Eradicating vulture funds. Freezing rents. Thousands of affordable homes costing under €230,000 in Dublin. Each of the Opposition parties have made eye-catching promises about how they would solve the housing crisis if they were in Government. Are these policies credible or doable? The Irish Times went through the main pledges with a number of experts and academics.
Affordable and social housing
Sinn Féin’s success in last year’s general election can partially be attributed to its strong stance on addressing the housing crisis.
On affordable and social housing, the party has promised to significantly increase capital investment in public housing to “deliver the largest social and affordable housing programme in the history of the State”.
This would involve delivering 20,000 public homes each year, prioritising the use of public land. Is this feasible? Sinn Féin has been considering the impact of the pandemic on the targets it set during the election last year. Housing spokesman Eoin Ó Broin says the figure of 20,000 may not be reached in the first year but whatever is lost initially would be made up in subsequent years.
Under their plans, affordable rents would be set at prices of between €700 and €900 per month in Dublin and lower elsewhere. Affordable purchases would be set at prices of €230,000 or less in Dublin and lower elsewhere. Eligibility for affordable housing would be set at a gross income of €55,000 for a single person and €85,000 for a couple and would be reviewed annually. Public housing would be delivered by local authorities, approved housing bodies and community housing trusts.
Experts who spoke to The Irish Times said that while the policies are ambitious, there are many pitfalls and potential problems.
They can be summarised as follows:
- Building from scratch can be slower, riskier and more complicated for local authorities and housing bodies for a whole variety of complicated reasons in comparison to buying from developers;
- Using local authorities as developers carries huge risk;
- The level of public land differs depending on the local authority;
- There is often debt attached to State land although experts differ on how significant an issue this is;
- Substantially higher subsidies would be needed for affordable housing developments on State lands in urban areas which could also fall foul of EU state aid rules;
- High density units such as apartment blocks are much more expensive at a time when many people on social housing lists are single or lone parents;
- Building costs are also considered to be still too high.
All of these complex problems present major stumbling blocks to the plans, they say.
The issue of the overall costings for the Sinn Féin plan was also raised a number of times.
Sinn Féin has promised an additional €6.5 billion for the construction of these 100,000 homes.
Half of those homes are already budgeted for under the National Development Plan. Sinn Féin also propose to add another 10,000 social homes to this lot and then a further 40,000 affordable homes, split evenly between affordable sale and rental, from that pot of cash.
The party says the cost to the exchequer for the 20,000 affordable sale homes will be €40,000 per unit.
These figures are based on calculations from sites such as the Ó Cualann development in Ballymun, Dublin. In an example such as this, a site is provided by the State, for a low and nominal cost. It is often also serviced, meaning connected to utilities, at no cost to the builder although there is a cost to the exchequer. Development levies are also waived.
Multiple housing experts raised concerns about the feasibility of replicating this across the country. Some say developments like Ó Cualann may not be scalable nationally because it is not a given that the site can or will be provided on the same terms and at the same density. The “waived” fees still effectively have to be paid for by the taxpayer, they say.
The remaining 20,000 homes, the affordable rental homes, could be built for €236,000 on average under information used by the party. Taken in the round and including inflation the total plan comes to just under €6.5 billion but experts have said given the number of pitfalls and complexities already outlined, sticking within budget could be a tall order indeed.
There is another aspect of the party’s policy that rankles with those who keep a keen eye on the market. Sinn Féin says that when it comes to buying a €230,000 affordable home, it will be a leasehold, not freehold. So you might own the property but the council owns the land and will have a say over the future sale of the property.
The question has been posed: why would a family buy a house knowing that they could never sell or rent it on the private market?
Who else is offering you a home in Dublin for €230,000?
“You own the house. You renovate it, extend it, amend it, pass it to your kids. They pass it to their kids. But the land on which the house rests is not your property. It is not just the first purchaser than gets the affordability, every subsequent purchaser gets it. Some people say that is not real home ownership. What I say is who else is offering you a home in Dublin for €230,000?” Ó Broin asks.
Rental
When it comes to the rental market, almost all of the Opposition parties were united last year in calls for rent freezes. Labour also favoured a scheme which would count rent payments towards deposits for houses which was proposed by Labour. Experts believe the latter proposal should be doable.
Academics and housing policy wonks differ on whether any move for across the board rent freezes would be constitutional. Many agree, however, that linking rents to inflation and providing increased security of tenure could provide an adequate middle ground.
‘Cuckoo’ funds
The big issue of the month has been the existence of so-called “cuckoo funds”. Sinn Féin has said it would remove tax exemptions ued by investment funds. “They would have to pay capital gains tax. We’d also increase their stamp duty,” Ó’Broin said. Labour has also said it believes a targeted increase to the stamp duty rate would act as a deterrent once the rate increase was big enough. Industry sources are sceptical and say the rate would have to be quite high and going beyond a certain level could potentially leave the State in a legally tricky position.
The Social Democrats have gone further and promised to “legislate to stop land hoarding by introducing an effective specific tax, by closing all loopholes and by eliminating all tax breaks for Reits [real estate investment trusts] and cuckoo funds.”
Some experts point towards a 2019 Department of Finance study which states that "at a local level there have been instances of investors purchasing large blocks of stock, removing some of those units from the owner-occupier segment of the market.
However, at a national level, or in terms of the broader Dublin market, the advantages of institutional investment are manifold, broad-based and beginning to yield positive outcomes for the Irish housing system.” Minister for Housing Darragh O’Brien is expected to bring proposals to this end next week.
Other promises
The People Before Profit housing policy says that housing should be treated as a universal public service the same as health and education. They would abolish the income threshold limits to “make public housing available to more people on a broad range of incomes with rents set at a percentage of take home pay”. Experts say the ultimate problem with such a system would be the cost attached to it with higher taxes being necessary across society. That, they say, is a whole other debate.
