The Gist: The Roof Over Our Head

The beginning of September is a liminal time of the year. School terms restart. Political and court terms likewise start to think about what will happen next.

But this year, this anticipatory element has an extra sharpness. The world has been on an extended sabbatical from business as usual thanks to Covid lockdowns and close downs. The political system across the world has been consumed by the immediate crisis of a pandemic.

Now we’re tipping towards a new dynamic- largely driven by the vaccine rollouts triggering an improvement in circumstances. But it’s being driven by something else too- vested commercial and political interests are screaming for a return to the business of income generation as usual.

But let’s leave behind the assertions of city centre office building owners that we will all want to get back to work in their assets and the demands by tech companies that we don’t let our climate emission reductions get in the way of unending data centre expansions.

Instead, let’s look at the document the government announced this week to deal with the problem of Housing. Housing for All follows Rebuilding Ireland, a plan that started in 2016, failed signally for six years, ended the career of the housing minister who regularly announced how successful it was being and has now been dropped down the State’s memory hole. (take a look at rebuildingireland.ie)

At least nobody can say the new plan has big shoes to fill. Unless those shoes are the proverbial concrete boots its predecessor now wears.

The Government’s problem with dealing with unattainable housing and even more unaffordable rents is that the institutions of the state have been stymied by the requirement to meet two aims- to protect the asset value of property owners and to allow people to find somewhere they can afford to live.

Trying to ride both these mismatching steeds has seen the reversal of normal presumptions of economics. In Ireland, high prices have become the cause- not the effect- of a shortage of supply.

As the state constantly intervenes in the market to stimulate price rises (See Rebuilding Ireland Home Loans, or Help to Buy etc) the logical thing is to sit on development land and even empty apartments in the anticipation of selling them for more, later. It is the same calculation that sees people cut back on their spending in a deflationary spiral, but applied to supply, not prices.

And, like a deflationary spiral, the only way out is to have the state to intervene on a huge scale to break out of the universal beggering of market logic. It needs to do something which acts contrary to the delivery of profit- provide large amounts of housing that could be worth more later, now.

And, sure enough, that idea is certainly talked up in the new Housing for All plan. It promises local authority housing- “9,500 of these will be new-builds, each year between 2022 and 2030”. But, put beside the same plan’s estimate of needs -“Ireland will need an average of 33,000 new homes to be provided each year from 2021 to 2030.”- it would seem a little optimistic to suggest that adding 24% of the housing supply from the state would fundamentally move the market.

The recently published How Ireland Voted has a chapter which reflects on messaging in the most recent election and highlights the potential impact of the statement from Sinn Féin’s leader during the RTE debate that “If Fianna Fáil were party of the developers, Fine Gael are the party of the landlords.”

The truth is, the last time Fianna Fáil oversaw a sudden and dramatic drop in house prices, it nearly broke them. And Fine Gael’s voting base is the primary beneficiary of housing asset price inflation.

It is anathema to the government parties to ever try to cause a drop in house prices- or rent. And that is why our current policy machinery had failed to solve this social crisis for over a decade. It is also why we can expect to have no more to show from Housing for All than we got from Rebuilding Ireland.

There is a clash of short to medium term interests between those with property and those who need places to live securely. Helping one is contrary to the (short to medium term) interests of the other. Our state (more than most) has been designed and been run by the former since its creation.

Long term, of course, a state built on a deepening social divide over something as basic as the need for shelter is in nobody’s interest. The time is approaching where the choices will have to be made that break us out of the price-rise protection cycle. But this week, the government declined to make that time now.

Fianna Fáil may have found the one policy they genuinely would sooner see their party die rather than implement.

Postscript: There may be a bonus Gist video for subscribers this week, so keep your eyes peeled for that. It will be very different to the newsletter, because, sure, why not?