Saturday 21 September 2019

Home Truths: The cuckoos are not the problem - blame State policy

 

Owner-occupiers locked out: The proposed redevelopment at Dublin’s Connolly Station will include 697 build-to-rent apartments. Artist's impression Taken from the website of architects Pascall & Watson
Owner-occupiers locked out: The proposed redevelopment at Dublin’s Connolly Station will include 697 build-to-rent apartments. Artist's impression Taken from the website of architects Pascall & Watson
Sinead Ryan

Sinead Ryan

Cuckoo: a bird of the Cuculidae family. There are 54 species in total but only two of them are native to Europe. A female cuckoo famously doesn't build her own nest but uses the nests of other birds to lay her eggs - up to 22 in any one season. More than 120 species can be tricked into raising young cuckoo chicks as their own, saving momma bird the expense of rearing them.

First we had the vulture used as a pejorative term, now it's the poor old cuckoo. When it comes to housing policy, their poor reputation precedes them.

The term 'cuckoo fund' relates to those investment vehicles which buy up entire apartment blocks for letting, kicking out prospective young first-time chicks who might want to have their own home rather than feather the nest of an American hedge fund.

But it's a poor analogy.

First of all, they make up the tiniest segment of the market. Far from being the sweeping, pervasive force it is claimed they are, in fact fewer than 3,000 units, mainly apartments, were bought by 'cuckoos' last year, spending a total of €1.25 billion - chicken-feed in investment terms.

They cater for a particular market and make no apology about it: professional city slickers, working in one of the multi-nationals we work so hard to attract to our shores, or young couples on an upward career trajectory for whom €2,000 a month is easily found within their income bracket.

In our developer-led market, it's the case that many of these units may not have been built at all if it were not for the ability of a behemoth investor to swoop in and buy up the lot.

And why wouldn't they? The Government has thrown the rule book out of the window when it comes to many of these developers. They don't tax them like other landlords, for instance (in some cases, not at all); many don't need to worry about pesky Rent Pressure Zones, and obliging the Rental Tenancies Board merely raises a smile. Why have a tenant when you can have a licensee, and why offer any social housing when Part V regulations are for the little guys?

On average, each man, woman and child in Ireland owns around €140,000 of 'wealth'. It's a crude sum, but an effective marker. Half of this is tied up in property. We are asset builders rather than income growers.

The system is designed that way; indeed, it is enabled and encouraged.

If you earn €70,000 as an individual through work, it is taxed at around 50pc. However, own it in your home, and the tax is 0.18pc. No wonder 92pc of all landlords are the 'amateur' kind. That is, they own just one, two or three other properties. Not 50, 200 or 1,000 like the cuckoos and vultures.

Asset-based wealth has been a feature of Irish aspirations since the Irish were ever allowed to own property. It has been promulgated enthusiastically by every government since. It is the basis of our inheritance, pension and tax planning.

So don't blame the odd cuckoo for getting in on the game; they fly by even more generous rules than the rest of them!

The developer-led model we employ is entirely dependent on profit-making. The owner of the land takes all of the risk - financial, planning and construction. Building five or 500 housing units is not done in collaboration with the State, or even oversight of it, never mind co-operation.

Development is carried out where the land is, based on the maximum profit that can be extracted from it, not where it is necessarily needed, nor with social conscience in mind. If you want social housing for purchase or long-term rental for low-income earners, don't ask a profit-driven entity to deliver it. It's madness. Why would they take their profit over 40 years when they can make it in four?

In other countries where societal development is at the centre of planning, you tend to find, along with private housing and social housing, a third kind: public housing. Public housing in Vienna accounts for 60pc of all property. Almost two-thirds of people live in buildings constructed in conjunction with, and collaboration of government and developers. The state divvies out parcels of land where planners believe housing should be built, rather than give the builders free rein on whatever they can find.

In Sweden, if you own a property to rent, you must offer it for life to your tenant. In Belgium, property inflation is a steady 3-4pc a year; there are no roller-coaster booms and busts in housing. This is because, unlike in Ireland, housing is seen as (a) a right, (b) not conflated with home ownership and (c) built to home people, not improve wealth.

The cuckoo is not the problem; policy is. But perhaps we would all feel a little bit better if the cuckoo tended the collective social nest, rather than selfishly cherry-picking for its own.

This is entirely within the Housing Department's ambit. It can, immediately, insist that the cuckoos pay their dues to society in both tax and housing for those who need it but cannot afford it, and treat their tenants in the same manner as the 'amateurs' must, rather than as a scaled up Bean an Tí, who can kick out the naughty kids when the summer's over, which is all a licence requires.

But the Department remains curiously disinclined to do so.

Indo Property

Editors Choice

Also in Life