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Dr Rory Hearne: Investors received a clear message from Government last night - 'keep buying, you're flying'

The housing analyst responds to last night’s announcement by Government on investment funds and property.

Rory Hearne Lecturer in Social Policy

THE GOVERNMENT BOTTLED it. When faced with the clearest of choices between taking measures that would benefit Generation Rent or continuing to support the cuckoo funds and Real Estate Investment Trusts, they backed the investors and the markets. The investor fund measures are meaningless.

They will be utterly ineffective to stop the funds buying up homes – apartments and houses. And worse than that, the measures give certainty to the investor funds that this Government isn’t going to touch them.

So it’s a green light to the investors to plough on – ‘buy, buy, buy’.

Don’t just take it from me. Just look in the picture below which shows that the stock market share values of Irish Residential Properties REIT, Ireland’s largest landlord, rose significantly on the opening of business today.

If the measures were going to have any serious impact on their profits and investment strategy of buying up Irish homes and renting them out, then the share price would have fallen. It didn’t fall. It actually rose in value, by 2.6%. That’s hardly a sector in retreat.

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The Government measures have sent the signal to the markets – Ireland’s homes remain a highly lucrative asset for your investments. Vulture and cuckoo Real Estate funds remain central to the Government’s housing and economic policy.

Generations let down

And Generation Rent, Generation Locked out, Generation Stuck at home, and our children’s children will pay a massive price in lost dreams, stunted ambition, emigration, lost lives, poverty, and homelessness.

It is illogical that the proposed restriction on bulk purchasing of houses relates only to new planning permissions, and do not apply to units with planning permission already.

There are tens of thousands of houses with planning permission that will be built in the coming years that will be exempt from this restriction. The planning measures will not have any impact for years to come. This means first time home buyers and those seeking to get an affordable rental home will continue to be outbid by cuckoo funds in the coming years. Watch as investor funds continue to snap up houses.

But most significantly none of the measures relates to apartments. Apartments are homes too. Most new homes being built in Dublin will be high density and apartments. So as I said before, it’s a case of if you are looking to buy or rent a new home inside the M50 forget it. Inside the M50 is investor land.

But apartments will also be a significant provider of homes in cities like Galway, Cork, Limerick and some towns. Watch as the investor funds buy those up too. The problem with excluding apartments from the Government measures is that it essentially means all new apartment supply will be build-to-rent at unaffordable rents.

This is a social disaster. The rents they charge are unsustainable. It also, even more significantly, means that investor funds will continue to bid for, and buy up land in Dublin the commuter belt and all around the country, inflating land prices even higher – a key factor that influences house prices.

These measures could mean we are likely to see a major expansion in funds buying up land in order to put in planning permission for build to rent apartments. Any Irish developer or builder seeking to build low-density houses, or affordable housing providers will not be able to compete with these funds in the purchase of the fundamental ingredient for housing – land.

And if they do manage to buy the land, it will only be at inflated land prices which mean the houses will have to be more expensive anyway. Also if there are no affordable apartments for people to buy, then inevitably that will put even more pressure on house prices, as there will be even greater demand for the limited supply of houses. Pushing house prices further out of the reach of Generation Rent.

Ultimately it’s the high rents that these funds can get that makes Ireland most attractive. The Government did nothing to address that. And so they will continue to roll in, lock you out of affordable homes and lock you into permanently unaffordable rents.

On my podcast, Reboot Republic, this week, Professor Lorcan Sirr, outlined that these real estate investment funds are only here to maximise their return on investment, and these measures will not deter them as they look at their investment over the long term, and the rental yield is key. He explained that countries like Germany have banned these funds. So why do we not do that here?

The government claims these funds are needed to supply and finance the delivery of housing. That we are dependent on them. This is not true as I have outlined in my previous articles, and in my book, and have shown from other countries.

Our State is a slave to the market

Just take NAMA, for example, it’s a state agency owned by you and me. Yet Government leaves it sitting there selling homes to investors with the finance and land to build 70,000 homes – three years housing supply.

The O Cuallann Alliance has explained how with just €500 million state funding it could finance the building of 5000 affordable homes per year. The state can borrow at zero cost to build, the credit unions have billions, the European Investment Bank has said it is open to lending for building affordable homes.

We could be funding the building of 30,000 affordable homes – a mix of social, public lifetime rental for middle income and genuinely affordable homes to purchase. The private sector would be involved – as the SME builders and all the associated trades and professions required to deliver on that scale.

The finance argument is another red-herring to try deflect attention away from their reluctance to disturb the market and investor funds. They are trying through spin and bluster to portray that they are standing up for homeownership but it’s a lie. They they are not. Some of them know this, and others have convinced themselves they are through their own delusion.

If they were serious about affordable homeownership they would direct NAMA to sell all its remaining units at actually affordable prices to home buyers and fast-track the building of 60,000 homes in three years – that would be a supply that would deliver affordable homes and bring down house prices. But they don’t want to disrupt the market. They just want a trickle of affordable homes delivered – so they don’t upset the markets and investment funds.

They are throwing around the accusation at myself and others of being ‘ideological’. But they have a clear ideology too. Their ideology is the market. Their ideology is pro investor and pro the private property market – and its anti genuinely affordable housing to buy and rent.

Their ideology is housing as property, housing as asset, housing as investment. Their ideology has utterly failed and causing a social catastrophe in the housing crisis. A new ideology is needed urgently. That ideology is a new value framework that views that key function of the housing system as delivering an affordable, lifetime secure, decent standard home for everyone.

That new ideology is one that views housing as a home, not an investment asset. The new ideology we need is the human right to housing for everyone. The reason they are throwing around the accusation of ideology is a form of projection – the psychological term of unconsciously taking unwanted emotions or traits you don’t like about yourself and attributing them to someone else.

The tide is turning

They do not want people to see they are deeply ideological in their housing policy – wedded to the private speculative market model of investor funds, banks, big developers, and large landlords. They do not want people to see it. But the veil has been lifted to reveal who they are actually making policy for. People see through the spin at last.

That we got 25,000 signatures on the petition I set up with Uplift in just over a week is a demonstration of how Generation Rent are no longer accepting it. We have reached a turning point in the housing crisis. Generation Rent is a generation that has stood up and achieved massive social change on Marriage Equality, On Repeal, on mental health, and now are standing up on their most basic of needs – a secure affordable home to rent or buy.

They realise they were the sacrificial lamb for the Irish economic recovery, their dreams of owning or renting an affordable secure home were sold out to investors and the property market.

I set out in my book the potential for a housing dystopia ahead in Ireland of housing exclusion and huge human suffering caused by a permanent housing crisis, and that is what is likely if we continue with these policies. But there is an alternative. As I have outlined above. Other countries like Austria, Germany, have affordable housing, this is utterly doable.

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But it will require a social movement of Generation Rent – linking together all the groups affected, across the generations, talking about it, talking to their parents, about why we need a major radical shift, why we need the policies outlined in the Uplift petition.

Telling the human stories were key to previous social change and so we are encouraging you to tell your story of how the crisis is affecting you, let us help each other through these difficult times, plan out what should be done, continue to propose and pressure the Government to introduce the measures needed, such as rent affordability measures and a Right to Housing Referendum, and creatively develop ourselves the ways we can create a new housing system (also through tenant campaigns like CATU, and building cooperative and community lead housing) and together a campaign for, and achieve it. We can ensure everyone has an affordable secure home.

It’s going to take work and campaigning. Let’s do it.

Dr Rory Hearne is Assistant Professor at Maynooth University and author of Housing Shock: The Irish Housing Crisis and How to Solve it (Policy Press, 2020). 

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About the author:

Rory Hearne  / Lecturer in Social Policy

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