The latest Government intervention in the housing market – offering low-interest loans to a limited number of people refused mortgages by their banks – is a carefully designed political distraction. Like the earlier help-to-buy scheme, produced for a more affluent group of voters, it will circumvent the lending criteria laid down by the Central Bank that were designed to prevent the re-emergence of a property bubble. Analysts predict that land values and home prices will rise.
Unless a common interest that links land owners, property developers, financial institutions, government and existing home-owners is recognised and addressed, the housing market will remain dysfunctional. "We all partied," Brian Lenihan said, to considerable public annoyance, following the collapse of the last bubble. Well, some people are partying in similar style again. Homes are again being regarded as revenue sources and profit-making assets by various vested interests, rather than as living spaces.
A belief in Government that more building will bring cheaper homes does not stand up to scrutiny. It did not happen when housing output reached record levels more than a decade ago. And recent initiatives are directed primarily through private developers and are linked to high profit margins for banks and associated professional groups.
Banks have a vested interest in rising prices, which reduce their exposure to negative equity loans, while expensive mortgage charges and new loans to builders improve their profitability. Their policy of refusing bridging finance to downsizing households has frozen an important section of the market.
The Government, as a significant bank shareholder, is reluctant to take direct action and has concentrated its efforts on reviving the private building sector. In doing that, the capacity of the voluntary sector to provide affordable housing was largely ignored while the demand for limited local authority housing, because of spiralling rents, increased dramatically.
Treating homes as profit-making financial assets makes no sense. What goes up invariably comes down, as owners learned to their cost. That memory has been buried, however, as young people are encouraged to get their feet on an upward-only property ladder. Those already housed are fiercely defensive, recruiting politicians to protect the value of their homes from perceived threats, such as high-rise developments, social housing or halting sites.
It may not be possible to sever the bonds linking these overlapping interests but they should be publicly challenged. What is now needed is the large-scale production of cheaper, affordable, local authority housing. Once those needs are met, rents and the housing market should stabilise.