The Economics of Ireland’s Housing Crisis

By Orla Leahy, News EditorOn Tuesday, February 8th, the UCC Economics Society held a panel discussion on Ireland’s Housing Crisis. The event was hosted by Chairperson of the Economics Society, Calum O’Donnell, and featured four distinguished guest speakers, including Counsellor Ms. Gillian Coughlan, the Lord Mayor of County Cork, Mr. Conor O'Connell, director of the Construction Industry Federation, Ms. Fiona Dunkin, policy advisor at Clúid Housing, an Approved Housing Body (AHB), and Mr. Hugh Brennan, the founder of Ó Cualann Housing. The panel discussion functioned to shine a light on the current barriers to housing in Ireland, and what we can do in Ireland to overcome the crisis.What are the current problems?Counsellor Coughlan drew attention to the fact that there are two key issues, demand and supply. The current demand for housing exceeds the rate at which houses can be developed. She noted that quite often the variety of services required to build housing are overlooked. Services such as water, which would have been governed by the County Council, are now governed by other governmental bodies, such as Irish Water. Ultimately, whilst many consider housing to equate to homes, others equate housing to costs, such as mortgages, electricity etc. While demand for housing is very much there, smaller landlords view housing as commodities, and until society sees housing as homes alone, speculation will remain part of the cause for our housing crisis. Mr. O’Connell notes that the law has a role to play, as regulations are constantly increasing which have a negative impact on the supply of vital products required in the construction industry. The over-regulation and centralisation of certain services, such as water, creates complications, which culminate in higher prices, negatively impacting the supply of construction services. Development costs, construction costs, and for social houses, the lifetime maintenance costs, all contribute to our current shortage of housing. Mr. O’Connell observed that, “we should not forget the policy mistakes of the past” and that currently, “our biggest obstacle is the regulatory system.” Ms. Dunkin highlighted the prevalence of cost deficiencies, and the lack of bulk production of housing. She suggested that the collaboration between local authorities within the construction industry to facilitate bulk procurement would overcome this difficulty. Ultimately, however, the vast numbers on social housing and HAP waitlists create a significant barrier. Clúid Housing strives to provide housing for life to those on waitlists. Mr. Brennan spoke about the difficulties of developing affordable houses. In Ó Cualann’s most recent housing project, they succeeded in developing and selling A2 rated houses, 3 bed, 7km from Dublin’s city centre at €219,000. On the other hand, private developers, who are not AHBs, will add a margin to make as large a profit as possible, which ensures that houses constructed by private developers are more expensive. Furthermore, the cost of supplies, even basic materials such as timber, are reflected in the higher prices of privately developed homes. Complications arising throughout construction also hinder development, in particular where diversions arise due to the installation of water mains etc. What are Ireland’s possible solutions?Counsellor Coughlan spoke about the Affordable Housing Bill 2020, and praised the renovation home scheme, which she encouraged citizens to apply for. She also acclaimed the dereliction scheme, which facilitates the clearing of old, derelict houses, particularly in cities, in favour of highly functioning, accessible apartments. Ultimately, “Housing for All'', is a work in progess, with Counsellor Coughlan, “welcom[ing] it, but that it will need to be nuanced slightly.”Mr. O’Connell, acclaimed the endeavours of AHBs instead of social housing. 70%-80% of those renting houses want to buy their own houses, there were 3,100 houses commenced in Cork city and county last year. He stated that the continuation of such initiatives may eventually meet the demand for housing in Cork. Mr. O’Connell said that we ought to learn from our previous mistakes, for example, spatial and regional planning in Dublin failed us. With the mountains to the south, the coast to the east, the airport and port to the north, and pharmaceuticals and warehouses to the west, Dublin is overly centralised and such mistakes cannot be afforded in other counties. Cost rental, Ms. Dunkin stated, works to build up and develop a stock of affordable housing for those who do not qualify for social housing but are experiencing financial difficulty and cannot afford rent. Once Clúid pays off the mortgage, the rents decrease. Cost rental is supported by government funding, as laid out in “Housing for All”, to ensure that it is accessible to a broader group. Clúid focuses on home ownership rather than leasing, as Ms. Dunkin notes, “why lease it when you can own it?” It is more affordable to run your home, once you own it, rather than run a privately rented house. Whilst pro-ownership is optimal, the negative impacts on our social welfare system, such as pensions must be borne in mind and dealt with. The objectives of the scheme are ambitious, requiring serious “man power”, but may not be wholly sufficient to meet targets. 33,000 units per year does not incorporate latent demands.Mr. Brennan has praised the “rebuild your own home” scheme. Under the scheme, housing is affordable where occupants are not paying 35% of their net income on home maintenance. Across Europe, the norm is 33%, whilst Ó Cualann believes that 30% or less of net income on home maintenance constitutes affordable. Accordingly, the scheme almost meets Europe and Ó Cualann’s rates. Ó Cualann aims to increase home ownership, but rental schemes to offer increased security of tenure are also required. Mr. Brennan drew attention to BOK LOK which is based in Sweden, and profit greatly from apartments designed and marketed for a teacher and a child specifically. This highlights the potential for affordable private development in Ireland. Were affordable housing truly implemented, disposable income would increase greatly, boosting Ireland’s economy. For example, in Ballymun, should affordable housing be implemented, an additional 13m disposable income would greatly boost the locality, with 60% of 13m spent in the location. Mr. Brennan also mentioned the important opportunity to enshrine the right to a home in our constitution. ConclusionMr. Brennan summarised Ireland’s needs in three parts, “the right housing, in the right location, at the right price.” Overall, retro-fitting, accessible, and environmental universal designs will form an integral part of the effective utilisation of Ireland’s resources to overcome our current crisis, according to Counsellor Coughlan. As Ms. Dunkin noted, “the decisions that we make will have impacts for decades to come.”