IT opinion: "lack of housing supply is not the problem"

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Brendan Burgess

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Ireland has many housing problems. But lack of supply isn’t one of them

Today’s problem is high prices and rents relative to incomes, a legacy of undersupply in the past
www.irishtimes.com

Every market has an optimal vacancy rate that facilitates the fluid movement of occupiers. If vacancy falls below this, the market is undersupplied. Our Government says the vacancy sweet-spot lies between 2.5 and 6 per cent in a properly functioning housing market, and I have previously estimated the optimum for Ireland at about 5.75 per cent. However, the Census recently measured housing vacancy at 7.85 per cent, excluding temporary absences and unoccupied holiday homes. This does not scream undersupply.

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We can challenge the accuracy of vacancy data, but pricing signals cast further doubt on the idea that our housing market is undersupplied. Real house price inflation in Dublin has averaged just 1 per cent a year since March 2019, and negative inflation has been recorded 23 times in the last 50 months, including in each of the last seven. Real property prices are currently falling by 5.8 per cent a year (3.4 per cent nationally), and a similar pattern is evident in the rental market, where there has been negative real inflation since the second quarter of 2022.

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Confronted by this evidence, why is there such a widely-held conviction that Ireland’s property market is undersupplied?

The reason is that our national housing debate has been dominated by sectional interests which benefit from the chronic undersupply narrative. From a commercial perspective, undersupply makes development funding easier to obtain. It also provides leverage for industry representatives to lobby for occupier subsidies that draw out supply by supporting higher prices and rents. Examples include Help to Buy, the First Home Scheme, the Local Authority Home Loan and the Rent Tax Credit, all of which have been introduced, extended or enhanced in the last six months, while mortgage restrictions have been relaxed.
 
Right Winger said:
If there was no lack of supply, we wouldn't be putting refugees and asylum seekers into hotels.
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That depends on how you define under supply. Is it a lack of new builds or a lack of properties available to the market? If the problem is under utilisation then increasing the supply of new properties is a very expensive and inefficient solution.
 
McCartney's article is a series of non-sequiturs and you can tackle specific points but they still don't add up to anything conclusive.
Brendan Burgess said:
With an 8% vacancy rate, it suggests that underutilisation is a big part of the problem.
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I disagree. This may be true in rural counties but not at all in urban areas.

Seamus Coffey had some good tweets on this last year:

 

Total number of dwellings in Europe in 2021, by country(per 1,000 citizens)​

The number of dwellings per one thousand citizens gives an insight into a country's need for housing. The total number of dwellings per one thousand citizens in European countries in 2021 was highest in Croatia. There were approximately 604.46 dwellings for every one thousand citizens in Croatia. Germany as of 2021 had approximately 43.11 million dwellings, of which there were 518.01 per one thousand citizens. Poland on the other hand shows a greater need for housing construction with 400.1 dwellings for every one thousand citizens. https://www.statista.com/statistics/867687/total-number-dwellings-per-one-thousand-citizens-europe/

Ireland on this metric is 419.86 near the bottom of housing units per 000 of population.

So you have to ask yourselves what is our average 'family size' (in the very broadest sense) or where is it going. My sense is that its heading to 2 or 2.1 and on that basis we require closer to the German figure. That shows a gap of about 300,000 housing units short today not next week.

The vacancy rate with OECD figures https://www.oecd.org/els/family/HM1-1-Housing-stock-and-construction.pdf puts us mid table on a par with Germany.
 
Purple said:
That depends on how you define under supply. Is it a lack of new builds or a lack of properties available to the market? If the problem is under utilisation then increasing the supply of new properties is a very expensive and inefficient solution.
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Yeah, that's true I suppose. Could we define the problem as "lack of properties available to the market?" An element of any solution has to be the building of more properties though.
 
Brendan Burgess said:
It's a good article, but I would have liked to see his proposed solution.

With an 8% vacancy rate, it suggests that underutilisation is a big part of the problem.

Brendan
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The vacancy rate comes from the census, and is overstated. Some people, just don't want to complete the census form and so don't answer the door. Some census enumerators will then, after a few attempts, register the property as vacant.
 
Julius said:
Some census enumerators will then, after a few attempts, register the property as vacant.
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This is not true.

Enumerators are obliged to check with neighbours to ascertain if a property is actually vacant.

If occupant doesn't want to engage with the enumerator it is recorded as occupied and all the other data is left as "not stated".
 
NoRegretsCoyote said:
This is not true.
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It is most certainly true, regardless of the obligations on enumerators.

There is no other sensible explanation for the crazy overestimation of vacant dwellings on a townland-by-townland level in particular areas in recent censuses.
 
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NoRegretsCoyote said:
This is not true.

Enumerators are obliged to check with neighbours to ascertain if a property is actually vacant.

If occupant doesn't want to engage with the enumerator it is recorded as occupied and all the other data is left as "not stated".
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That might be the theory but in an apartment complex good luck with that in practice.
 
T McGibney said:
It is most certainly true, regardless of the obligations on enumerators.
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Is every enumerator perfectly consicentious? No. But it is not a "true" claim in the general sense.

Seamus Coffey looked at units vacants in the last three censuses and it's below.

If your "hermit-never-opening-the-door" theory were true you wouldn't see the kind of variation below as presumably there would be some kind of person who consistently never engages with the CSO who lives all over the country.

In Dublin there was one property in 400 consistently vacant for three censuses - that is not a material vacancy rate in any sense.




Whichever way your view is on the reliability of the statistics, I don't think either of us thinks that there is some magical supply of empty housing in Ireland.
 
Well with the hybrid working bubbling away it might be that commercial properties will be reconfigured out of necessity ..
 
My point doesn't remotely contradict Coffey. Both he and I conclude that the Census statistics grossly overstate the problem of vacant homes.
 
The article doesn't reflect any reality I know.

It reads like a property sector and govt policy that doesn't want supply to increase in case it effects values. But passing the blame on high housing costs on everything else.

They could fix this at source by building low cost public housing with limited profits and govt ownership.
 
AlbacoreA said:
They could fix this at source by building low cost public housing with limited profits and govt ownership.
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Or by waving a magic wand !

There is a shortage of skilled workers.
Planning considerations are complex. Necessarily so.
Materials are expensive.
Building specifications are demanding. Rightly so.
The transport infrastructure is terrible in most areas where there isn't already housing.
The wastewater treatment infrastructure is poor everywhere.
The electricity supply infrastructure is poor (albeit improving slowly)
The water supply infrastructure is bad.

It will have to be a big magic wand.
 
While you're worrying about "specifications" people are living in tents.

There were big public housing schemes in past decades 60s and 70s and 80s etc. Not sure why it requires "magic wands" in 2023
 
AlbacoreA said:
While you're worrying about "specifications" people are living in tents.
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Yes, a few "will somebody please think about the children!" emotive talking points really help these discussions.
AlbacoreA said:
There were big public housing schemes in past decades 60s and 70s and 80s etc.
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Thankfully we don't do really stupid things like that anymore.
And those projects were in the 60's and 70's. Our housing and spending policies between the 30's and the 70's were a disaster and kept this country impoverished. The reason we didn't have homelessness back then was because 40,000 or so young people emigrated each year. In the early 80's most homes in this country didn't have central heating. Much of the social housing we were building was worse than the emergency accommodation we have now. That was because of the stupid policies of investing so much in housing and not in education and health. It is only since we stopped doing that, that we have become rich.
AlbacoreA said:
Not sure why it requires "magic wands" in 2023
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So that we don't repeat the moronic mistakes of the past. We want massive social transfers (the highest in Europe), massive healthcare spending (amongst the highest in the world), a good education system and all the other things that developed countries have. If we stopped doing all of that then we could build houses like we did in the 60's and 70's. Still think it's a good idea?
 
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