Eilis O'Hanlon: The housing crisis is about people, not just prices
Houses are not affordable, whatever economists say. Just ask anyone still struggling to buy or rent one, writes Eilis O'Hanlon
In any normal week, an announcement that house prices were set to rise by 20pc over the next three years would be significant news.
That finding by the Economic and Social Research Institute's (ESRI) latest assessment of the Irish housing market did indeed hit the headlines when the research was published last week.
What proved that the world is now anything but normal is that this was accompanied by the widespread assertions that the housing market is not overheating; that house prices remain affordable, according to international standards; and even that they're slightly "on the low side". Say what?
Right now in Dublin, the average price of a house is €401,890. That's for properties which are far from fancy; what an auctioneer might even call "bijou" or "compact"; and which those who have to live in them would regard as shoe boxes. Sufficient perhaps for a singleton or young married couple but hardly bearable for anyone with more than one small, very docile child.
To afford to live in such a house, said couple must stretch themselves to the absolute limit financially. Pray tell, ESRI, is that "on the low side"?
The institute's research is not in doubt here. They used "several methods" to calculate the data and looked at all the so-called fundamentals.
But when intellectuals deplore the increasing loss of faith in experts, seeing in it a sign of increasing anti-scientific irrationality, this is what they fail to grasp - that a boffin can correctly amass all the relevant evidence, analyse it thoroughly according to best professional practice but still come up with the wrong answer.
The smallest outbreak of common sense should set off alarm bells at this report.
A non-expert would have asked some simple questions, such as "If house prices are affordable, why can't I afford one, despite my partner and I having perfectly good jobs and living more frugally than Buddhist monks?" Or "If house prices are 'on the low side', why are my children probably going to be renting for the rest of their natural lives?" Even: "If houses are going up by more than four times the rate of wages, how can I ever catch up?" Faced with all that, the puzzled non-specialist might decide to agree instead with the director of the Nevin Economic Research Institute who points out there's "not a chance" average workers can afford a house in Dublin.
The questioner would then be inundated with expert analysis showing that what he was seeing was, in fact, not happening at all, bringing to mind the famous quip by Groucho Marx: "Who are you going to believe - me, or the evidence of your own eyes?"
Experts such as the ESRI say: "Trust us". Laypeople keep trusting instead what they see around them, even if they don't have the statistical tools to fight back against the army of spreadsheets and forecasts telling them they're wrong. And it's not as if the experts do this because they're bad or because they don't care.
It's just that they're able to tot up the house price-to-rent ratio and determine that we're not meeting the conditions which would allow it to be called a housing bubble but are unable to recognise that they're in a bubble of their own, preventing them from seeing the gaping disconnect between theory and experience, then asking: "What are we missing here?"
What they may be missing is that their obsession with seeking reassurances that the Celtic Tiger is not repeating itself has blinded them to new, but equally pressing, problems. Like generals fighting the last war, they're doing what economists have also been accused of doing, which is fighting the last depression.
This makes sense if the economy always behaves predictably by making the same mistakes, but the evidence suggests it just makes new ones. It may well be that the main problem now is a lack of supply; but the idea that house prices must be affordable because people are paying them is the same logic which said the housing crash wasn't as bad as it looked because people were still paying their mortgages. Yes, they were, but at huge personal cost.
Same now. Are house prices affordable to emigrants who left Ireland in the last decade and might want to come home? Are they affordable to people who don't want to spend the best years of their lives in traffic as they crawl in to Dublin from commuter counties and further afield?
How, for that matter, can economists say house prices are not out of step with wages if they fail to take into account that buying a home these days needs two incomes, which, if the couple have children, also means paying for childcare, which in Ireland is disproportionately expensive?
Nor do we have an affordable rental sector to soak up the pressure. The latest report from daft.ie, tracking rents for the year to September, shows double-digit increases in that time alone. Kildare rents are now 70pc higher than at their lowest post-crash point. Limerick has seen a 57pc increase in just five years.
Meanwhile, yet another survey, this time by expats, has rated Dublin 47th out of 51 cities in terms of its attractiveness to emigrants. The reason? The high cost of living and exorbitant rents. What was that about affordability again?
There is no obvious answer, though wasn't former Housing Minister Simon Coveney promising this time last year to work body and soul to fix this "national emergency", before jumping ship for the more glamorous port of Minister for Foreign Affairs? It must have been a dream. More than one year on, the crisis continues.
Obviously, we need to build many more houses, and release the land at competitive prices on which to build them. That goes without saying. Planning reform and fast-tracking of projects likewise, as well as more funding for social units. All of these were identified by Coveney's ambitious Rebuilding Ireland plan.
But it's also true that there are no obvious answers, and, despite correctly assessing the situation, Opposition deputies and rival economists and analysts have no more idea how it can be done than anyone else.
The private sector proved during the boom that hundreds of thousands of units can be built if there's a profit to be made. The trick is to do the same in more straitened circumstances, and no one has figured out how to do that.
Fianna Fail leader Micheal Martin said last week: "The Government seem paralyzed by the scale of this crisis." He is surely right, but it's not necessarily deplorable to be stymied by a problem this big.
What are hailed as easy solutions turn out to be complicated. It's not straightforward to tax empty buildings or vacant land without falling into a legal quagmire, and labour shortages make fuelling a new construction effort difficult. The Nevin Economic Research Institute has come up with some proposals, but it's affiliated with the Irish Congress of Trade Unions - always a warning sign. Some might even call it a red flag.
Like many broadly on the left, its spokespeople are good at identifying shortcomings in the current economic model but not so good at finding solutions. It talks of wanting to create an "economy that works for society", which is meaningless gibberish. No one wants an economy that doesn't work for society, not even convenient villains such as landlords, developers and Government ministers.
But it's at a deeper level where the inescapable need for a house traps and curses every one of us to misery.
With winter approaching, the immediate focus is invariably on homelessness, particularly people sleeping on the streets, and on children in temporary, unsuitable accommodation. And rightly so because the numbers affected, whilst large enough to count as a national tragedy, are still small enough to make a solution possible. Those who are fighting through the courts to save their homes from repossession by banks have also captured much of the media attention, because for them the risk of being made homeless is imminent and urgent.
But having a house is not a magic carpet ride either. There are plenty of people taking extra jobs and making other sacrifices to keep on paying the mortgage, who never get any sympathy or attention. Or those who are forced to pay more rent every year, so can't afford to save for a deposit to buy a place of their own but who still don't know if they'll have a roof over their heads from one month to the next because leases offer little protection and landlords can always wriggle out of them.
There are no advocacy groups speaking up for them. People who struggle to keep paying mortgages and rents are just less likely to rail against the pressures they're under or to demand action.
These people never show up in the housing crisis figures, but they're living lives of quiet desperation. For them, houses have gone from being metaphors for security and safety to ones of insecurity and danger. Homes bring anxiety rather than comfort.
Economic reports don't make room for these housing market casualties, but they are legion, and there's no respite in sight for them either.