Budget 2019 Housing Redux: welcome to the Republic of missed opportunity

THIS WAS SUPPOSED to be the ‘Housing Budget’.

A series of government plans, strategies and false starts have so far failed to stem the surge in rents, reverse the relentless rise in homelessness or put homeownership back within the means of low-to-middle income families.

A decade since the property bubble burst and homeless figures began their long march to 10,000, this was flagged as the moment when the Minister for Finance would do what Ministers of Finance do to tackle a social crisis when there’s an election on the horizon – throw money at the problem.

So, let’s take a deep dive into the good, the bad and the ugly of the housing measures in Budget 2019.

*** This article was first published on thejournal.ie on 10 October 2018 ***

The good

The headline number sounds impressive at first glance: nearly €2.4 billion allocated to housing in 2019, up by a quarter on this year’s allocation.

Just over half of this amount will be allocated to social housing to deliver, we are told, 10,000 ‘new social homes’. But, only about half of these will be new-builds, barely more than this year.

The other half will come from ‘leasing and acquisition’. Obviously, these aren’t new houses, but existing houses being bought or rented by the State. This will reduce the supply of private housing for families that don’t qualify for social housing, pushing rents and house prices even higher.

The €121 million increase in the Housing Assistance Payment (HAP) is simply a recognition of policy failure. This payment, which goes directly to landlords, is being eaten up by rent hikes, themselves the result of an inability to ramp up the supply of houses.

If rent is seen by many as ‘dead money’ that could be used to pay down a mortgage towards owning a home, then the same goes for government. Paying part of the rent charged by landlords may be penny-wise in the short-term, reducing the outlay to put a roof over the heads of vulnerable households, but it is pound-foolish in the longer term.

The HAP is a stop-gap solution that does nothing to address the fundamental problem of housing supply increases falling further behind demand.

The bad

Extra funding for emergency accommodation (+ €60 million) and homeless services (+€30 million) is yet another admission of policy failure. Certainly, we need to treat the symptoms of a social crisis, but we need to get serious about eradicating the disease.

The minister said in his speech that “the affordability of housing remains a priority”, but the allocation of only an extra €20 million, with the aim of subsidising 2,000 so-called ‘affordable houses’ per year for three years is a pitiful response given the scale of the problem.

However worthy, these micro-interventions are fiddling around the edges while ignoring the elephant in the room. What we need is bold policy innovation, like rolling out the cost-rental model as a mainstream housing option as in other European countries.

The ugly

If the definition of insanity is doing the same thing over and over and expecting different results, then the Einsteins of Kildare Street should keep their eyes peeled for men in white coats.

Full deductibility of mortgage interest relief for landlords is to be restored as of 1st January 2019 at a cost of €18 million, about the same amount of extra funding being allocated to affordable housing. Meanwhile, there was no reintroduction of income tax relief for renters.

Think about that. Rents have increased by nearly 50% in six years while property prices have increased more than 80% in five years. This means that both the value of, and the annual return on, landlords’ investments have increased massively, yet the government sees fit to give them a tax break to further sweeten the deal.

Giving investors tax relief on debt raised to make the investment is bad policy, which is one of the reasons it was reduced back in 2009. But, given the large number of full-time TDs who are also part-time landlords (about one in five), perhaps it shouldn’t come as much of a surprise that turkeys are voting to cancel Christmas.

Fine Gael and their ideological bosom buddies in Fianna Fáil have conspired to put the interests of landlords and developers over those of ordinary households struggling to put a secure roof over their heads. By accident or by design, the net effect of many of the policy measures will be to further increase house prices, hurting affordability.

Until our policymakers begin to treat houses as homes for families rather than speculative assets for investors, it seems we are doomed to ‘rinse and repeat’ market failures. Welcome to the Republic of missed opportunity.

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