. As the boom years came, those crippled by mortgages looked on in envy at socially housed neighbours taking three holidays a year.
Today most of those who cannot afford to buy or rent are most usually working. So the rents they pay in State-provided housing should reflect their earnings. We need to make sure there is no big housing giveaway. Those who have no means pay little but those who are earning pay a reasonable, if not full market, rent. Any efforts to sublet or profit from social housing by the tenant should be heavily penalised. Families should not 'inherit' homes.
5. Lots of Cheap Prefabs
If it's an emergency (this Government has declared two states of emergency in housing), then we need emergency accommodation, and lots of it, to house 11,000 homeless people in the short term. States or businesses have historically provided prefabs where large numbers of homes were needed fast.
For families living in hotels and hubs we need to erect estates of prefab family homes. Yes they won't be of a building-regs standard, but they are emergency homes and they have the advantage of being moveable.
The recent adversity of planners to the idea of "log cabins" in back gardens as a temporary relief measure in the housing crisis is mindboggling, given the obvious need for housing spaces in all forms. We need to change planning rules to encourage the installation of factory built prefab units.
Many homeowners with spare rooms won't rent them out under Rent a Room because they don't like the idea of sharing their living space with a stranger. These garden "pods" would solve that problem. When you need housing fast, you need fast-build housing.
6. Harsh And Real Penalties for Failure On State Contracts
There is a long and dishonourable history of private building and contracting firms routinely going massively over budget, over time and often delivering poor quality builds on Irish State-funded projects. A State agency will need to hire building firms from the private sector to construct the thousands of social housing units required, but we don't have to be ripped off.
Successful tendering firms should pay a bond which will be returned to them only if they deliver. With strict quality monitors in place, harsh financial and other sanctions will be levied against builders who miss deadlines, mislead on costs or fail to deliver the quality required. If construction firms break their promises, they will pay for it.
7. Abolish Council Levies
We need to eliminate council levies on housing straight away. Levies were originally introduced to help fund infrastructural services following the abolition of residential rates and this charge can amount to 8pc to 10pc of the end cost of a new home.
However, local authorities now earn residential property tax introduced to fill the funding hole caused by the extinction of domestic rates.
A recent survey of building across Europe showed that basic Irish housebuilding costs stand comparable with those in most European countries. The factors which hiked Irish costs up relatively were extra costs such as council levies, taxation and funding costs.
In the boom years, local authorities got fat with funds by charging huge per-unit levies on new schemes, which in turn increased the prices of the homes to the purchasers. In the mid-1990s levies were around €1,000 or €1,500 per unit but were soon ramped up through the boom years with greedy Dublin local authorities regularly taking €30,000 up to €60,000 plus per unit.
Despite token reductions since the crash (15pc is usual) local authorities have inexplicitly persisted in taking extortionate amounts off home builders (and therefore home buyers) while also pocketing the property tax.
8. Temporarily Abolish VAT on Homes and on Building Materials
When the Irish hospitality sector was economically hamstrung following the crash, that Government was politically willing to cut the VAT rate from 13.5pc to 9pc just for that sector - pubs and hotels.
So is the 11,000 homeless tally not a good enough reason to temporarily abolish VAT on homes and on building materials going into homes? If we have a housing emergency, we need emergency tax. The VAT rate can be restored again when the crisis is over.
9. Stop Protecting/ Red-Taping Empty and Underutilised Buildings To Death
Thousands of former school houses around Ireland are in ruins because they were listed for protection by their local authority. Indeed they were so well 'protected' that they were too expensive to restore.
Many of those that weren't listed have since been turned into functioning homes of character. In our cities, the abolition of bedsits in Pre 63s, and largely period buildings, has left many multi-storey period town houses both decrepit and in limbo. Repairs are too expensive due to preservation orders. We need to be real about disability access and older buildings. Some just can't be made wheelchair accessible at reasonable cost.
Drop the rules with certain buildings or expect the buildings to remain empty and ultimately to crumble.
10. Get a Proper Living Over the Shop Scheme
In 2015 the Government introduced the third unworkable Living Over The Shop (LOTS) scheme. The State has had three attempts to get it right and all three failed because the terms were simply impractical. In the last two attempts, the schemes were deemed failures by the industry and commentators on the day of launch.
It is unbelievable that in a time when so many are homeless that floors upon floors over older shop buildings, particularly, are empty and have been thus for years, rotting away. A combination of factors is preventing owners from letting over-shop spaces out as homes. Latterly insurance costs and fire regulations are among the factors which see landlords leave them empty rather than refurbish them and let them out.
Successive Government grants for upgrading upper floors for residential accommodation have failed because they come with rules that are unworkable for a combined business and residential building. We need changes in planning that afford an easier change from full retail to residential use, incorporating ground floors also.
Internet shopping is closing shops in cities and in towns and we have been left with more retail space than we need. The obvious solution is to enable the conversion of entire buildings (ground floors included) in selected streets.
11. Consider Reducing Current Building Standards
The best 'all round' car on the road as judged by 'What Car?' for 2018 is the Volvo XC40 SUV. Its average price is €47,450 compared with the average spend on a car in Ireland which is €30,000. There's no doubting the quality of this car, so why don't we simply make it the law that everyone who buys a new car has to buy this one? The answer is obvious to car buyers. Not everyone can afford it.
Building standards have been upgraded since the crash and are also set to be updated again to ensure all homes are increased in standard including a stipulation that all must be to the nearly zero energy saving standard. This is the housing regulation equivalent of making everyone buy a Volvo XC40 or nothing at all.
Our radical overhaul of home-building standards since the crash was a backlash against the poorly built houses we got in the boom. The irony is that poor construction happened because of inspection and enforcement failure, rather than an inherent failing in the standards we had. So now houses must be built to a higher grade, but also at a significantly higher cost. It has been estimated that they cost 10pc more because of building regulation upgrades.
High standards are great to have, but affordability should also be an obvious factor and few among us can afford the equivalent of a Volvo.
12. Land Control As Planning Policy
Ireland's housing market cannot be fixed without first making fundamental changes to the whole chain by which land is zoned, sold and developed, says a report published last year by Ireland's policy think-tank, the National Economic and Social Council (NESC).
The NESC is spot on. We need to manage land use from the centre in accordance with our needs and to prevent local market forces dictating what is built, where, how and for how much. The NESC report, entitled 'Urban Development Land, Housing and Infrastructure: Fixing Ireland's Broken System', says the shortage of affordable homes is caused by a fundamentally flawed system whereby developers must outbid one another to pay top dollar for land and afterwards recoup this through the most profitable form of development possible - rather than the type of housing or development that is most needed.
Land use control policies are deployed in other European countries where they are simply considered a proper component of correct everyday planning and have proven more than any other measure in keeping housing affordable while also ensuring that building/development remains profitable.
They do so by eliminating the big cash bonanza initially made by the landowner who sells to the developer following rezoning. The developer must of course recoup this money ultimately from the home buyer. So the system breeds inflation.
Germany, Austria and Belgium all operate land use control policies for both publicly and privately owned holdings. These are actively managed by the authorities in accordance with societal and business requirements. These countries have controlled house price inflation with this tool and any Government wishing to sort a housing crisis needs to have it in its toolbox. Although it is unclear yet, it is believed that the LDA might perform such a task. Thus far it's too early to say. If not, it should be.
13. The State Buys Cheap Land And THEN Rezones It
Today I can acquire a 20,000sq ft property in Dublin 12 (that's 20 times the size of an average semi) on one-tenth of an acre and for just €520,000. Why so cheap for such a huge building? Because it's an office and warehouse complex, albeit a dated one and it's zoned for that purpose only.
As such, it demands that annual rates of €27,573 be paid to South Dublin Council, which keeps its market value so low. Our cities, and especially Dublin, are full of outdated, decrepit industrial zones on the doorsteps of mature residential areas. Many parts of these estates are commercial property's versions of slums. They should be rezoned immediately for housing use.
14. Cease Immediately the Wasteful Disposal of State-Owned Lands
Is there some sort of hidden clause in the Irish Constitution that says the State and taxpayer must always lose, to provide profits to the usual suspect privateers? Witness, for example, recent revelations that land disposed of by the State (Nama) which was sold to a private fund was later bought back again by the State for housing, but at a much higher price.
Last year, we saw the sale of State-owned land at RTÉ for a record high price to a private developer, which by nature of the price paid, can only ensure that high-priced homes are built on it.
Now bizarrely, under the LDA, whose launch document outlined how it would be charged with prioritising the development of existing State lands, it has stated that its objective is to enable 90pc private development for the private market on these lands with only 10pc allocated for social housing. A 30pc chunk has been provided for impossible to define "affordable housing". When asked at the launch, the minister suggested "affordable" meant €340,000. How can this be when a couple who each earn an average salary of €40,000 can borrow €280,000 maximum?
What the LDA is being instructed to do might just result in the greatest handover of land to the private sector ever seen. We have a housing crisis, we need the land. If anything is going on it, all of it should be within reach of the consumer/those on housing lists. Quite simply we need to end the long tradition of handing out State-owned property to the private sector to the detriment of the taxpayer and use it for social housing.
15. Start A Workable Finance Fund For Builders and Developers
When it comes to loan finance for new home schemes, the builder's problem becomes our problem and it makes new homes far more expensive than they should be. Banks are still not lending at reasonable rates to builders and developers who want to get into constructing estates of homes. In some cases if they are lending, they are lending half and telling them to get the rest from expensive mezzanine financiers. Finance rates of 14pc and beyond are being charged by private equity providers and ultimately this is having a big impact on the end price of new homes to consumers.
Last year the Government moved to address the issue when the Finance Minister sought and received Cabinet approval of the Home Building Finance Ireland (HBFI) Bill 2018. It was hailed as being set up to provide €750m from the Ireland Strategic Investment Fund. It was stated that HBFI would start lending by the end of this year. But there are no signs of this happening and efforts to contact the department on our part failed to produce responses. The finance issue needs to be addressed urgently.
16. Get the Numbers Right
Thus far the State has been unable to tell us how many new homes are being built with allegations that the categorisation via ESB connections has overestimated the numbers. Meanwhile, the Government has been massaging the homeless figures with the recent "recategorisation" of more than 1,000 people who, it turns out, were in receipt of funding from housing charities.
In order to address the housing crisis, we need to have accurate and true numbers and apply general accepted and measured terminology regarding the size of the problem and the progress (or lack of) in solving it.
17. Railroad the way through to cheaper homes
Fast-expanding cities in other countries have also run into housing problems. In China and in many European countries they have helped solve the problem by developing new towns linked via extensive high-speed rail links to the cities. The trains, which run at between 160kmh and 320kmh, get them in from 160km out in less than an hour. This sort of service could get Drogheda commuters to Dublin in 20 minutes and bring workers in less than an hour from places like Carlow Town, Mullingar and Athlone. Balanced against the cost of paying for housing for increasing numbers in the city, a committal to the rail solution would prove a decent investment.
18. Subsidise Training and Retraining for Construction Workers
The construction industry in Ireland is once again running into a skills shortage with most of the 160,000 who were laid off during the crash now employed again. A certain number of these headed abroad when the economy collapsed and are likely to stay there because of Irish housing costs. Bringing in foreign skilled workers is no longer an option thanks to a global shortage of construction labour but also the lack of affordable housing. What's the point if they too will need to be housed? A provision for the State to sponsor retraining classes at night would allow them to keep working while reskilling for a shift back into construction.
19. Home Buyers must adjust to new realities
Somewhere in the noughties our housing expectations rose massively. Before that semi-detached homes had one bathroom only, not three. They had a small kitchen rather than an open-plan kitchen/living/dining/conservatory experience. Siblings happily shared bedrooms and parents didn't believe they were running a slum if their offspring didn't have a bedroom each.
Then the boom came along and we suddenly needed a marbled bathroom for every eventuality. Builders tailor their schemes to market expectations and right now, they're way too high. So why are we surprised when the developments they choose to produce turn out luxury four-beds with three bathrooms for €800k a piece? We need to cut our cloth when it comes to housing expectations.