Splashing the cash is well and good but housing simply must take priority now
IT’S good news that the Government plans to spend loads of money, as it announced yesterday. The intentions seem admirable: new roads, a new maternity hospital and the replacement or upgrade of old community nursing homes and disability centres, a family law courts complex, loads of primary and secondary schools and better broadband across the entire country. There’s some stuff about improved energy efficiency in there too, money to give Gardaí cars to drive as well as upgrading the remaining stations and providing better IT systems, and even money to improve flood defences in 300 locations around the country.
The planned spend – not all at one time it has to be said, but over six years – is €27 billion. The number of jobs that could be created is 45,000. Indeed, one of the more expensive individual items – the train to Dublin Airport – won’t be completed until over a decade’s time.
The sceptics are out in force of course about the scale of the plans. Less seriously, some are accusing the Government of trying to buy the next election, as if the opposition parties don’t have their own plans to woo the electorate with expensive promises, as if governments shouldn’t have plans to govern. Some have noted too that many of the announcements have been made before, that this is an aggregation of the already announced and new, instead of all new.
More importantly, however, some people are wondering where all the money is all coming from, casting doubt on the selection of projects, why this and not that?, wondering if the spend will provide value or be wasted – although there are others who, of course, would have the Government spend much more. Those are legitimate concerns – and rigorous monitoring of the decisionmaking and implementation should be demanded and enforced – but overall it has to be good that the Government is in a position where it has money to invest in things that should bring a long term benefit to society. As long as they are done.
Earlier this week Professor John Fitzgerald of Trinity College – where he resides now after retiring from the ESRI – made a very interesting contribution to a conference on homelessness hosted by the Simon Communities. He argued that Ireland does not have a debt problem to worry about too much anymore when it comes to spending money on the right things. The economy is growing and the ratio between the Government’s debts and the size of the economy has been restored to manageable levels. So far, so good.
The problem, as he identified it, is that this Government, and the last, did not adequately prepare for the recovery. In dealing with the economic crisis that swamped us they cut investment to protect day-to-day welfare and other ‘current’ spending, notwithstanding the reduction in public sector wages. We allowed the negative mood of the time to overcome the likelihood that things would improve in the future.
We are now playing catch-up as a result – although, in fairness to this Government, it did inherit a situation where the country was effectively in receivership, depending on the largesse of the lenders of last resort, the Troika. Nowhere is this more evident than in the housing crisis we are experiencing, one that threatens to derail the economic recovery as well as creating serious social problems.
Roofless economy
There is a strange irony at work here of course, given that the excessive construction of houses – about 90,000 per annum at its peak – was one of the main reasons for the subsequent collapse in the economy. Construction made up about 14 per cent of the economy at one point, which was unsustainable. Tens of thousands of jobs were lost when the depression hit. Now, however, we have the opposite problem. We are building only about 10,000 new homes a year – most of them one-off and few in urban areas – and have a shortage of suitable office accommodation for foreign multinationals who want to locate here or for local companies with growing export businesses. The country needs construction and not just of the kind announced by the Government yesterday.
The lack of housing supply threatens to derail our economic recovery. Recently I earwigged a conversation between two young women in a Dublin coffee shop. They agreed that getting a job was easy enough but that finding somewhere affordable to live was nearly impossible. Rents soared over the last two years, by an average of more than 20 per cent. While this is not as dramatic in itself as it seems – after all rents had fallen by an even larger amount from their pre- crash highs – people’s ability to afford rent payments has been diminished by lower wages and higher taxes. When I put that example to Fitzgerald he agreed that this example is typical of the big problem facing us. We simply don’t have enough affordable places for our workers to live.
Fitzgerald spoke on Monday of the most important bell-weather being employment growth and, indeed, yesterday was further confirmation that the unemployment rate is now below the 10 per cent benchmark. Jobs are becoming available. However, the lack of affordable housing is a major problem that impacts on the ability of people to avail of those jobs. It is why, for example, we have so many problems filling medical posts for both doctors and nurses in our hospitals: many of our emigrants simply cannot afford to return home.
Many of our construction workers emigrated in the last decade. They’ll be needed back to help the Government’s new construction plans because, believe it or not, we now have a building skills shortage. But the necessary people might not return if they cannot secure affordable accommodation. We have heard a lot recently about needing to deal with homelessness, as a social necessity. But it has its economic benefit too. Part of the Government’s plans announced yesterday included the building of thousands of new units of social housing. This is not always popular with those who scrimp and save for a mortgage or who pay for their own rent without financial support from the State: why should others get for little or nothing what they have to pay for?
However, there is a social and indeed financial benefit involved in providing for those who can’t pay for themselves. More social housing – as well as providing work for those involved in the construction – frees up demand for the limited private rented accommodation that is available. It is also cheaper in the long run to the State than housing families in hotels – and better for children too. But the Government has to provide these places to live – not just funding the local authorities and various housing associations but putting the pressure on them to deliver a lot faster than they have been doing – before it can legitimately raise the issue of introducing what it calls ‘rent certainty’, which is a euphemism for ‘rent control’, in the private rented sector.
Landlords are an easy target for Government criticism, some of the price rises imposed in recent years dubbed “immoral” by Minister Alan Kelly, even though many landlords find themselves under great pressure from their banks and are trying to recover previous losses. Not all are greedy, especially the ‘accidental landlords’ who have moved for family reasons but have been unable to sell their original home. Let’s talk about rent controls once the supply issue – provided by both the public sector and the bank funded private sector – has been dealt with first.