by Peter McVerry SJ
The two major issues creating the housing crisis are:
- the cost of buying a home, which is beyond the reach of most people;
- the cost of renting, which then devours the household incomes of those unable to buy.
At least one-third of the cost of a house is often the cost of the land on which it is built. This substantial cost is often hugely inflated by land speculation, where a landowner waits for their land to be rezoned for housing and then sells at a massive profit. For example, a nine acre industrial site was valued at €2.55 million. The owners received planning permission to build 350 houses on the site. Thus the cost of the site would add approximately €7,000 to the cost of the house. However the owners, instead of building, put the site back up for sale. Now that it had planning permission, the site was valued at €25 million. This would mean that if 350 houses were to be built on the site, the cost of the land would add €70,000 to the cost of each house before a foundation was poured or a brick was laid.
The Kenny Report in 1973 recommended that land for building should be compulsorily purchased by the local authority at agricultural value plus 25% profit for the owner. This could reduce the cost of a house by 30% or even more. Thus many houses that cost €300,000 could have been available for €200,000 if the Kenny Report had been implemented. However, 50 years later, it is not even being discussed! The government would say that implementing the Kenny report would be unconstitutional as it would interfere with the right to private property, even though the report was chaired by a High Court judge who did not think it would be unconstitutional. If there is a doubt about its constitutionality, then it should be tested in the courts. Conscious of the unfairness of vast profits being made by landowners for doing nothing – land speculation being the epitome of unproductive work – the government proposes a punitive tax on those profits but this does nothing to reduce the cost of housing.
If we consider this resistance to a simple step which would benefit many, then we have to come to a different conclusion. Maybe the reason the Kenny Report is sitting on a shelf gathering dust is that governments do not want to reduce the cost of housing. Their core voters are home owners who will be horrified at the thought that the value of their house would be reduced, even minimally. But unless they are planning to sell the house, that is a purely paper reduction.
Furthermore, builders state that they require a minimum of 15-20% profit on house building. But there are also alternatives to further reduce the cost of producing houses by removing the profiteering. During the State’s infancy, the ESB was established in 1927 as a national state company to bring electricity to every householder in the country. It was extremely successful in doing so. The State today could set up a National Residential Building Company to address our housing crisis. Such a company would not require a profit. This could further reduce the cost of housing by up to 20%. Most construction workers are not building homes, but rather office blocks and hotels. They are employed on a contract basis or often on bogus self-employed contracts. They would enthusiastically transfer to a National Residential Building Company which offered secure, sustainable and well-paid employment. This would compel the construction industry to reform its employment contracts. However, to set up such a company would incur massive opposition from the construction industry, which the government would be reluctant to face. So it’s not going to happen!
How are we then to reduce the cost of rent as many households have little option but to brave this highly dysfunctional system and being subject to extreme precarity. Landlords are leaving the residential tenancy system, reducing the number of tenancies available to rent, and pushing up the cost of renting. Many of those landlords will say that they are opting out in order to sell their property. As house prices are not almost at their peak, this may be a reason for them doing so. But perhaps there is a deeper reason. While only a tiny minority of tenants are engaged in drug use, anti-social or criminal behaviour, landlords may be afraid that they will end up with such a tenant. The landlord is left to manage that situation. Perhaps we should scrap HAP (Housing Assistance Programme) and revert to RAS (Rental Accommodation Scheme).
Both are government subsidies to landlords to help low-income households to pay the rent. If the tenant is a social welfare tenant, the local authority pays most of the rent due directly to the landlord. In HAP, however, the responsibility for managing the tenancy is delegated on to the landlord, even though the property is now designated “social housing.” If the tenant stops paying their small contribution to the local authority, then the local authority will stop paying the rent to the landlord, leaving the landlord in a difficult financial situation.
But in RAS, the landlord’s only responsibility is to make available a property to the local authority to be used as social housing. The rent is paid to the landlord each month and does not depend on the tenant making their contribution. If the tenant fails to pay their share of the rent, that is a problem for the local authority, not the landlord. The local authority has the responsibility of managing that property, selecting the tenant, managing the tenant, collecting the rent due, and if necessary, evicting the tenant. Local authorities have the responsibility to provide and manage social housing, and this responsibility should not be passed on to a landlord who has no experience or expertise in dealing with social housing tenants. This might encourage landlords to remain in the system and others to become landlords. However, with the added security of a long term agreement with a local authority, landlords must be offered a lower rental price.
However, such a proposal would meet with howls of protest from every local authority in the country. They do not want to manage social housing, because it can be so difficult. Thus they pass the responsibility to the landlord, or, often, to Approved Housing Bodies. In fairness, they do not have the resources to do so and would have to be properly funded to resume its historical, and effective, role.
Solutions to the housing crisis are available, but they are, unfortunately, not politically palatable. High house prices and rents are a double-edged sword, cleaving Irish society and creating high levels of inequality. For some, high house prices and rents are a gift, while for a rapidly increasing number, they are a curse.
So the housing crisis continues on.