Saturday 19 January 2019

If Kenny is wise, he'll focus on the housing crisis and hit it with everything he has got

If Mr Kenny has demonstrated one proven talent as Taoiseach, it is an ability to concentrate on one central issue to achieve concrete results
If Mr Kenny has demonstrated one proven talent as Taoiseach, it is an ability to concentrate on one central issue to achieve concrete results
Ivan Yates

Ivan Yates

Now that we finally have a Government - even if the ground is a little shaky under its feet - the business of running the country can finally begin.

Our senior civil servants can begin to restore a sense of direction. Policy implementation can resume once more with today's publication of the new Government's programme.

The protracted wheeling and dealing between Fianna Fáil and Fine Gael, and Fine Gael and Independents, has resulted in a dolly mixture of copy-and-paste segments from various manifestos.

It is a populist, pot-pourri of localised pet projects, ranging from garda station reopenings, such as the Stepaside station, to restoring the Athenry rail links.

In other words, crude constituency 'whatever you are having yourself' politics.

None of this addresses the most pressing issue which has become a national crisis - the lack of new housing.

If Mr Kenny has demonstrated one proven talent as Taoiseach, it is an ability to concentrate on one central issue to achieve concrete results.

Through delegation and a sharp focus, he has juggled competing demands. From 2011 to 2013, during the reign of the Troika, he held the line on budgetary discipline, containing expenditure within budgets, and widening the tax base. Job creation was the one overriding theme of all policy objectives - every minister knew the number one priority across government. Unemployment halved, and an extra 40,000 jobs were created annually.

Realistically, Mr Kenny now has a year before Fianna Fáil and/or Fine Gael leadership pretenders become restless. If the Cabinet applies a scattergun approach and targets a range of policies, they will miss the mark.

They must not be hidebound by excessive caution, with the fear of a Dáil vote paralysing progress. Fine Gael needs to be bold and to bag a big success. I suggest housing should be their prime priority.

It is an area that offers visibly measurable success milestones, in the manner in which it went after unemployment. It brought jobless figures from 15pc to 8.4pc and achieved a halving of the live register.

In the area of housing, there is urgent need for action. People are suffering. There are homeless families in emergency accommodation, long waiting lists for social housing, and quarterly rent statistics are crying out for attention - there is political capital to be made if the Government can make progress on these issues.

New Housing Minister Simon Coveney has a one-off opportunity to make an indelible mark to stimulate residential construction.

The Cabinet subcommittee on housing, meeting monthly, will be critical to success.

Mr Coveney will need vital support from Finance Minister Michael Noonan for tax reductions, and to engage Nama in the development of idle strategic sites.

He will also require Paschal Donohoe in Public Expenditure to back extra resources for the development of water, sanitary services and roads infrastructure.

The Department of the Environment will also have a role to streamline the planning processes, and also reduce development levies.

And Social Protection will have to adapt the rent supplement, as well as housing benefits to prevent evictions.

There is a job too for the Department of Enterprise to channel finance to construction firms, expand building apprenticeships and address skills shortages.

It will be a team effort and all departments must act in unison.

I believe that the policy launched in May 2014, Construction 2020, has failed. The latest construction index of activity shows a decline, and that is off a low base.

House rents in Dublin now surpass the boom levels of 2007-8. Some 6,000 people are tonight in costly emergency accommodation. And 90,000 applicants linger on social housing waiting lists, while local authorities only built 75 houses over the past year.

This creates a spectrum of problems. Employers can't recruit staff who can't get accommodation. Housing costs absorb 30pc of monthly employee incomes. About 40,000 hardcore mortgage arrears cases still persist, with imminent prospects of 5,000 evictions or repossessions. Young couples cannot obtain affordable starter homes.

The solutions really don't require any further analysis. Reports from commissions, expert bodies, and committees already exist, along with dozens of recommendations from voluntary organisations, the construction industry, surveyors, estate agents and the Housing Agency.

Political risks have to be taken urgently to jump-start annual house construction from 11-14,000 new units per year to 25,000.

Most of these are required in cities like Dublin, Cork and Galway, as well as the commuter counties of Kildare, Wicklow and Meath.

Previous reliance on Nama or market forces isn't working because of legacy dysfunction from the boom and crash, when we built 93,000 new units in 2006.

The introduction of a two-year VAT reduction from 13.5pc to 9pc for all new starts from July 1, 2016, to December 31, 2018, would be a game-changer. On average, this would make houses €7,000 more affordable. It would incentivise builders to build. Like the VAT reduction on the hospitality sector, (the last administration's most effective measure), it would create 20,000 jobs. Over the same fixed period, a development contribution rebate scheme in the form of a 100pc refund could be introduced, conditional on fixed sale prices, avoiding profiteering.

Both measures would instantly entice immediate development.

Construction firms cannot obtain adequate finance. Lending institutions are only prepared to provide 60pc of the cost of new projects. This means the remaining 40pc has to come either from equity funding or long-term capital provision.

We need to also introduce a 'carrot and stick' approach with a more vigorous penalty on hoarding green/brown field sites with maximum potential, especially for sites near to public transport access. The vacant site levy of 3pc should be raised to 10pc for next two years.

To stimulate investment exclusively on new-builds for buy-to-lets and encourage landlord construction expenditure, full capital allowances and 100pc interest relief on borrowings should be credited on the taxation of rental income for accommodation built and completed prior to December 31, 2018, for social/affordable housing stock.

Irish Independent

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