Thursday 14 November 2019

'House prices and rents won't stabilise for up to three years'

Housing Agency boss under no illusions about challenge ahead, writes Paul Melia

John O’Connor, chief executive officer of the Housing Agency. Photo: Steve Humphreys
John O’Connor, chief executive officer of the Housing Agency. Photo: Steve Humphreys
Paul Melia

Paul Melia

Housing Agency boss John O'Connor is under no illusions about how long it will take for house prices and rents to stabilise.

"Two to three years, provided we address the non-performing loans," he says. "If we address the banks and loan issues, that will speed it up. Let's also get what's readily available back into use. If you supply housing units and vacant properties into the market, that will help stabilise prices."

His comments point to little relief in the short term for those hoping to get onto the property ladder, or householders hit with rising rents. But there is low-hanging fruit which could help boost supply as highlighted in the housing report from Census 2016 - vacant units.

"The detail on some of the figures is interesting, and it's food for thought," he says. "We talk about 183,000 vacant properties, and nearly 80,000 are detached houses, which is a surprising figure, that there's so many of them.

"We need to resource local authorities better in relation to investing in vacant homes. We need to identify what homes are vacant, and then engage with the property owner. The next focus is incentives like the Repair and Lease initiative, or potentially as indicated by the minister, tax reliefs to bring vacant homes back into use, particularly in towns and villages.

"There are 20,000 to 40,000 properties which could realistically be brought back into use in areas of demand and that's where we need to focus. Since Christmas, we've looked at 1,500 vacant properties which are primarily previous buy to lets. There are a lot of those. That's only a small sample."

Established in May 2010 to help local authorities, approved housing bodies and the State to deliver housing, the Housing Agency is actively buying units through a €70m capital fund.

So far in 2017, it has bought 400 at a cost of around €160,000 each. It plans to buy 1,600 over the coming years. It has also secured another 2,000 from Nama, and will end up with around 2,500.

The agency deals directly with banks, and Mr O'Connor is critical at the lack of progress, saying it's time for them to deal with non-performing loans and write-down debt. He also says units shouldn't be sold to vulture funds, but instead placed on the open market.

He believes banks may hold up to 10,000 vacant units, adding it is a speculative figure, and they should not be held back from the market.

"Prices are back up and we don't want them to increase more," he says. "Holding back on selling a property in the hope prices will go up shouldn't be encouraged by the Government or banks.

"The banks need to be more realistic in terms of writing off the debt, and not waiting for further increases and even causing an increase in prices by leaving properties vacant. There's a need for housing, so don't leave properties vacant.

"We're interested in the buy to lets primarily. The only dwelling houses we would have bought were abandoned when people left the country. We probably bought about 50 of those, and we're being cautious because we don't want to be accused of buying something which people have been evicted from."

He also points to problems in achieving best value for money. The agency buys units on behalf of local authorities and housing associations, and has bought small apartment blocks, but says where private tenants are in situ, housing associations are reluctant to take them on.

"In the main, the issue is a lot of apartments are rented so we're not in a position to buy a bigger block with vacant units and handle the private tenancies.

"It's about whether a housing association would be prepared to do private tenancies as well as social housing tenancies. They're not prepared to do it on any scale. They have done some, but they may consider it too risky. It does limit what we can buy. Mixed tenure is a good thing and there's some very good value when you buy a whole development. When we get picky, you end up paying market value."

On new supply, some progress is being made. Unpublished figures from the Department of Housing show that planning permission for 16,375 new homes was granted last year, up 26pc. Work began on 13,169 new homes in the year to February, up 27pc, and house completions are also rising, albeit not quickly enough.

Part of the solution to the crisis is to free up larger houses by building smaller units in established areas, allowing people to downsize. He cautions against reducing VAT rates, saying the savings could be added to land prices, but says State-owned land should be used.

The recovery, he says, will come only when the banks deal with bad debts. The vacant site tax, due to come into force from 2019, also needs to be amended to encourage development. Currently, if a loan is equal or greater than the value of the land, an exemption can be secured. Local authorities must also take a more pro-active role in building communities.

"We can't underestimate sorting out our loan problems. That's having a huge effect on housing, and we need to just bite the bullet. The vacant site levy is a good thing. It's worked in other countries. Land needs to be used if there's a need for housing in the area," he says.

Communal areas needed to 'prevent isolation' for apartment dwellers

People are becoming "more isolated" as apartment living becomes the housing tenure of choice, John O'Connor has warned.

In other countries, apartments are designed with laundry rooms and communal facilities to encourage neighbours to interact.

This model neededs to be encouraged here, the Housing Agency chief executive said, given that average household sizes were falling, meaning people were living in smaller units and often alone.

"The demographic changes in Ireland have been far greater than any other country in Europe in terms of the timescale. In 1971, it was four people per house. It's 2.75 now. In other countries, that happened over 100 years," he said.

"Communities are breaking down a bit. People are becoming more isolated. Other countries have addressed this better. The idea of an apartment which is totally self-contained, with your own washing machines and utilities, isn't encouraged in other countries. People have to interact. They have to talk to each other.

"Interaction is a good thing, instead of everybody being given their own island."

He also said people living in larger homes needed to be encouraged to make better use of their property.

"People should think about renting out rooms, or sharing with a family. If you have a big house, you could turn part into a flat for yourself and rent the rest to a family," he said.

Irish Independent

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