LAST WEEK THE Construction Industry Federation (CIF) painted a bleak forecast for another reduction in house building throughout 2013. New housing supply has gone effectively from a feast to a famine in less than ten years – the heady days of over 90,000 homes completed in 2006 compared to a 90 per cent fall in 2012.
Despite this, social housing never reached more than 10 per cent of overall housing output. In the boom although Ireland completed up to 20 new homes per 1000 population – the highest in the EU – Â less than two new homes were for social housing, one of the lowest in the EU. The foundations of an unbalanced Irish housing system were being created.
The funding of traditional social housing has almost disappeared but a joint commitment is now required to support the new social housing financing regime to reduce waiting lists.
High demand – historically low supply
At a time when demand for social housing is at an all-time high, the traditional mechanisms for delivery of social housing have completely stalled to historically low levels. Since 2008, the capital expenditure for social housing has been sacrificed more than most areas in successive budgets with cuts of 80 per cent (from €1.3bn to €275m). This is at a time when demand for social housing has reached an all-time high with nearly 100,000 households on waiting lists and in need of social housing supports. Unfortunately in terms of political priority and allocation of resources, the image and debate on empty properties masked a huge underlying problem – an escalating demand for social housing support.
The effects of this can now be clearly seen in the sheer drop in output (new build) from both local authorities and non-profit housing associations. There has been a 90 per cent decrease in housing output from local authorities between 2007 and 2011 and a 73 per cent decrease in the number of houses completed by non-profit housing associations. Families remain on the waiting lists longer with reduced new supply and turnover of existing vacancies.
Statistics such as these illustrate the stark reality of the challenge ahead for non-profit housing associations who have been placed firmly at the centre for the future delivery of social housing by the Government. One of the key reasons is that housing associations have the ability to raise non-state finance which will benefit the Exchequer and assist local authorities in meeting their housing needs. However, housing associations, whose work began in the 1890s, need to have all other processes in place such as a stable policy, financial and regulatory framework to make this happen.
NAMA properties
Housing associations have had no option in recent years but to look at more innovative ways of delivering housing. Without the significant state capital budget to build or purchase properties, leasing supply options offered the most potential to ensure a continued supply of housing for those most in need. The properties identified by NAMA and those in ghost estates – where they are fit for purpose and, importantly, meet the demand for housing in a particular area – offer some potential.
The difficulty arises when the properties are not available in areas of social housing demand, particularly urban areas, and there is an oversupply in other areas of low demand where housing was never built for a rental market. Unfortunately some of these properties will face the wrecking ball if they can’t be salvaged.
The shift away from capital expenditure to revenue expenditure for social housing such as leasing is not, in principle, the problem. Work has progressed by the sector over the last two years to use mixed financing models of raising loan finance from a few keen financial institutions with less dependency on the traditional 100 per cent state capital funding. This shift will not happen overnight but there will never be a better time to accelerate this new programme of mixed funding of social housing if we get the foundations right.
Construction activity
The market-led responses to housing have been dominant and for housing associations to make a dent in the waiting lists and assist local authorities, it is time now to test the mixed funding model on a much greater scale as the number of suitable vacant properties will likely dry up in the next few years. Significant land is still available and this should be a great opportunity to start building again with a mix of private and public funding. This will also provide for essential construction activity.
All stakeholders, housing associations, Government, local authorities, financial bodies and NAMA should have the common goal of a greater supply of non-profit housing to assist local authorities in reducing waiting lists. With other social housing reforms ongoing such as with rent allowance, new social housing delivery mechanisms can offer some additional solutions that have a significant multiplier effect for the economy.
Donal McManus is the Executive Director of the Irish Council for Social Housing.
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