"Some sane ideas to fix this housing madness"

I have an opinion piece in today's Sunday Times


I am sure that the paper will soon be sold out in the rush, so just in case you can't get a copy, here is a trailer...

It’s a crazy housing world.

Dun Laoghaire Rathdown Council is buying luxury apartments for €788,741 each to provide social housing.

In Cabinteely, the same Council has agreed to lease an entire block of 81 newly built apartments at a rent of about €24,000 each. Very few private tenants could afford to rent these luxury apartments, but when the taxpayer is paying, money is no object.

First time buyers working in Dublin can only afford to buy in Dundalk, Portlaoise and Wexford while social housing tenants insist on being housed in their own community.

The government has recently announced grants of up to €144,000 to developers to build apartments because the developers say that it’s no longer economically viable to build apartments. This must come as a surprise to someone who can’t afford to buy a newly built apartment at the current prices.

Good piece Brendan. Unfortunately it appears currently that logic and sanity are trumped by popularity and a mistaken belief that this is viable and a valid approach but I don't see anyone in political life outlining a counter balance as you have tried to do.

Why would anyone bother trying to save a deposit and get a mortgage anymore? Better to join the housing list and wait to get a fancy upmarket place on the public purse.

There are very few people who could afford to buy apartments for €744k, even people trading up from cheaper properties, let alone first-time buyers. It is a crazy situation that local councils are allowed to spend public money on expensive luxury real estate instead of buying, or building, standard no frills housing units that cost less.

Developers are incurring part5 costs from council regulations then getting a building subsidy from the housing department and still nobody can find a reasonably priced starter home to buy. Then the councils hand over public money to buy that high cost housing for social tenants who hit the jackpot with a three quarter million euro property provided by the taxpayer.

All of our legislators, local politicians, state agencies, cannot be so blind that nobody is asking questions about this shambles and just carry on regardless. Surely someone must look at the big picture and the damage the current policies are causing.

It is an impossible situation for anyone trying to buy in order to be self-reliant and not be a burden on the state.

What's going on that we don't know about?

Yes Brendan, it's an interesting piece, but ?
It's a pity we don't have people with power in this country who think outside the box. Wouldn't it be great if someone threw out there for debate the building of a few more cities with all the relevant infrastructure, etc. Yes, yes, I know, we can't handle and modernise what we already have and all that guff. But, we can, we have the people, the ways and means and soon enough the cities we do have will just demand all this be done anyway, or simply die. Building houses in itself will solve one problem, but that's about all it will do. We need to build cities for a modern country and we need to start planning on doing it now.

noproblem said:

Yes Brendan, it's an interesting piece, but ?
It's a pity we don't have people with power in this country who think outside the box. Wouldn't it be great if someone threw out there for debate the building of a few more cities with all the relevant infrastructure, etc. Yes, yes, I know, we can't handle and modernise what we already have and all that guff. But, we can, we have the people, the ways and means and soon enough the cities we do have will just demand all this be done anyway, or simply die. Building houses in itself will solve one problem, but that's about all it will do. We need to build cities for a modern country and we need to start planning on doing it now.

Click to expand...

That would be great but looking at the problems we have building new hospitals, or even linking up two luas lines, I don't think new cities will be happening anytime soon. The 2008 crash seems to have sent our politicians into some kind of CYA stupor where they are terrified of making any big decisions.

bipped said:

That would be great but looking at the problems we have building new hospitals, or even linking up two luas lines, I don't think new cities will be happening anytime soon. The 2008 crash seems to have sent our politicians into some kind of CYA stupor where they are terrified of making any big decisions.

Click to expand...

Very defeatist comment and attitude. Believe me, if Ireland showed the proper ambition for this type of future development there would be investors knocking down the Dáil door to become involved

And the madness gets worse.

Full article as it appeared in the Sunday Times now attached.

I was talking to a Developer on Saturday. He said that any significant attempts they have made to reduce costs by using modern construction methods are being met with a brick wall within the Department of the Environment. If it doesn't fit within current regulations you can't do it. That certainly doesn't help.

The bigger problem of all of the extra money in the world is still the primary driver of the housing affordability problem. It's not that people can't afford houses, it's that people who rely only on earned income can't afford to buy them. The stock market and commodity boom has been driven by QE so that was making materials more expensive anyway, before Covid and land prices have increased vastly as a result of that increase money supply.
This is an international problem. Bad policy decisions and State sector inefficiency have exacerbated the problem here and elsewhere, as have the inherent inefficiencies within the construction sector, but when you look around the developed world we certainly aren't alone in facing this and we certainly can't fix it all with any amount of domestic solutions.

I like Brendan's suggestion that social housing should be a much bigger part of any government housing policy. Council housing with secure tenancies, and reasonable rents are part of the answer. And no selling of said houses, full stop.
If you want to buy a house go into the private market. The council house stays in public hands and is passed onto the next person on the waiting list. Many people might, quite happily, spend their entire lives living in a rented house, if that rented house gave them lifetime security of tenure, with full maintenance costs covered, with a rent that simply covers those costs and original building costs.

The state's attempt to contract out this policy has been a disaster and way more expensive than direct building of housing projects.

Allpartied said:

I like Brendan's suggestion that social housing should be a much bigger part of any government housing policy. Council housing with secure tenancies, and reasonable rents are part of the answer.

Click to expand...

How much do you count as "reasonable rent" for a property that costs say €250k to build and €2k a year to maintain?

Allpartied said:

I like Brendan's suggestion that social housing should be a much bigger part of any government housing policy. Council housing with secure tenancies, and reasonable rents are part of the answer. And no selling of said houses, full stop.
If you want to buy a house go into the private market. The council house stays in public hands and is passed onto the next person on the waiting list. Many people might, quite happily, spend their entire lives living in a rented house, if that rented house gave them lifetime security of tenure, with full maintenance costs covered, with a rent that simply covers those costs and original building costs.

The state's attempt to contract out this policy has been a disaster and way more expensive than direct building of housing projects.

Click to expand...

It would also be better if the Co. Councils actually refurbished the properties that are laying idle , I would imagine that it would be much more financially prudent than shoving money into the pockets of developers.

T McGibney said:

How much do you count as "reasonable rent" for a property that costs say €250k to build and €2k a year to maintain?

Click to expand...

I would imagine the same as an interest only mortgage, with a reduction for the lending rates that the state can get.
So, if the cost is 250k, and the state can borrow at 2%, then the tenant pays a 3% rate ( to cover some maintenance).
So rent is 250k/100 x 3 per annum.
Rent is 7500 per year, or 625 a month. That seems reasonable and state retains ownership of the property, through the local council.

Where are the Greens in all of this? Surely building new housing as social at those astronomical prices is contrary to all their Green-washing efforts. The most carbon emissions-intensive of all building materials is cement, be it in it's production or it's incorporation with other materials to produce bricks, blocks or poured concrete.

I agree, refurb all the abandoned buildings, houses etc around the country as social housing. Get out of the cities, decentralize.

Allpartied said:

I would imagine the same as an interest only mortgage, with a reduction for the lending rates that the state can get.
So, if the cost is 250k, and the state can borrow at 2%, then the tenant pays a 3% rate ( to cover some maintenance).
So rent is 250k/100 x 3 per annum.
Rent is 7500 per year, or 625 a month. That seems reasonable and state retains ownership of the property, through the local council.

Click to expand...

Thanks. A 1% rate of return before maintenance and after interest isn't remotely economic though. How many decades until the original €250k outlay will be recouped?

Remember also that in most cases especially nowadays the build cost will be much higher than €250k, and there will be a site cost, and site-related costs. And the unit will in time require substantial refurbishment and renewal. And there will be need to budget for contingencies, just as there is in apartment and estate management companies.

T McGibney said:

Thanks. A 1% rate of return before maintenance and after interest isn't remotely economic though. How many decades until the original €250k outlay will be recouped?

Remember also that in most cases especially nowadays the build cost will be much higher than €250k, and there will be a site cost, and site-related costs. And the unit will in time require substantial refurbishment and renewal. And there will be need to budget for contingencies, just as there is in apartment and estate management companies.

Click to expand...

Social housing shouldn't ever be analyzed by financial and economic criteria. If our Social housing stock was treated properly by all those involved that stock would be useful for 3 or 4 generations .

I'll stand corrected here but Councils have huge amounts of land laying idle and if they were to develop this land sensibly there would be economic activity provided initially and during the years after would probably eliminate or at least vastly reduce any future maintenance costs.
Obviously a full and detailed financial model would need to be done using DCF on all cashflow which is probably beyond most CCs .
There are solutions available but the amount of vested interests, parochial mind sets and a host of uniquely Irish attitudes seem intent of finding any.

I will be discussing this and a report from the Banking and Payments Federation on Newstalk after 8 am tomorrow morning.

Brendan

Looking forward to it but what about (re) introducing rates for housing not in productive use? Rate empty houses, run-down or otherwise, like commercial properties. If they are not brought into use as housing (occupied by families off the local housing list) the owners get levied with the full rateable valuation annually or some multiple thereof. If finance is needed to covert the houses, have the lending institutions design products to fill the need at rates more competitive than mortgages for new properties. Make the rental income tax-free for x years.

Not too well thought out yet. Constructive criticism is welcome.

mathepac said:

Looking forward to it but what about (re) introducing rates for housing not in productive use? Rate empty houses, run-down or otherwise, like commercial properties. If they are not brought into use as housing (occupied by families off the local housing list) the owners get levied with the full rateable valuation annually or some multiple thereof. If finance is needed to covert the houses, have the lending institutions design products to fill the need at rates more competitive than mortgages for new properties. Make the rental income tax-free for x years.

Not too well thought out yet. Constructive criticism is welcome.

Click to expand...

It's a perfectly good idea, rates or other taxes should be introduced, a scheme like section 23 would be of great assistance or other " incentives " .

But the bottom line is that something has to be done that's radically different to what is being done now. First job would be to ascertain exactly how many vacant properties are there, and include commercial, accurately because the figures we have seem contradictory.

We have the resources to turn this around so it's up Government, Local Government, Housing Charities, the legal profession and all other stakeholders to come together and fix this , its 2022 and it would be a better way to celebrate our independence than remembering killing eachother and fixing the mismanagement of so many aspects of our country in the 100 yrs since.

And if the results of this means changes to our constitution so be it.

I'm not sure I agree. We're coming dangerously close to not being able to own anything outright without owing some tax of some type on it. I guess it comes down to where you draw the line from a libertarian perspective, but if I own a holiday home that I don't visit for a year and a half, which i've paid for fair and square, why would I pay any additional tax over and above that which I already had to pay, to purchase it, just becomes someone else deems that it is 'vacant'?

You could point to the housing crisis, but I would argue that's feckless government mismanagement of an issue 20 years in the making. I'm not sure why I should be penalized for it. Carrots not sticks in my opinion. Remove tax on rental income from currently 'vacant' properties for 15 years from next year with an enhanced repair and lease scheme. That'll incentivize them to be done up and leased out in short order.