The Housing Figures Don’t Stack Up*

The Rebuilding Ireland Plan has allocated insufficient funding, is manipulating the use of the term ‘social housing’ and misleading people with its promises

The government has been responding to the Apollo House action by stating that dealing with the housing crisis is its “number one priority” and that their housing plan, Rebuilding Ireland, will address the crisis through the investment of €5bn in “a truly ambitious social housing programme of 47,000 units to 2021”.

Minister Coveney claims that “There’s a real acceleration happening here in terms of delivery” and has stated that there will be more than “21,000 social housing solutions provided in 2017”. With Budget 2017 providing “for a very significant increase in housing funding (of €1.3 billion).

But the Minister’s figures and the Rebuilding Ireland Housing Action plan just don’t add up.

The graph above is the forecast provision of social housing in the Rebuilding Ireland Plan from 2016-2021. But in this you see that the new construction of social housing (represented by dark blue shade at the bottom) is only a very small proportion of the overall 100,000 ‘social housing’ units to be provided over the next 5 years.

The majority of ‘social housing’ is in fact not new build social housing at all but are various housing support schemes provided through the private rented sector such as the Housing Assistance Payment and the Rental Accommodation Scheme.

These social housing ‘solutions’ (as the Minister’s refers to, note change of language from ‘new build housing units’ to ‘solutions’) are temporary, do not provide tenants with security of tenure and most importantly do not increase the much needed supply of real permanent social housing homes.

The schemes such as RAS and HAP have not met their delivery targets due to lack of availability of private rental housing (thus the governments social housing strategy also exacerbates the rental crisis – as it is taking supply from a sector that requires greater supply – a third of all tenancies are state funded social housing schemes.These should not be classified as social housing as it is not providing a secure form of tenancy).

Of course the HAP schemes suit government because they can reduce the housing waiting lists and make it appear as if the housing crisis is being dealt with – also while subsidising private landlords and avoiding allocating the necessary increase in funding to government/local authority state provision of affordable housing.

The Rebuilding Ireland Quarterly Review published in November gave the first official figures for what is represented in the graph above and breaks down the 47,000 ‘new social housing’ units figure.

This outlines that of the 47,000 social housing units by 2021:·

It is expected that 26,000 units will be built (construction, voids, Part V) exclusively for social housing

11,000 will be acquired (by LA, AHB & HA) from the market

And 10,000 units will be leased by LAs and AHBs – this will be a mix of units from the existing housing stock and newly-built units

Now the key figure here is the new build one because this provides additional housing supply. This is particularly important in Dublin, the commuter counties and other large cities (Galway, Cork) which need new units built and do not have the same vacancy level as other parts of the country. So the actual figure for ‘new build’ social housing units is 26,000 units (just over half the headline 47,000 figure).

Now as is mentioned this also includes bringing local authority voids back into use and new housing built under Part V (the 10% social housing provided in large private housing developments). But Part V delivered just 65 units in 2015 (but 286 were in progress).

Given that Part V delivered 3,246 units in 2007 (4.5% of total 71,000 private units delivered), and that was when Part V was 20% of all developments – which has since been reduced to 10% (but developers could pay cash to the local authority in lieu of the units and this is no longer available), then using the same percentage, then on the basis of 25,000 private units per annum, Part V is likely to deliver no more than 1,250 units per annum in the coming years.

That brings the 26,000 ‘new builds’ down to 24,750.

It was also estimated that 800 local authority voids would be brought back into use in 2017 so taking that away it leaves us with 23,950 new real social housing units planned to be built between now and 2021: which is 3,991 units per annum.

At that rate of delivery it would take 22 years to house all those of the current social housing waiting lists (90,000 households) into real permanent social housing homes.

How can that, in any way, be deemed an acceptable time frame of delivery to address the crisis? Particularly given that housing need is increasing significantly.

So what about the increase in the allocation in social housing investment in Budget 2017? The total exchequer Housing allocation in 2017 will be €1.2 billion –up from €814million in 2016.

However this is the same trick – the main increase is on temporary social housing through the private rental sector. Current (mainly spent on private rental sector schemes and leasing from private sector) increases from €382m to €566m while capital expenditure (includes new building and purchase of permanent social housing) only increased by an additional €150 million from €432m in 2016 to €655m in 2017.

But the ‘housing’ capital budget appears also includes €50m for an ‘infrastructure’ fund for local authorities to enable the development of private sites for housing, the payment for previous social housing already built by housing associations, the mortgage to rent scheme, urban regeneration, €70m for retrofitting existing social housing stock, €45 million for grants for private housing and funding for schemes such as the Pyrite Remediation Scheme. So while we don’t have an exact figure we can see that the actual budget allocation for new building (and purchase) of social housing is certainly under €400 million.

Therefore, the social housing units outlined in the Rebuilding Ireland plan are in fact largely various forms of private sector and privatised housing delivery. They are dependent on various forms of private financing, ‘off-balance sheet’ mechanisms, Public Private Partnerships, acquisition from the private market and delivery from Part V mechanisms.

The plan itself acknowledges that securing the social housing output is “dependent on a number of critical factors” including, most importantly,

“A functioning private residential construction sector, with levels of supply to meet demand (delivering 10% social housing units under Part V and providing a supply for targeted acquisitions).”

Social housing provision is being privatised onto the private rented sector– which has meant a failure to achieve social housing targets and reduced private rental stock available to the wider population. This is not a ‘social housing’ strategy!

And this is where the plan ultimately fails. Its output of social housing is dependent on a very significant increase in supply in the private housing market which has already proven in its inability to do so.

What is required is an increase of the social housing capital allocation to €2bn per annum to local authorities and housing associations to ensure the building of at least 12,000 new permanent social housing units. This is alongside the changing of NAMA’s mandate to prioritise its social mandate over the maximising financial return and to ensure the 20,000 units it builds are affordable and public housing units – and to use its 3bn cash reserves to build an additional affordable and social 30,000 units.

It is only when we get close to building at least 20,000 new affordable and social housing units per annum that we can get close to addressing the national emergency of the housing crisis.

Ultimately the only guarantee of affordable supply of housing to a broad range of income groups (from the lowest income to middle income workers) is by the state through local authorities (with support from Housing associations). A social mix in developments can be achieved by the state building affordable housing available to different income groups.

This should be a mix of traditional public housing, cost rental housing, shared ownership, equity partnerships and cooperative housing. It is the time for a ‘New Deal’ in housing where we take this opportunity to ensure the provision of affordable and high quality homes as a right to all in this country.

It is great to see that Home Sweet Home’s Emergency Housing Plan includes these ideas as some of its core proposals.

Home Sweet Home outlines that there should be the provision of “a minimum of 10,000 new social/public housing units owned by Local Authorities and Approved Housing Bodies per year for the next decade in order to clear all social housing lists”.

The government should “suspend all sales by NAMA of land and assets and use its finances to deliver 10,000 new social and affordable housing units for families and low-income households”.

Most importantly Home Sweet Home outlines that this new social and affordable housing building programme can be financed through “ceasing all tax cuts until the current housing and homelessness crisis has been averted”. It states that it “is morally reprehensible that we have so far given more than €2.5 billion in tax cuts while homelessness has doubled and thousands of children are spending their childhoods growing up in hotel rooms”.

They also highlight correctly that “should borrowing be necessary, the National Treasury Management Agency (NTMA) has borrowed €500m at an interest rate of 0.81%. This low cost borrowing could provide up to 5,000 social housing units per year”. Furthermore, they point out that in 2014 the Irish League of Credit Unions formally proposed making up to €5bn available for social and affordable housing schemes but “two years on and Government has yet to formally respond. This source of funding should be accessed as a matter of urgency”.

The reality is that the government in its Rebuilding Ireland Plan has allocated insufficient funding to the new build of permanent real social housing homes. It is manipulating the use of the term ‘social housing’ and misleading people with the figures it is using in order to suggest its plans will address the crisis – when in fact there is much less new build of real social housing in the plans than the government is trying to portray.

Rebuilding Ireland is a fundamentally flawed plan as it driven more by an ideological aversion to the state building affordable homes than evidence-based policy solutions based on meeting the housing needs and right to housing for people.

The Plan is based on the taxpayer incentivising and subsidising the private construction industry and private speculative finance through the various private rental social housing schemes, the ‘help-to-buy’ subsidy (for which there was no cost-benefit analysis done!), Real Estate Investment Trust tax breaks, the sell-off and leasing of local authority land to developers and the sale by NAMA at discount of land and property to vulture funds and investors.

The alternative approach outlined above is, therefore, urgently required. And that is why it is really important that the Apollo House and Home Sweet Home campaign gain sufficient public support to achieve this policy change.

Rory Hearne

*Originally published on Broadsheet.ie

 

Apollo, Nama And You

There is still time to use NAMA to do what it should have been used to do from the outset- to help heal the scars of the crash and austerity and the injustices of the bailouts.

Yesterday (3rd of January) at 12 noon the HomeSweetHome campaign marched from Apollo House to hand in a letter and petition to the Minister for Finance, Michael Noonan, calling on him to direct NAMA to use its property assets to address the homelessness and housing crisis.

The government and NAMA have been trying to hide from the public the significant role that NAMA could be playing in addressing the housing crisis. But the Apollo action means there is no more hiding for NAMA and the government.

This article provides a detailed overview and analysis of why and how NAMA should be used to address the housing crisis. A number of these points are included in the HomeSweetHome letter to the Minister.

While myself and other academics and housing activists have been making the case about NAMA for a number of years it has taken the innovative and inspiring Apollo House action to bring widespread public attention to this.

And it has become even more urgent as the homelessness crisis continues to worsen. The latest monthly figures show that there are now 1,205 families, with 2,549 children, living in emergency accommodation in Ireland.

These figures how that the occupation of the vacant NAMA building, Apollo House, and its transformation into safe and secure accommodation for homeless people is the correct, and socially just, thing to do in order to get public and political attention focused on our housing and homelessness crisis which is a national humanitarian emergency.

The figures show that the the dismissive criticisms made recently by various politicians and Dublin City Council officials about Apollo House are wrong.

Those comments are part of an-going attempt to undermine the massive groundswell of public support for the HomeSweetHome action.

This truth is the core injustice of NAMA itself – it is a truth that government and NAMA officials have attempted to hide from the Irish people.

The NAMA injustice is that NAMA is a state (i.e. belongs to me and you) agency that has the buildings, land and finance that is being used to enrich wealthy property investors rather than being used to end a homelessness crisis that sees hundreds forced to sleep on our streets and thousands of homeless families and children traumatised living in emergency accommodation.

The central problem with NAMA is that senior NAMA officials (operating under direction from the Minister of Finance) have prioritised NAMA’s purpose outlined in Section 10 of the NAMA Act 2009 which is to “obtain the best achieveable financial return for the state”.

 

The problem with this is that while it might appear that NAMA is maximising the commercial return to the state and taxpayer, it is in fact playing a major role in worsening the housing crisis and thus adding to the economic and social costs of dealing with the housing crisis.

NAMA has sold off loans, land and property to foreign vulture funds who have evicted tenants and raised rents to unaffordable levels.

Most disgracefully NAMA has sold development land (sites) to investors that had the potential for up to 20,000 housing units. However, just 1,100 (5%) of these have been built or are under construction. The investors have hoarded the land, waiting for (and contributing to) housing prices to rise.

NAMA’s current approach is thus worsening the housing crisis and resulting in a significant cost to the state through the necessity for increased spending on homeless accommodation and private rental schemes such as RAS, HAP etc.

It also means that there is no guarantee that the sale of its land and assets will be used in the provision of affordable housing (or other uses). In all likelihood in the current market – financiers are purchasing them to hoard and accrue value before resale in future years rather than redevelopment.

As I wrote in an opinion piece published in the Irish Times on NAMA in 2014:

“By pushing for maximum commercial returns, Nama is working against the interests of those looking for an affordable and secure home. It is continuing the speculative-asset approach to housing that fuelled the crisis. This promotes residential property as a commodity rather than a social good.

Nama is facilitating a massive transfer of wealth created by the Irish people to foreign and domestic capitalist investors.

But Section 2 of the NAMA Act 2009 states that NAMA’s mandate is “to contribute to the social and economic development of the State”.

So why is this not NAMA’s priority?

Furthermore, under the provisions of section 14 of the NAMA Act the Minister for Finance has the power to issue a direction to NAMA.

The Minister Finance could, therefore, as part of converting NAMA into an affordable housing agency, direct NAMA to prioritise its Social Mandate (section 2) over its commercial maximising mandate (Section 10) in all of its operations. Also this Social Mandate should be made to include the prioritisation of the delivery of social and affordable housing.

The Minister should then direct NAMA to sell its property related assets in Ireland (loans relating to land and residential property and holdings of property and land) to local authorities, housing co-operatives, community land and housing trusts, and housing associations rather than vulture funds and REITs.

NAMA should also use the 6000 residential units currently in its possession to house homeless and people off the housing waiting lists as these units become vacant.

Most importantly, NAMA is planning to build (finance and develop) 20,000 houses by 2020 and 90 % of these are to be in the greater Dublin area).

However, the only legal obligation on NAMA is to provide 10% of these units for social housing.

Furthermore, while NAMA states that these units will be ‘starter homes’, at market rates they will be out of reach for many first-time buyers. In 2017 3,500 of these are expected to be built (2,500 are already under construction in the Dublin area). A third of these units- 1,100 of these units – should be used to house all families who are currently living in emergency accommodation, such as hotels and B and B, in Dublin.

Such accommodation is totally unsuited to their needs and particularly those of children who may suffer lasting damage from such accommodation.

It should be noted that NAMA has provided around 2000 social housing units to date. In fact, local authorities have been offered 6,635 units by NAMA e.g. over 800 houses were offered to Dublin City Council but only were 400 taken up, largely because of insufficient funding being made available to local authorities by government and issues relating to over concentration of social housing in certain areas.

The Minister for Environment, should immediately direct local authorities to take up all NAMA offers of social housing and that these will be funded and sanctioned by his Department.

Furthermore, NAMA could build tens of thousands of additional homes on its own and local authority land through the use of its cash reserves and delaying the repayment of its remaining debt. NAMA has already paid off 81 per cent of its debt of €31 billion (€25 billion), so that only €5 billion remains to be repaid.

Currently the Minister Finance and NAMA are planning to pay down the remainder by 2020 and Michael Noonan, has repeatedly defended NAMA’s ‘maximising of the commercial return’ from the sale of its land and buildings in order to pay back this debt as soon as possible.

But that timeframe is arbitrarily set by NAMA and the Minister for Finance. NAMA can fulfil its commercial mandate and pay down the debt – just over a longer time frame – through the development of affordable housing schemes using its cash reserves and ability to raise low interest finance to fund development.

This can be staged over a longer time frame than that currently fixed. For example, NAMA could fund through its cash reserves and lending to local authorities and housing associations the building of upwards of 50,000 affordable (affordable homes for broad range of income groups through social rental, cost rental and affordable purchase) housing units in coming years using NAMA and other state land.

The 50,000 figure is based on 20,000 units on NAMA land and using NAMA’s cash reserves and other assets at a cost of €500 million per 10,000 units of affordable housing and €1bn per 6000 public/social units.

This would save the State a substantial proportion of the €100 million annual expenditure in emergency accommodation and hundreds of millions more euro on various social housing schemes in the private rental sector.

So if NAMA, for example, provided 20,000 social and affordable units, it could save the State at least €1 billion over five years, and at least €2 billion over ten years (this would increase if 50,000 units were built), which equates to the return NAMA is supposed to provide to the taxpayer anyway.

Furthermore, this approach would provide a longer term rental income stream and housing assets to the State, and would address the humanitarian disaster of homelessness and the social and economic costs of the wider housing crisis. NAMA has already developed a model for doing this using its NARPS special purpose vehicle, and is building some social and affordable housing across the country, although at very low numbers.

But there is still time to use NAMA to do what it should have been used to do from the outset- to help heal the scars of the crash and austerity and the injustices of the bailouts.

It could do this by contributing to the social recovery through social and affordable housing provision for the Irish people rather than fuelling the economic recovery of the already wealthy global and Irish investors.

As I wrote in 2014:

“When our financial system was in peril there was no obstacle too large for the State to overcome. Now we face an equivalent crisis in housing needs. It is legitimate to ask why the same radical approach is not applied to the housing crisis. It appears the Government is unwilling to stand up to the financial and property investors”.

The Receivers appointed by the NAMA to Apollo House obtained an injunction from the High Court directing the occupiers to vacate the premises by noon January 11 2017. The effect of this is that at least 40 people, currently housed at Apollo House, will be rendered homeless and forced to live on the streets.

In the coming days a lot of public support is required to convert this brave citizen’s act into an unstoppable movement for a right to an affordable and secure home for all in Ireland.

You can start by signing the HomeSweetHome Open Letter to Michael Noonan, demanding he use NAMA’s resources to help end the homelessness crisis here

Rory Hearne

* Originally published on 3rd January, 2016 on Broadsheet.ie

 

The Housing Bill 2016: More than supply or the same old story?

There has been much discussion, and not a little disagreement, about the Housing Bill 2016 (Housing Miscellaneous Provisions Bill 2016) currently going through the Seanad.  In essence, it is the Government’s attempt to ‘fast track’ the delivery of new housing units.  And while there has been some debate about a small number of legislative changes that will, potentially, give tenants more rights, the bill offers an example of more of the same, rather than fundamental departure, in terms of the housing policy pursued by successive governments.

In this post, I want to do two things. Firstly, I want to look briefly at some core points of the bill with a view to identifying where they depart or continue existing policy.  Secondly, I want to place the state’s approach to focusing on stimulating supply through incentivizing the development sector in a historical context.

 

The Housing Bill 2016

The Housing Bill 2016 is generally a continuation of the kinds of housing policies successive governments have been pursuing for years now. Its basic premise is to remove (more) barriers to development in order to increase supply quickly. Most fundamentally, it assumes that supply is the single most important element of the housing problem and that remedying the issue of supply will have a ‘trickle down’ effect to subsequently alleviate the other crises of housing affordability, homelessness, and tenure insecurity.

As I want to argue below, this assumption is highly problematic, as borne out from historical evidence in the Irish context.  But before I get to this, I want to briefly focus on three key points from the bill that have gained media and activist attention.

Firstly, the bill includes a clause to curb wholesale evictions when a property is sold to a large investor. It builds on the so-called ‘Tyrllestown amendment’ by including a provision that landlords with 20 properties or more cannot evict tenants when selling to an investor.  This protects against a particularly high-profile form of eviction, but one which is perhaps very limited in the overall scheme of things.  Some estimates suggest that this will affect only 0.56% of landlords*.  Moreover, a new get-out clause was also included in the bill, which allows a landlord to pursue a vacant sale (i.e. evict existing tenants) if they can prove that the value of the sale is decreased by 20% as a result of occupancy.  Given the current market conditions it may not be difficult for landlords to ‘prove’ this.

Secondly, the bill makes provisions to amend Part 4 Tenancy by removing the six-month window at the beginning and end of a four-year lease agreement in which a landlord can terminate a tenancy.  This improves the rights of tenants but offers limited protections in a context where a number of other gaping loopholes exist that allow landlords to terminate tenancies. Moreover, in a context where rents have increased by 40 per cent since 2011 this will do little to combat the tsunami of economic evictions taking place.

Thirdly, the bill proposes to give increased powers to An Bord Pleanála by introducing new ‘fast-track planning permissions’ for ‘strategic housing development’.  This removes planning powers, in particular instances, from the local authorities.  The bill proposes that:

“Applications for permission for strategic housing developments shall be made direct to the Board (An Bórd Pleanála) and not to the local planning authorities.”

The rationale here is to reduce the time it takes developers to secure planning permission, and thus reduce the overall time it takes for new housing supply to come on stream.

In the Irish planning system, An Bord Pleanála operates as an adjudicator of last resort on planning decisions made by local authorities: “Anyone applying for planning permission and anyone who made written submissions or observations to the planning authority on a planning application, can appeal a subsequent planning decision to An Bord Pleanála”.

As such, the ‘fast track’ approach, while ensuring a quicker process for developers, potentially removes one more avenue for community opposition to new development. Given the less than exemplary recent history of sustainable development in Ireland, the removal of recourse to objection is potentially worrying.

It has been documented in academic work by Linda Fox-Rogers and Enda Murphy and Gavin Daly that during the boom local authority planning departments were put under pressure to deliver favourable planning outcomes.  One mechanism used was the incorporation of ‘pre-planning’ talks, whereby a developer submitting an application could avail of extensive meetings (even negotiations) with the planning authority to ensure that a planning application could fit the criteria to be granted permission.  Will An Bord Pleanála, which is an independent body, now also be expected to engage in pre-planning discussions with developers given the political pressure to quickly increase supply?  If the answer is yes, it could seriously undermine the independence of the authority.  If the answer is no, the new measures might well fail to deliver the fast-track supply of housing the bill promises.

Underpinning the bill as a whole is the assumption that the supply of housing is the biggest challenge to overcome.  This dogma, although increasingly challenged by various housing experts, is stubbornly trotted out in the media by politicians and vested interests.  This simple formula for solving periodic housing crises, namely increase supply through removing barriers to development and incentivizing the construction and investment sector, has had a long history in Ireland, with highly variable outcomes.

 

Build it and they will come

This approach has deep roots in the history of Irish Housing Policy. Indeed, the first Fine Gael government sought to deal with a crisis of tenement housing by offering grants to incentivise higher income families to take out mortgages to buy their own home, thus freeing up units in tenements for low income families.  When Fianna Fail came to power in 1932, they instead embarked on a programme of building social housing, in the process offering incentives for the construction sector during a period of relative economic stagnation.  These two moves set in place the conditions that have remained stable in Irish housing policy since – a focus on homeownership as the optimum model of housing tenure and a close relationship between the successive Governments and the construction sector.  These close relationships have provided fluctuating outcomes for Irish housing.

To take two broad, and broadly different, examples.

Firstly, attempts by the state to solve period social housing crisis have in the past focused on strategies to increase supply and/or renovate existing stock.  Moreover, this has often been achieved through incentivizing the private sector.  For example, the plans to create Ballymun emerged in the context of a crisis of tenant housing in Dublin city centre.  Built using new rapid-build materials, Ballymun was intended to as modernist utopia delivering a large supply of working class housing.  However, while the development proved a relative success in the early years, the state’s failure to deliver local jobs coupled with the withdrawal of Dublin Corporation investment and general upkeep of the flats led to spiralling social problems in the area.  The supply of housing alone was not enough to make the community sustainable.

However, when the regeneration of Ballymun was slated in the 1990s, the focus was once again overwhelmingly on the ‘bricks and mortar’ approach to supply.  Although the plans included provisions for community and economic regeneration, these promises remained largely undelivered by the state.  Moreover, the regeneration was to be financed by the construction of new private housing units on site, which was expected to also lift the economic profile of the area.   Thus, what the community got was new public and private housing units, but less in terms of long-term investment in the community or the local economy.  The regeneration during the 1990s failed to deliver on long-term community development because of a focus on a supply of housing units rather than taking a more holistic view of housing.

Despite these problems, the Ballymun model of regeneration became the template for regeneration schemes in places like Cork, Limerick, and Dublin.  Using a Public Private Partnership (PPP) approach, regeneration of social housing was expected to deliver new social housing, enhance community development, and deliver private sector housing supply.  Moreover, it was expected to do this by incentivizing the private development sector.  Many of these PPP schemes collapsed with the property crash, leaving communities high and dry.

Secondly, from the 1986 Urban Renewal Act on, the state introduced a series of tax incentive schemes to increase the supply of property development in urban and rural areas.  This was a major factor in kick-starting the Celtic Tiger property bubble, which saw an astronomical increase in the supply of housing.  Between 1991 and 2006, 762,541 housing units were built in Ireland.  However, this supply did not lead to more affordable housing. In fact, house prices increased by between 300 and 400 per cent in different parts of the country.

The tax incentive schemes were extended far beyond the point at which they were necessary.  These policies to increase supply were a key factor in the creation of the 2,846 unfinished housing estates identified in 2010, including 78,195 complete and occupied units, 19,830 under construction, 23,250 complete and vacant, and planning permission in place for a further 58,025.

Moreover, the unregulated development that resulted from reducing the barriers for developers actually undermined the creation of sustainable communities built around strong transport links and services.  One of the reasons planned developments like Adamstown and Clongriffin failed to deliver on their promises, for example, was that unregulated development in neighbouring local authorities undermined plans for the timely delivery of schools, transport links, and other amenities in tandem with the phased delivery of housing.

Following the crash, there was little legislative change introduced to the planning system. And while the development sector has been significantly affected by the financial and housing crash, this has been the impact of external factors rather than designed through government policy.

The current housing and homelessness crisis is a direct outcome of the series of systemic problems created throughout the boom and the policy responses to the crash that ignored issues like mortgage debt, the decline in social housing provision, and the changing character of the rental sector, and continued to support existing and new development interests.

 

More than supply

The Housing Bill aims to solve a series of complex problems in the housing system through a short-term intervention to increase supply.  While this might be what vested interests in the sector need to get building in the short term, it will only exacerbate conditions for most of us with regard to our access to secure and affordable housing.

It foolish to assume that focusing on the needs of the same vested interests will remedy these problems.  Firstly, because they have never solved these problems in the past and indeed created many of them. Secondly, because the housing market has changed since the crash.

For financial actors, the rental market has become more profitable in recent years as a form of investment.  For international funds, in particular consistent rising rents is essential for them to return growing profits on their investments.  As such, a greater supply of rental stock will not mean more affordability – there will still be pressure to push up rents.  In combination with the incentives for first time buyers, measures supporting developers, landlords, and investors will only serve to further inflate the housing market.

In the meantime, the clear and modest demands to increase the supply of social housing, or improve tenants’ rights are being side-lined.  For example, the Secure Rents campaign asks for three things:  to regulate increases in rent by linking rents to the Consumer Price Index; to revoke the right of landlords to evict tenants for the purpose of sale; and to move from current 4 year leases to indefinite lease terms. These provisions are not radical by any means, but rather start to address some of the imbalances between the rights of tenants and those of landlords.  Indeed, tenant rights are particularly poor in Ireland in comparison to the rest of Europe. These provisions would not unnecessarily penalise developers, landlords, or investors. But they would slow down some of the crisis conditions.

More starkly, within the context of a housing crisis of unprecedented proportions, the Irish Housing Network have made a call for a complete ban on evictions.  It is worth remembering here that the number of homeless people in Dublin has risen by 35 per cent in a year.

In sum, the Housing Bill is unlikely to change the current system to any great extent – in terms of tenants, the new amendments will not make much of a dent, while in terms of development interests, the changes are just the latest iteration in a long-standing state support for this sector.  But in the context of the current housing crisis, this response is inadequate at best and has the potential to worsen the problem.

The assumption of supply being the most significant factor is highly problematic, as we can see from historical evidence.  The evidence suggests that relying on the logic of supply (without considering issues of affordability and security of tenure) will create increasingly dysfunctional housing systems.  It is time that we finally took stock and addressed the bigger housing problems that repeat themselves.

This is an emergency. And an emergency requires new thinking.

Cian O’Callaghan

*My thanks to Lorcan Sirr for providing this figure

 

Housing Beyond the Market: four reflections for housing movements

As the housing crisis is getting increasingly worse it seems that more than ever that we need housing movements proposing progressive solutions. However, the almost complete lack of government action to address the crisis would seem to suggest that progressive solutions are not getting through to policy makers and politicians.  In this post, I offer four reflections for housing movements and those seeking a more just housing system to consider.

 

1. The big picture: demographics, credit and scarcity

Housing is at the centre of three irreversible process: demographics; scarcity and credit. We need to understand how these interact to appreciate the importance of housing politics today. First of all, there are strong demographic trends exercising pressure on the housing systems of medium and large cities. Populations are growing and people are living longer. Household size is steadily falling – people are living in smaller groups. And, finally, economic activity is increasingly concentrated. This means cities like Dublin will see significant in-migration (especially rural to urban) as people seek out employment.

These demographic trends, however, only become a problem in the context of the way the economics of housing works in market driven societies. This is a broad topic, but the most pressing matter for housing politics is the relationship between the availability of credit and the scarcity of land and property. Houses, land and property in desirably located urban areas are inherently scarce. We can’t just produce more of land to meet growing need. As such, given the above demographic trends, more people are competing for a scarce resource.

But credit money is not finite. As argued by Adair Turner in his recent Between Debt and the Devil banks don’t just help money move around the economy, they create money by issuing credit. This means credit can increase with few limits. But if desirably located urban land and real estate is scarce the inevitable result of increased credit is price inflation. This means property and housing becomes something of cash cow but it also introduces instability and volatility into market driven housing systems.

Over coming decades, intense competition for housing and erratic rises and falls of house and rental prices will become the norm in urban housing systems. This will lead to the expulsion and displacement of lower income and working class communities, the accumulation of private debt and volatility in the housing system, the financial system and the economy as a whole.

 

2. The market and supply: its weakness is our strength

Because of the interaction of the above three processes housing markets are volatile and housing and rent is expensive. Here it is crucial that we appreciate an issue which cannot be underestimated in terms of its importance for housing activists: the market cannot and will not provide affordable housing for low and moderate income households.

In fact, the market has never been able to provide affordable housing. A brief look at Irish history is revealing here. Before significant state intervention in the housing system most working people rented housing in the private rental sector. The vast majority of this was over-priced and had extremely poor quality – the tenement being the most famous example. This changed from the 1930s. In the decades in the middle of the 20th century 50% of all housing output was social housing. Meanwhile, home owners also benefited from huge supports, in the form of tax relief and mortgages provided by the state.

This pattern is repeated across Europe – up until the 1930s every city was dominated by expensive private rental accommodation of dreadful quality. Throughout the 20th century this changed radically and social housing and home ownership became dominant, but only with a huge amount of state intervention.

The reality is that it is not profitable to build housing for people on low and moderate incomes. The only way it can become profitable is if you allow those people to borrow huge sums of money, which inevitably results in uncontrolled house price increases and eventual collapse, as we know only too well.

 

3. Non-market solutions: playing to our strengths

Only non-market based solutions to the housing crisis can work. There is also an important strategic political point here. The key weakness of market based approaches to housing is not that they are unjust or that someone gets rich off them – it is that they don’t work and can’t work. The main strength of housing movements is that because we are willing to advocate for non-market solutions we can provide solutions in terms of the supply of affordable housing.

I think it is fair to say that we have remained somewhat ‘on the back foot’ in relation to the issue of housing supply. Housing activists for the most part have focused on the problems and injustices with the current housing system and the ‘vulture funds’ etc. that make money from it. We have tended to focus much less on providing solutions in terms of housing supply. Yet this is exactly where our main strength lies and where we should focus our energy.

In doing this, however, we have to be creative and innovative. In particular, we should be willing to look at innovative forms of financing and providing affordable housing. This includes new forms of financing social housing, such as including a greater role for private finance (credit unions, pension funds and banks) and cost rental and self-financing models. It should also include a greater role for not-for-profit housing providers such as housing association, cooperatives or community land trusts.

In exploring these innovations, we should not be afraid of taking a new approach to social housing and we should not be ideologically blinkered: by developing pragmatic solutions we will be able to put non-market approaches to housing at the centre of the debate.

 

4. More than bricks and mortar

Creativity and innovation are also crucial at other levels. A great strength of housing movements is that we appreciate that a house is more than bricks and mortar, that a home is both a fundamental right and is a key part of our social and community life. How we think about housing and in particular supply of affordable housing can draw strength from this insight.

For example, provision of affordable housing should also be linked to the task of creating sustainable, mixed income communities. Similarly, housing provision should be linked with the extremely important challenge of environmental sustainability. This is another major social challenge that the market has absolutely no hope of responding to. Energy efficiency, sustainable water usage and environmentally friendly transport planning can and should all be part of progressive approaches to providing affordable housing.

Mick Byrne

Mick Byrne is a lecturer and researcher in UCD School of Social Policy, Social Work and Social Justice and a member of the Dublin Tenants Association.

 

Event: Public Lecture – ‘Serial Forced Displacements in the American City’. Prof. Mindy Fullilove. Friday 14 Oct 2.30-5.00pm

Coffee – From 2.30 pm

Lecture – 3pm

HAUGHTON LECTURE THEATRE, MUSEUM BUILDING, TRINITY COLLEGE DUBLIN

As part of the symposium organised by Karen Till (Maynooth University), Mapping Spectral Traces: The Place of the Wound, Professor Mindy Fullilove will give a public lecture on Friday afternoon 14 October in Trinity College. Prof. Fullilove is an amazing speaker and activist, as well as public and social health expert. No registration is necessary. Hope to see you there.

Professor Mindy Thompson Fullilove, MD HON AIA, is Professor of Clinical Psychiatry and Public Health at Columbia University and Professor of Urban Policy and Health at The New School in New York. Dr. Fullilove has conducted research on AIDS and other epidemics of poor communities, with a special interest in the relationship between the collapse of communities and decline in health. She has also published numerous articles, book chapters, and monographs, and has worked with planners, designers and architects on projects linking communities to healthy urban ecologies. Her book publications include Root Shock: How Tearing up City Neighborhoods Hurts America, and What We Can Do About It (2005, One World) and Urban Alchemy: Restoring Joy in America’s Sorted-Out Cities (2013, New Village Press).

 

Understanding the financialization of the city

The role of finance and financial actors in shaping the city is increasingly key to understanding some contemporary urban problems. Why are rents rising? Why is office space being built when we’re in the middle of a homelessness crisis and desperately need to increase the supply of affordable housing? How and where is profit being produced from urban space and what are the likely outcomes of this type of model? All of these questions in some way relate to how finance shapes the city.

These questions have somewhat complex answers.  Moreover, these are also quickly shifting sands. Indeed, the crisis (both in Ireland and internationally) and government responses to it has also created new opportunities for financial actors (Vulture funds, Real Estate Investment Trusts etc) to invest in and profit from the production of urban space.  To understand the contemporary city requires us to understand the role that finance plays.

In a previous blog post I looked at the concept of the ‘financialization of the city’. There were two key arguments put forward in that post. The first was that it is important to grasp precisely what is being financialized when we say the city is being financialized. It is the capacity of urban space, or rather property ownership over urban space, to generate ‘rent’ by capturing socially produced value. The issuing of credit and other financial products secured by or underpinned by income streams arising from property is ultimately underpinned by this singular monopolistic feature of ‘place as a commodity’, to use Molotch and Logan’s term.

The second argument relates more specifically to the contemporary context of ‘financialization’, understood as a specific phase of the development of capitalist political economy. Here, the argument is that what is decisive about the current conjecture is the ‘tradability’ of income streams arising from property. The classic example here is the securitisation of mortgages, whereby mortgage repayments are bundled together and traded on international financial markets. This argument has been put forward by a number of the most insightful commentators on this issue, including John Coakley’s (1994) early and extremely prescient work on property as a financial asset and the empirically rich analyses of Guironnet and Halbert (2014; see also Gotham 2006; 2009). Fine and Saad-Filho are particularly succinct in their analysis here:

“[A] mortgage…remains a simple (transhistoric) credit relation between borrower and lender. However, it becomes embroiled in financialization once the mortgage obligation is sold on as part of some other asset…”

In my previous post and elsewhere (e.g. Byrne, 2016) I also but forward the above argument. However, there are problems with this approach that I’d like to address here briefly.

The principal problem with the focus on real estate as a ‘tradable income yielding asset’ (Guironnet and Halber, 2014) is the fact that it is overly reliant on the US case and especially on the example of securitization. This is understandable given the role of securitization in the financial crisis. But it presents a particular problem for understanding the financialization of the city in the European context, where securitization played a relatively minor role. Understanding the role of property in the European financial system leads us in another direction. Here, the key driver of the property bubble was flows of finance between ‘core’ and ‘periphery’ (Flassbeck and Lapavitsas, 2015). This mainly took the form of inter-bank lending.

Essentially, northern European banks invested in the over-heating property markets of Ireland and Spain (and elsewhere) by lending to banks in those countries. Securitization did play a role in Spain (López and Rodríguez, 2010; Norris and Byrne, 2015), but it was far from the main vehicle through which credit flowed into real estate. Nor was it the vehicle through which income streams arising from Irish residential and commercial real estate flowed bank into the international financial system.

Most of the credit issued in Ireland during the property boom was non-securitized, more or less old fashioned development finance, investment loans and residential mortgages. The main driver was thus not financial innovation and the tradability of property as a financial asset, but economic and monetary union and the deregulation of financial flows, elimination of exchange rate risk and low ECB interest rates that accompanied it.

If the transformation of real estate into a tradable income-yielding asset is not the definitive feature of financialization of the city then what is? Drawing on the Irish and Spanish cases, the key feature relates to the way in which income streams arising from local real estate took on a structural and systemic role in the European financial system and its expansion as well as in European political economy more generally. As has been argued by others (Hadjimichalis, 2011; Flassbeck and Lapavitsas, 2015; there also many parallels with David Harvey’s work on the built environment as the secondary circuit of capital here), investment in and returns from real estate canalized the flows of capital from the ‘current account surplus’ core countries to the ‘current account deficit’ peripheral countries.

What is novel, then, is the systemic role of real estate in the circulation of interest bearing capital at a European level. The massive increase in the volume of credit flowing into real estate in Ireland and Spain reflects this role. From this point of view, securitization and inter-bank lending are two different mechanisms or avenues through which global financial capital can flow through local urban spaces, but not the cause or essential factor of the financialization of the city. Instead, the key  factor is the structural and systemic role that income streams arising from property take on in the accumulation of capital at the European level.

One concluding note which is interesting, however, is that the aftermath of the financial crisis has seen huge trading of financial assets linked to property in Ireland, Spain and across Europe. This has mainly taken the form of ‘bad banks’ and other ‘wind down operations’ selling distressed assets to US private equity and hedge funds (Byrne, 2015; 2016; forthcoming). This may mean the importance of property as a ‘tradable income yielding asset’ will grow in the aftermath of the crisis and the role of inter-banking landing and structural flows of capital between core and periphery may diminish. For the moment it is too early to draw any conclusion.

Articles referenced

Byrne, M. (2015). ‘Bad banks: the urban implications of Asset Management Companies’, Journal of Urban Research and Practice, 8(2) 255-266.

Byrne, M. (2016a). ‘Asset price urbanism’ and financialization after the crisis: Ireland’s National Asset Management Agency. International Journal of Urban and Regional Research, 40(1), 31-45.

Byrne, M. (Forthcoming) ‘Bad banks and the urban dimension of financialization: theorizing the co-constitutive relationship between finance and urban space’. City.

Coakley, J. 1994. ‘The Integration of Property and Financial Markets’. Environment and Planning A 26 (5): 697–713.

Flassbeck, H., & Lapavitsas, C. (2015). Against the troika: Crisis and austerity in the Eurozone. Verso Books.

Gotham, K. F. 2006. The secondary circuit of capital reconsidered: globalization and the U.S. real estate sector. American Journal of Sociology 112(1): 231-75.

Gotham, K.F.  2009. Creating Liquidity out of spatial fixity: the secondary circuit of capital and the subprime mortgage crisis. International Journal of Urban and Regional Research 33(2): 355-71.

Guironnet, A. and Halbert, L. 2014. The financialization of urban development projects: concepts, processes, and implications. Working Paper n14-04 URL: https://hal.archives-ouvertes.fr/hal- 01097192/document

Hadjimichalis, C. (2011). Uneven geographical development and socio-spatial justice and solidarity: European regions after the 2009 financial crisis.European Urban and Regional Studies, 18(3), 254-274.

López, I. and E, Rodríguez. 2010. Fin de ciclo: financiarización, territorio y socieded de propeitarios en la onda large del capitalismo hispano. Madrid, Traficantes de Sueños.

Norris, M. and Byrne, M. 2015. Asset Price Keynesianism, Regional Imbalances and the Irish and Spanish Housing Booms and Busts. Built Environment, 41(2): 227-243.

Mick Byrne

 

It’s not all good news: the hidden story of Ireland’s population change

Media coverage of the 2016 Population and Migration Estimates, just issued by the Central Statistics Office, has focused on the return to net immigration. This, combined with the recent report that 2 million people are now at work in Ireland, has been used as evidence of an economic upturn in Ireland.

These headline figures mask an important change that has taken place in Ireland. That change is shown by the ‘dependency ratio’, which measures the relative size of younger and older populations (under 15 and over 64) compared to the working age population (between 15 and 64). This ratio is important, because working people provide funds for public services and benefits, such as full-time education, health care and pensions, that are used by the younger and older populations. The higher this figure, the more people have to be supported by each working person.

The total dependency ratio across the EU as a whole in 2015 was 52.6% (calculated by Eurostat). This includes the young dependency ratio (23.8%) and the old age dependency ratio (28.8%). In Ireland in 2016, the total dependency ratio in 2016 was 55.3%, made up of the young dependency ratio (34.5%) and the old age dependency ratio (20.8%). On one level, this shows that there are proportionately more younger people and fewer older people in Ireland than across the EU. It is possible to argue that Ireland’s high young dependency ratio is potentially positive, but this would only be the case if these young people remained in Ireland. Instead, the CSO figures show us that many young people have left, particularly those aged between the ages of 20 and 40.

In 2016, total dependency ratios varied across regions. The highest was the Border region (62.7%), while the lowest was Dublin (49.8%). There were also considerable variations in the young and old age dependency ratios. These are shown in Table 1.

Table 1: Dependency ratios by region in Ireland, 2016

	Total dependency ratio	Old-age dependency ratio	Youth dependency ratio
STATE	55.3	20.8	34.5
Border	62.7	24.6	38.1
Dublin	49.8	18.4	31.3
Mid-East	56.0	17.2	38.8
Midland	56.8	19.8	37.0
Mid-West	58.0	23.1	34.9
South-East	56.8	22.3	34.4
South-West	55.3	21.8	33.5
West	59.2	23.9	35.3

Source: Calculated from CSO Population and Migration Estimates 2016

The geographical variation highlights one problem, since some areas (e.g. Border, West, and Mid-West) have proportionately fewer economically active people. A second problem is the dramatic change in total dependency ratio since 2009, when the average in Ireland was 47.3% (see Table 2). This means that there has been a significant increase in the proportion of younger and older people who are supported by working people.

Table 2: Total dependency ratio by region in Ireland, 2009 and 2016

	2009	2016
STATE	47.3	55.3
Border	51.5	62.7
Dublin	42.5	49.8
Mid-East	47.0	56.0
Midland	51.5	56.8
Mid-West	48.6	58.0
South-East	50.6	56.8
South-West	47.8	55.3
West	49.2	59.2

Sources: Calculated from CSO Population and Migration Estimates, 2009 and 2016

Across the EU, changes in dependency ratios are attributed to declining fertility rates and ageing populations. This is not the case in Ireland, which consistently has one of the highest fertility rates in the EU. While the population of Ireland is ageing, the country has the lowest proportion of people aged over 64 in the EU. Instead, the key factor in Ireland’s changing dependency ratios is the decline in the proportion of the population aged between 15 and 65. This is a result of migration: in particular, the net emigration of almost 170,000 people aged from 15 to 44 in the years from 2009 to 2016. Net emigration is the main reason for the striking change in dependency ratios in Ireland.

Headline figures, such as a return to net immigration in 2016, mask the ongoing and persistent effects of austerity in Ireland. The increase in dependency ratios means that the working-age people who remain in Ireland have more people to support, particularly in rural areas. These geographical variations will intensify further in future years. There are long-term consequences from austerity, and the dependency ratios show this clearly, through the loss of a significant number of economically active people from the country. Headline figures must not distract us from this, more troubling, reality.

Mary Gilmartin