Published in the Irish Examiner, Tue Oct 28th, 2014.

The residential vacancy rates from the 2011 census highlight the necessity of a radical change in housing and regional economic development policy in Ireland. Most significantly they make it very clear that our housing system is fundamentally dysfunctional. We now have the scandalous and untenable situation whereby there are 90,000 households defined as ‘in housing need’ and up to 5,000 homeless, and yet over twice that amount (230,056) of housing and apartments lie vacant. This is because far too much of the housing built over the last two decades has been done as a speculative investment rather than being provided as an affordable home giving shelter and long term security.

Vacancy rates also vary considerably across the country. This shows how the housing system in Ireland requires a spatial analysis to understand its regional differences and develop appropriate solutions. Vacancy rates are understandably lower in the cities, particularly Dublin at 8.2%, South Dublin 5.4%, Cork City 11.1%, and Galway 11.2%. The counties with some of the highest vacancy rates include Longford (21.6%), Leitrim (30.5%) and Cavan (21.6%) which result from oversupply due to residential tax reliefs provided as part of the Rural Renewal Scheme for the Upper Shannon Region. In terms of the actual numbers of units, the largest numbers are in Leinster which has almost half of the total vacant units in the country (106,658) and Dublin has one fifth of all vacant properties (43,707) including 16,321 apartments.

The reason for the extremely large number of vacant units is the oversupply produced during the Celtic Tiger housing boom. A private investor and developer-led property development frenzy was encouraged through government policy (tax reliefs, lack of planning and regulation, promotion of owner occupation), domestic and international speculative finance lending (Irish and European banks), and the Irish property industry (developers, newspapers’ property supplements, mortgage brokers, legal firms, estate agents etc.). For example, in 2007 the Bank of Ireland Group was lending as much money to speculative investors (as ‘buy-to-let’ and second properties) as it was to first-time buyers. Banks also lent recklessly to families who were desperate to get a home as they were told that property prices were only ever going to rise.

All this led to a massive housing bubble resulting in the oversupply and huge vacancy rates we have today. The regional variation in vacancy rates was also influenced by the failure to implement proper regional policies. National employment policy has focused on the construction industry and foreign multinationals that tend to locate in and around Dublin. The economic recession has shown up the spatial inequality of this policy as unemployment rates in areas like the South East and West remain significantly higher than the East.

The vacancy rates mean that, according to the ESRI, even though there will be an increase in household demand of 180,000 housing units by 2021, because of the oversupply in many parts of the country only 90,000 new units will need to be built. And most significantly 86% of all new build is needed in the Greater Dublin region. Many counties such as Donegal, Kerry, Mayo, Tipperary, and all the Upper Shannon counties of Leitrim, Sligo, Cavan, Roscommon and Longford are projected to still have an oversupply in 2021.

There is an assumption by policy makers and property economists that vacancy rates will fall in the coming years as owners help ‘supply’ by either selling or renting their properties as prices rise from increasing demand and the market returns to the ‘normal’ vacancy rate of six percent. However, this ignores the fact that a significant portion of vacant properties are investments that are primarily focused on capital appreciation i.e. to make a large profit when they are resold. This is evident from the fact that when demand and prices were at their highest ever in 2006 there was still over 200,000 properties vacant in Ireland. Furthermore, vacancy rates of three per cent exist in other European cities. This is also a serious issue in London where city councils believe that investors are leaving residential units idle waiting to sell at the ‘correct’, i.e. most profitable, time. This problem worsens as a greater proportion of residential units are investment properties, as is the case in Ireland over the last two decades.

Furthermore the CSO’s vacancy figures do not include derelict properties which are classified as dilapidated and boarded up for a significant time. Any casual observation of our towns and cities reveals this as a major issue. Added to this there are even higher vacancy rates in commercial and office buildings.

Part of the problem is that most of the analysis in the media of housing and property issues is being provided by economists and analysts with a direct interest in the property industry. Such as those working for Irish Mortgage Brokers, KBC bank, Sherry Fitzgerald property advisors and so on. They articulate the perspectives and analysis of those who have wealth to accumulate and profit from investment in housing. They advocate policies that aim to achieve rising house prices. There is an absence of alternative analysis that questions for whom such price rises benefit and uses different assumptions and indicators for housing and property such as fair, sustainable and balanced policies focused on what needs to be done to address housing need (separate from those seeking owner occupation).

This article uses such a ‘rights-based’ framework to analysis vacancies in a very different light by contrasting them with levels of housing need. For example there are 2000 households on the housing waiting lists in Co. Clare yet there are 7172 vacant properties. It’s the same across the country. In Cork City there are 6,000 in need of housing and 6,108 vacant units, in Kildare 5,500 in need and 6,123 vacant, in Laois 902 in need and 3,938 vacant, in Waterford 1800 in need and 3,232 vacant. A national level analysis shows that we could solve the housing waiting lists twice over using vacant properties (and that is even excluding holiday homes).

There are clearly issues of ownership and if a vacant unit is rented it wouldn’t automatically provide lower rents. Also the location of units must be appropriate. However, what it does show is that the government has options when it comes to providing increased supply for meeting housing need. It is very likely that many of the 40,000 buy-to-let properties in mortgage arrears are vacant. The government could buy these off their owners and provide them as social housing or low cost rent. It could instruct and empower local authorities to implement vacant and derelict property taxes (not just sites as currently proposed) or fines that would bring units in to use. It could compulsory purchase the vacant units using funding the strategic infrastructure fund and provide local employment and social housing.

Overall, the high vacancy rates show that we have to move away from a housing system based on promoting finance-led owner occupation and speculative investment and implement policies that provide genuinely affordable, high quality, long term secure housing as a home. It also highlights the need for proper planning and regional development that can develop indigenous employment rather than an unsustainable reliance on the low-tax multinational sector.

See also the Irish Examiner‘s editorial from the same day.

Rory Hearne

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