Monday 28 May 2018

Home truths: Simon the builder says 'yes we can'

The man with the plan, Housing Minister Simon Coveney
The man with the plan, Housing Minister Simon Coveney
Mark Keenan

Mark Keenan

Hard hats off to Minister Simon Coveney. After announcing the biggest national housing strategy in generations in July (albeit with the inclusion of tens of thousands of homes formerly promised in previous plans) he's popped up again just two months on to give us a comprehensive update on how the big job is going.

"Rebuilding Ireland" promises 47,000 dwellings, a step up in social housing provision and the elimination of homeless families living in hotels among other pledges.

Mr Coveney issued a very comprehensive statement on Wednesday which suggests that the foundations of the plan are now in place and he and his team have waded right into their emergency housing plan. Unfortunately, with the Nama controversy raging midweek, what Simon said got little or no coverage in the media.

But it is extremely encouraging to note that among the aspects of the plan that Mr Coveney intends to move on first is a drive, in conjunction with Ireland's colleges, to start building more student accommodation on existing land on college campuses.

This is extremely shrewd on the part of Mr Coveney and his crew because students - 45,000 of them who need to be accommodated away from home each year - are most easily housed by virtue of the fact that most colleges will have the land on site and, with fast-track planning, these are the buildings which can go up quickest and are least prone to planning objections.

Students can live in high density conditions quite happily, so an accommodation construction drive here is the fastest way to take the most people out of the regular rental market and open places for professionals and others who must rent. If these blocks start opening a year from now, the effects on the rental market should be almost immediate in terms of cooling inflation.

The next encouraging aspect of Mr Coveney's update is his plan to address existing disused accommodation in a meaningful way - particularly in the commercial sector. He specifically mentions a local-authority-driven "Repair and Lease" initiative whereby local authorities provide grants to owners of run-down or disused property to repair and upgrade it for habitation in exchange for a right to use it for local authority housing.

This is a really good idea. As retail and traditional manufacturing have shrunk in Ireland, vast vacant commercial spaces have opened up over shops and in old fashioned industrial estates. In the former cases, they are blocked from residential usage thanks to planning rules and red tape, and in the latter case, by intransigent commercial zonings. Anything that can help free up existing space for fast conversion to residential use would, like the student housing drive, make a big impression on the crisis. Again, many of the buildings are already in place so conversion costs should be more reasonable than new construction costs.

The next most encouraging factor in Mr Coveney's statement comes from his promise to comprehensively assess "true" levels of demand. This is a very tricky question indeed and the answer has been fuzzed up by the Central Bank's lending regulations. The regulations have killed demand and have adversely affected the purchasing chances of 70pc of would-be purchasers in Dublin.

So it will prove very difficult to assess "true" demand in a market in which so many have been artificially ruled out of purchasing in the first place. Essentially, there are now two years' worth of postponed purchasers waiting in the wings for a lending regime change. It is also quite clear that most of those currently renting in the cities would like to buy their own home at some point.

Developers have stated that there's no point building more homes if people can't actually buy them. The Central Bank lending regulations combined with excessive levies, standards and taxation on home building mean that houses can't be built in many areas at prices for which people can obtain mortgages.

There are also huge regional variations on "true" demand. A localised housing crisis in a middle-sized town may only require the addition of a few properties in order to solve the problem. If three families are chasing just one available property, then the demand is for three properties not for 45. In raising the issue of "true" demand, Mr Coveney and his housing crisis team are showing they are aware of the real problem of overshooting the supply side rectification and, in doing so, tipping us into another property downturn.

Finally, Mr Coveney and his national housing-plan team admitted they need more time to address issues in the rental market, an area not covered extensively enough in the July announcement.

The man on the job has the foundations and a decent progress report in place. We should be impressed thus far.

Indo Property

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