How do we deal with falling home ownership/ build more houses - long thread

[Brendan Burgess]

We have a serious and growing problem that a large group of Generation Rent will not be able to ever get on the housing ladder.

This has serious implications. Ownership of one's home has generally led to lower housing costs and increased wealth. While long-term renting is expensive and uncertain.

ESRI chapter on Intergenerational Inequality

https://www.esri.ie/system/files/publications/CB202104.pdf

 

[T McGibney]

Very easy.

1. Build loads of more houses and apartments for rental and owner occupier use.

2. Dramatically cut building regulations and levies back to early Celtic Tiger era levels.

3. Do likewise with planning restrictions.

4. Cut CGT on residential development land to 10% for a 3 year period.

5. Reintroduce a form of section 23 relief for new properties built or restored from dereliction within the same period

6. Ignore the naysayers and objectors.

 

[The Horseman]

Very easy.

1. Build loads of more houses and apartments for rental and owner occupier use.

2. Dramatically cut building regulations and levies back to early Celtic Tiger era levels.

3. Do likewise with planning restrictions.

4. Cut CGT on residential development land to 10% for a 3 year period.

5. Reintroduce a form of section 23 relief for new properties built or restored from dereliction within the same period

6. Ignore the naysayers and objectors.

I would add to this list. Extend the rent a room relief to landlords. Any rent up to a given figure then no tax anything above than tax on all of it.

Private renters rent reduces, landlords remain in market (available rental bed spaces remain) why supply of new properties to buy increases.

Savings on rent for private renters saved for use as deposit on property purchase.

 

[ryaner]

The lack of home ownership by itself isn't directly the problem. Look to multiple continental countries for longer term renters living in decent accommodation, with security of tenure, and generally affordable costs for examples. There does need to be a mix of high quality accommodation on both sides, for renters and owners. And especially with apartments, we need to improve the quality and also the rules around ejecting bad tenants.

 

[Sophrosyne]

This discussion paper from the UCD Geary Institute titled “Varieties of home ownership: Ireland’s transition from a socialised to a marketised policy regime” traces home ownership since Ireland ceded from the UK.

“Introduction

For most of the 20th Century home ownership rates in the Republic of Ireland rose steadily and were among the highest in the developed world. In 1971, 70.8 per cent of Irish households were home owners, compared to 50 and 35 per cent of their counterparts in the United Kingdom and Sweden respectively (Kemeny, 1981; Central Statistics Office, various years a). By 1991 Irish home ownership rates had risen to 80 per cent, compared to 65 in the UK and 39 per cent in Sweden (Bokovert, 2006; Central Statistics Office, various years)”


It is an interesting read. If you don’t want to read it all, the paper concluded:


“As the Irish case demonstrates when government supports are rolled back, home ownership declines, particularly among low income earners and average levels of associated debt increase.

Thus properly ‘neo liberal’, in the sense of entirely marketised housing systems are not characterised by very high (80 per cent plus) levels of home ownership but by home ownership among a small majority of the population accompanied by higher than average levels of (unsubsidised and unregulated) private renting1, and small, highly targeted social housing sectors.”

1: the paper was written in 2013 and so does not take account of legislative change in the private rental sector since then. However, the rest of the content is still relevant.

 

[nest egg]

The lack of home ownership by itself isn't directly the problem. Look to multiple continental countries for longer term renters living in decent accommodation, with security of tenure, and generally affordable costs for examples. There does need to be a mix of high quality accommodation on both sides, for renters and owners. And especially with apartments, we need to improve the quality and also the rules around ejecting bad tenants.

I'd agree, the solution shouldn't revolve around home ownership alone. Let's have a choice, especially for people who want greater diversification of their assets.

We should encourage investing via tax sheltered accounts (such as ISAs in the UK, Assurance Vie in France etc.) If the return on your investments cover your rent, you don't need to own your home.

 

[skrooge]

On the esri chart you could argue that through the selling off of social housing some of those lines are artificially high. I agree that homeownerhip isn't the glorious panacea to a housing crisis (unless what people really mean by housing crises is actually a homeownerhip crises?).

I'm not sure lowering building standards does anything in the longer-term. We want to avoid building the tenements of tomorrow for the sake of a short term fix. We don't have a great track record of meeting standards at the best of time and a considerable amount of construction resources will be spent fixing the problems of previous builders over the next couple of years. They could have be used elsewhere if the State had been on top of regulating building work.

What we need is consistency of approach/message. We're all waiting for the next knee-jerk government reaction. I know that the incentives to build tomorrow will be more than they are today, so why not wait to build. We need to take the politics out of it. A cross party agreement on housing might provide some level of certainty and actually lead to greater output.

 

[Bow tie]

If the gov decides not to build, build, build to bring the price down....we could incentivize parents to supply deposits to children.
We already have a form of this when parents are landowners and can give a plot, we could go all out and allow this one form of support tax free for all. The plot legislation includes clawbacks for timeframe and use- just apply the same to the purchased house.

 

[NoRegretsCoyote]

we could incentivize parents to supply deposits to children.

A parent has to give more to than €335k to a child before CAT is payable.

What more incentive do you need?

 

[Pinoy adventure]

A parent has to give more to than €335k to a child before CAT is payable.

What more incentive do you need?

Remove the 335k threshold.

 

[Silversurfer]

Looking at the figures of home ownership to those born in the 1950’s & 1960’s it seems that their children will inherit at some stage. So that is 60% with at least a sizeable deposit. It might not be soon enough for their liking but it will be available. For those on low incomes the Government should expand their plans to build modular homes as a form of social housing. Large numbers are living like this in the private sector. Our kids are going to school in these modular units too. Young people should be encouraged to start saving early and get well educated for jobs that pay well. Art degrees for 3 years and a masters for 2 years combined with travel for another couple of years means they are entering the housing market years later than their parents did.

 

[Bow tie]

A parent has to give more to than €335k to a child before CAT is payable.

What more incentive do you need?

That's pretty true, forgot about that.
I have thought for a long time that the housing market here might be moving toward requiring multi generational wealth.
Certainly in the last tiger people were encouraged to have parents go guarantor, give gifts etc. So if the purpose is transfer of wealth back to the younger generation maybe increase it?

 

[Bow tie]

Looking at the figures of home ownership to those born in the 1950’s & 1960’s it seems that their children will inherit at some stage. So that is 60% with at least a sizeable deposit. It might not be soon enough for their liking but it will be available. For those on low incomes the Government should expand their plans to build modular homes as a form of social housing. Large numbers are living like this in the private sector. Our kids are going to school in these modular units too. Young people should be encouraged to start saving early and get well educated for jobs that pay well. Art degrees for 3 years and a masters for 2 years combined with travel for another couple of years means they are entering the housing market years later than their parents did.

A society does need a mix of people though, students can't just be corporate fodder.
In addition not everyone is able for the courses that lead to well paying jobs.
There will always be some strata of people.

 

[skrooge]

Most of the measures I've heard so far are focused about increasing demand/purchasing power. Net effect will be a little more housing but more expensive property across the board. By increasing the benefits of homeownership I don't see how it's going to reduce the inequality? It's like trying to slow a car down with only the accelerator.

If it's inequality we want to deal with why not tax away the implicit benefits. Increases in LPT to fund an increase in social housing. Homeownership might be a dream for all but it's not going to be a reality for all. Higher property tax will make homeownership less attractive. It could also incentives empty nesters to downsize. Part of our problem is inefficient allocation of housing. There may be a time in my life when I need a 5 bed house but that will pass and the system should be designed to encourage me to move with I don't need it.

Another approach might be to tax the capital gains.

Of course this is all theoretical no government would bite the hand that elects it and the reality is most of the electorate are homeowners so we're left with the accelerator only.

 

[Bow tie]

As I've said in other threads, I don't think policy should railroad older people from their homes.

How about we do invest in local council housing again- however, it's only as a stepping stone to ownership.
A combination of very low rent, and say 25% rebate of your total rent paid becomes your equity when you move from a public council house to private? Have people considered for a 'move' application every 5 years?

 

[odyssey06]

Most of the measures I've heard so far are focused about increasing demand/purchasing power. Net effect will be a little more housing but more expensive property across the board. By making increasing the benefits of homeownership I don't see how it's going to reduce the inequality? It's like trying to slow a car down with only the accelerator.

If it's inequality we want to deal with why not tax away the implicit benefits. Increases in LPT to fund an increase in social housing. Homeownership might be a dream for all but it's not going to be a reality for all. Higher property tax will make homeownership less attractive. It could also incentives empty nesters to downsize. Part of our problem is inefficient allocation of housing. There may be a time in my life when I need a 5 bed house but that will pass and the system should be designed to encourage me to move with I don't need it.

Another approach might be to tax the capital gains.

Of course this is all theoretical no government would bite the hand that elects it and the reality is most of the electorate are homeowners so we're left with the accelerator only.

Tax away the implicit benefits and you discourage home ownership. Which translates to more people needing government support later in life from HAP and social housing etc instead of having the expense covered because they own their own home. And how are those supports to be paid for?

So all you have suggested will only increase inequality and encourage moral hazard.

Also, you only seem to care about inefficient allocation of private houses, what about all the inefficient allocation of social housing?

 

[Silversurfer]

A society does need a mix of people though, students can't just be corporate fodder.
In addition not everyone is able for the courses that lead to well paying jobs.
There will always be some strata of people.

Society does indeed need a mix of people. My comment was a suggestion for those attending college to study a course with a career path and start work earlier. Many are attempting home ownership in their mid thirties. Which with a 35 year mortgage being the norm makes it very difficult. Unfortunately ‘corporate fodder’ and mortgages go hand in hand. Those that are unemployed don’t have to live in expensive areas and perhaps could relocate.

 

[skrooge]

As I've said in other threads, I don't think policy should railroad older people from their homes.

Happy to have them stay where they are but I see no harm in them paying for the privilege. The LPT shouldn't be about railroading anyone but the LPT could reflect the cost to society of the 4 beds that might be underused? Is it really a bad thing for a couple in their 5 bed mansion to consider downsizing to a 4 bed smaller mansion?

Tax away the implicit benefits and you discourage home ownership. Which translates to more people needing government support later in life from HAP and social housing etc instead of having the expense covered because they own their own home. And how are those supports to be paid for?

That's a big leap you've taken there - no grey area with you it's all black and white! Your basic premise would seem to be that there is no inequality. Are you really suggesting that a tax increase will drive everyone onto HAP? I don't think exisitng or potential buyers are that fickle. The reality is people will want to own. It's as much a cultural thing as a anything to do with the tax benefits.

The average property price in Ireland is just over €300k. that's probably a mortgage of €1,300 a month. The LPT on that property is about €315 a year (or €27 a month). The average rent in Ireland is €1,500. There's plenty of scope to increase the LPT and have the average renter and new owner pay the same.

That's not even taking account of the fact many people own their home outright without a mortgage. The reality is many people have scope to pay more tax.

But my all means argue the point that pushing up demand for owner occupied housing is the way forward.

Also, you only seem to care about inefficient allocation of private houses, what about all the inefficient allocation of social housing?

No the problem exists there was well but thanks to the shortsighted view of previous governments there isn't a lot of social housing around the place at present.

 

[Sophrosyne]

The average property price in Ireland is just over €300k. that's probably a mortgage of €1,300 a month. The LPT on that property is about €315 a year (or €27 a month). The average rent in Ireland is €1,500. There's plenty of scope to increase the LPT and have the average renter and new owner pay the same.

That's not even taking account of the fact many people own their home outright without a mortgage. The reality is many people have scope to pay more tax.

Have you factored in property taxes and house and garden maintenance costs, particularly for older houses in your comparison of owner v renter? There is also insurance costs and in apartments, community fees payable by the owner.

 

[Purple]

Happy to have them stay where they are but I see no harm in them paying for the privilege. The LPT shouldn't be about railroading anyone but the LPT could reflect the cost to society of the 4 beds that might be underused? Is it really a bad thing for a couple in their 5 bed mansion to consider downsizing to a 4 bed smaller mansion?

That's a big leap you've taken there - no grey area with you it's all black and white! Your basic premise would seem to be that there is no inequality. Are you really suggesting that a tax increase will drive everyone onto HAP? I don't think exisitng or potential buyers are that fickle. The reality is people will want to own. It's as much a cultural thing as a anything to do with the tax benefits.

It's not about paying for a privilege and there's nothing wrong with some inequality. If I'm not as smart or hard working as my neighbour I'll probably have less than them. That's the way it should be. It's about having a relatively equal society which has social cohesion and low levels of real poverty and crime. Taxes are the price we pay for that and in general taxes should not discourage wealth creation.

The average property price in Ireland is just over €300k. that's probably a mortgage of €1,300 a month. The LPT on that property is about €315 a year (or €27 a month). The average rent in Ireland is €1,500. There's plenty of scope to increase the LPT and have the average renter and new owner pay the same.

That's not even taking account of the fact many people own their home outright without a mortgage. The reality is many people have scope to pay more tax.

But my all means argue the point that pushing up demand for owner occupied housing is the way forward.

We need to increase supply and reduce the cost of providing that supply. The State is grossly inefficient and adds huge costs to housing and the construction sector is also grossly inefficient and ridiculously labour intensive. That labour intensity means there's no easy solution since no matter what else we do that labour supply shortage constraint will still be there.

No the problem exists there was well but thanks to the shortsighted view of previous governments there isn't a lot of social housing around the place at present.

Ah there is and it's also very badly allocated. There's plenty of 3 bed social houses near me with single occupants in them. If we are going to start social engineering older home owners out of the houses they actually own then we should start by making sure all social housing units are properly and efficiently allocated.