For the past number of years, the Coalition Government has struggled unavailingly to deal with a housing market running out of control. It undertook a number of useful, tax-related initiatives, on foot of reports prepared by Mr Peter Bacon, that temporarily slowed but did not stop excessive price increases. Later this month, the Minister for the Environment, Mr Dempsey, will publish details of a comprehensive Planning and Development Bill, that has emerged from a consultation process he initiated with various vested interests in 1997.
A decision by the Minister to prematurely disclose a section of the Bill, which provides that builders be obliged to set aside 20 per cent of all future developments as "affordable housing" - to be allocated through local authorities - suggests that the housing crisis is deepening. Mr Dempsey's speech was clearly designed to grab headlines and to reassure the public that something is being done for middle-income earners who can no longer afford to buy homes on the open market. One effect was to bring a thinly veiled threat of a Constitutional challenge to any such legislation from the Irish Homebuilders' Association.
A scheme to force developers to surrender 20 per cent of their sites for affordable housing probably had its genesis in a desire to quell inflationary pressures. The single most potent factor driving house prices is shortage of supply. Actual construction costs have lagged far behind the surging price of new homes over recent years, providing builders and developers with huge, windfall profits. Making it easier to raise finance for home buyers, or introducing mortgage subsidies of other kinds, would simply increase prices. But this new measure might actually work, both in providing "affordable homes" through local authorities and in acting as a brake on prices in new estates. If councils can supply homes for low-to-middle income families at affordable prices in all new estates, then higher income earners might become more sensitive to value for money.
Whether Fianna Fail has the gumption to face down the building industry on this issue remains to be seen. Radical action is required if the housing crisis is to be overcome. A measure such as this would be a convincing start. A record number of house completions has been recorded for each of the past four years, with 41,700 homes being built in 1998. But last year also saw an increase of 60,000 in the workforce and high inward migration. At the same time, demographic trends point to continuing rapid population growth over the next 30 years. All of these factors emphasise the urgent need for an increased amount of re-zoned and serviced land, with efficient public transport, adequate roads and services and a shift to higher densities and smaller, first-time homes.
There is some evidence of a reduction in private house completions in Dublin during the first five months of this year, even as the number of people on local authority housing lists grew rapidly. What is obvious at this stage is that the Government must devote a great deal more money to the completion of local authority homes and the servicing of building land. It also needs to respond to the demands of students and others in the rented sector by striking a balance that will encourage increased investment while permitting a fair return to landlords. These are now matters of great urgency that must be dealt with through early legislation and the forthcoming Budget.