Timing is everything. AIB, the bank in which the State has a 71 per cent shareholding, issued a report on housing supply in Ireland over the weekend with a series of suggested policy prescriptions.
Or rather, it didn’t release the report. Instead, it carefully planted elements of the “unpublished” report in the main Sunday newspapers. There, its contents were treated with all the gravitas of a Government Green Paper. Maybe that’s not so surprising; policy suggestions from a bank which is overwhelmingly in State ownership would be presumed to carry the imprimatur of the Government of the day.
What the AIB report does contain is a cocktail of proposals, many of which hark back to the giddy days of the Celtic Tiger. A tax cut for developers by way of lower VAT; lower building standards; equity-release programmes with bridging finance to allow families release some of the value of their homes; tax breaks for landlords; a soft-touch approach to the vacant site levy so as not to upset developers; and a broadening of the help-to-buy scheme.
In isolation, some have merit; in aggregate, the impression is more one of throwing money fairly indiscriminately at a problem. This ignores the several warnings issued from the likes of the ESRI and the Fiscal Advisory Council about the potential for the Irish economy again to overheat and the need for any investment on housing (or anything else) to be balanced by tax increases or spending cuts elsewhere.
Of course, a more active property market offers more prospect for the bank to profit from the sector.
The report notes that the bank has beefed up its team working with developers and is also examining new funding models for the industry. It has also added specialist bodies to its home lending teams.
And that’s not all. It is “reviewing its credit policies” to see how it can provide “enhanced” funding for buy-to-let investors. And it is eyeing up funding options – including currently unavailable bridging finance – to boost the equity-release market.
Maybe, after all, this carefully leaked report was less policy prescription and more a business plan for growing bank profits.
