Mark Keenan: 'We're seeing the beginning of the end for home ownership in Irish cities as we know it'
We are today witnessing the beginning of the end of widespread home ownership in the cities of Ireland as we know it. I'm talking about the mortgage to ownership model we have become familiar and comfortable with over three and four generations and as originally encouraged and developed by the founders of our state.
Under the new emerging model, rental will no longer be for students and singles (as it once was) nor for young families aspiring to eventual ownership (as it is now) but for almost everyone who wants to live and work in an Irish city.
In place of the long-standing mortgage-to-ownership model, we are now witnessing the advancement of a Government encouraged reversion to the universal rental model of housing, as was once widespread in Irish cities in the colonial era. The difference this time is that in the years ahead, faceless international capital funds, rather than privileged individuals, will control the huge swathes of new city housing which are emerging.
Like the city slums of old, the new cities will be piled high and the spaces will be small, dark and restricted. The rents will be high relative to what's on offer. But instead of being provided harum-scarum by random sub division of former luxury homes, as occurred in the 19th century, this time it will be provided in homogeneous blocks of "units", manufactured and churned out like boxes of washing powder and bottles of Coke.
Instead of being sold to us, the deeds will be retained by vast global corporations and the occupants will rent en masse.
The children of city dwellers who grow up in semi-detached houses today will tomorrow bring up their children in these blocks in rented spaces half the size of the average semi or smaller. This is already happening with young families commonly renting now in two-bed apartments. While most are currently attempting to save to buy, increasing rents are slowly stamping out those aspirations. Before long they will accept their lot.
It is likely that the rent they will pay going forward will continue to proportionately exceed that which their parents today pay towards ownership of three and four-bedroom estate semis and terrace houses. Big funds will make wholly commercially driven decisions on occupation levels and market rents. So one might decide to leave its blocks 40pc empty in return for higher rents from the 60pc. The capital value of the units can make the financial running in a rising rental market. This is housing as pure commodity.
If all of the above sounds like a fanciful conspiracy theory for the tinfoil hat brigade, consider the recent reproach of Ireland by the United Nations, which last year published an unprecedented report about the rapid commoditisation of housing worldwide. Recently the UN named Ireland among the countries in which this was most notably underway.
We read extensively about 'cuckoo funds' which are currently playing a twofold role in the Irish housing market. First by becoming increasingly involved in buying up a huge chunks of all new housing wherever it emerges (they have been buying swathes of new houses as well as the much publicised whole apartment block acquisitions).
Second, they are creating their own market with vast purchasing powers excluding private buyers, thus creating more customers for rental.
At the moment those seeking to trade down to apartments have increasingly seen funds buy up all the new apartments in their areas.
The UN report shows how unregulated global capital has been responsible, at a rapidly escalating rate through the last decade, in distorting housing markets from Sydney to Vancouver by turbo boosting both prices and rents to a level that excludes the poor and drags the middle classes from mortgaged ownership into renting.
The UN report says this development has created housing precariousness on an unprecedented scale. It estimates that hundreds of trillions of dollars are currently being invested in residential property worldwide with the effect of accentuating housing need: displacing poor residents (often through forced eviction), driving up wealth inequality, and creating social dead zones in the hearts of cities.
If we want to see what they're on about, just hop on a Ryanair to London where in areas like Kensington (an early prime target) housing has been commoditised to the degree that the owners don't want anyone living in it. Just like gold bars sitting in a bank vault - valuable in its own right without bothersome occupation. Vacancies in Kensington have been running at 40pc. Meanwhile, London-born middle and lower classes are either renting or leaving, thanks to the resulting high prices. Vast nearly- new blocks sit there unlit at night.
Having started at the luxury end, commoditisation is now breaking into the lower and middle bands. The UN warns of big funds angling to take on social housing, offering governments the carrot of taking that costly responsibility off their hands.
Does this seem familiar?
While the official line on social housing provision built and held by the state is neutral, the Government's actions speak louder. The construction of such local authority housing continues to be minimal. Instead we have a national housing plan loaded with a very high privatisation requirement.
We have a housing minister who changed the planning laws to permit higher blocks with smaller and single aspect units required to enable the build-to-rent model. Last week our finance minister, who enabled the favourable tax concessions that allowed funds to buy more than 3,000 homes in 2018, defended these funds in the Dáil. Finally Central Bank lending rules increasingly exclude punters from owned housing and dictate that they pay more in rent than they would have done for the mortgages they no longer qualify for.
It means that history will likely credit this Government, and those who keep it, for enabling the end of home ownership in Irish cities as we have known it.