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Why can’t government ministers go cold turkey on home ownership?

The country, along with potential house buyers, is being held to ransom.

HOME OWNERSHIP IS like a drug to government ministers. Sometimes they pretend they’re off the junk but in the end they always give into temptation, knowing it’s probably going to end in tears, but they just can’t help themselves.

Recently, yet again, both a government minister and Fianna Fail succumbed to home ownership’s drug-like properties by suggesting that first time buyers be helped reach new Central Bank deposit rules. This move to help first-time buyers is wrong on at least four counts.

Firstly, those Central Bank rules were put in place for a reason. Helping people circumvent them renders the function of the Central Bank questionable. If the government wants the Central Bank to help the state maintain a healthy banking system, then it shouldn’t go out of its way to undermine what it does.

Secondly, the proposal of the minister blatantly contradicts the government’s own housing policy – put in place by another Labour minister – of promising ‘equity across tenures’. Helping first-time buyers flies in the face of that policy. It is also unfair to anybody who may not want to purchase a property that they are now, again, being asked to subsidise potential home owners.

While renters wait for the basics like a deposit protection scheme, something that has been on the cards for 20 years, and which the minister for the environment promised vehemently would happen last October, the government finds time and money for home buyers.

Where’s the equity in all that?

Not tackling the real issue

Thirdly, it is lazy. It’s too easy to throw taxpayers’ money at potential home-owners to help them buy houses. Instead, government should be looking at creating a more balanced housing system with home ownership part of a broader mix of tenures including renting, temporal ownership and other intermediate tenures, and social housing.

Ideally, home owners should comprise about 64% of a housing market, which allows for affordability, flexibility and labour mobility to be kept in equilibrium. It is ironic that given the shortage of housing available and the consequent rising prices, all this initiative will do is inflate house prices further.

Finally, supporting potential buyers afford what is on offer is not tackling the real issue which should be about questioning suppliers and making what is on offer more affordable. What’s happening now is like a loaf of Brennan’s bread suddenly selling for €5, and instead of challenging Old Mr Brennan on the price of his flour, the government is giving people an extra €4 to help them buy their sliced pan.

Fear of tackling the construction industry

Governments are reluctant to tackle the construction industry because the construction industry traditionally has very close political connections. According to Elaine Byrne, between 1997 and 2007 about 35% of Fianna Fail’s donations came from the construction and property industry. Alternatively, see Tom Parlon’s slide from politics to the Construction Industry Federation, or the Fianna Fáil tent at the Galway races.

The construction industry is also low hanging fruit for job creation (and hence easy votes). Many construction jobs require unskilled labour and so helping developers is an easy means of getting low qualified people off the dole, at least temporarily.

In not tackling the construction industry, the government gets led by the nose by it. Official construction industry figures are manipulated to make house-building seem more expensive than it needs to be.

For example, for a housing development of one hundred units, the official industry cost for a solar panel is €5,100 per house. My own research found the same model could be bought for €3,600 and even less per unit for one hundred, so why can’t builders?

Being held to ransom 

In Ireland, super normal profits are supernatural profits, and because they’re used to them the industry won’t build until they can reach them again. This is holding the country and potential house buyers to ransom.

Irish developers are not royalty, and if can’t afford to build like they say then let them go and buy a taxi plate or work in a Spar like everybody else has to do (or perhaps they´d like to try JobBridge?). Right now, they’re holding up progress, so we need to bypass them.

I suggest the government bring in the National Development Funding Agency to tender across Europe for batches of five hundred to a thousand housing units at a time (not necessarily large estates), incorporating social housing, intermediate tenures and private housing. This ensures economies of scale, and hence affordability, as well as building in the quantities we need.

It also helps diversify the housing market away from total home ownership, which is important for a properly functioning housing market, thus killing two birds with one stone.

I’m not sure why we’re waiting for the Irish construction industry to shift itself when there are many more competitive European house-builders out there who would jump at the chance to build at scale in Ireland. And the NDFA are very good at managing contracts and accommodation works.

I reckon Minister Kelly has the force of character to do this – and what I’ve proposed is not rocket science or impossible – but has he got the guts to go cold turkey on home ownership and indeed the builders?

Dr Lorcan Sirr is a lecturer in DIT, and currently profesor associat at the Universitat Rovira I Virgili, Tarragona, Spain.

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