There has been some recent talk in the Dail and the media about the extent to which Ireland’s vacant housing stock could solve the social housing waiting list and save the state half-a-billion euros worth of rent supplement payments per annum.  To what extent is this wishful thinking?

In principle it looks like vacant housing stock should be the answer to the social housing waiting list.  There are 98,318 households on the waiting list and 230,056 housing units vacant in the country (excluding holiday homes) according to Census 2011.  However, both figures are composed of a variety of types of household and housing units that deny a simple matching up.

The 98,318 households on the waiting list are composed of the following categories: 65,643 persons unable to reasonably meet the cost of the accommodation they are occupying; 9,548 persons in need of accommodation for medical or compassionate grounds; 8,534 persons sharing accommodation involuntarily; 4,594 persons living in overcrowded accommodation; 2,348 homeless persons; 2,226 older persons; 1,824 Travellers; 1,708 persons living in accommodation that is unfit or materially unsuitable; 1,315 persons with a disability; and 538 young people living in institutional care or without family accommodation.

The 230,056 vacant housing units consist of 18,638 unsold, vacant units on unfinished estates owned by developers or banks, a few thousand unsold, vacant one-off houses, and c.200,000 units in private ownership  that consist of units presently for sale or available for rent, empty bereavement properties, vacant investment properties, units where owner is in long-term nursing care or retirement home, or empty due to short-term or long-term migration.  In addition, there are another 8,794 nearly complete units and 9,078 under-construction units on unfinished estates.

On the one hand then, we have 65,643 people in suitable accommodation which they can’t afford, along with 13,129 people (medical condition, disabled persons, older persons) that need specialist or sheltered accommodation.  On the other, we have a stock of vacant units that are universally in private hands (either owned by an individual or a company), are not designed for social or sheltered housing, and are often in places unsuitable for social housing tenants (they lack public transport, social facilities and access to employment).   A small proportion of this vacant stock are in unfinished estates and these are owned by developers and banks, only a small proportion of whom are in NAMA (a large number of unfinished estates were funded by foreign-owned banks).  The means for the state to presently access this unfinished estate stock is the Social Housing Leasing Initiative.

Put simply, vacant stock is privately-owned (even in cases where the loan is with a state bank or NAMA) meaning there are only two options with respect to moving people on the social housing waiting list – move them into other private accommodation reliant on rent supplement or into private accommodation reliant on the social housing leasing initiative.  Neither is going to save the state much money as the state does not own the property and does not have any excess stock of its own.  Moreover, the latter will leave empty private rental stock in its wake whose buy-to-let mortgages will start to default, placing more pressure on the state-guaranteed banking sector.  In other words, vacant stock is not the answer to the social housing waiting list; it’s just moving people around privately owned stock.

Ultimately, the only solution to the social housing waiting list is for the state to build or buy social housing units, or to accept that the 65,643 private rental sector units that are presently unaffordable for tenants is de facto social housing stock held in private hands.  The only solution to vacancy is household growth, so that supply and demand equalise.

Rob Kitchin (@robkitchin)

CIF and NAMA were never going to be happy bedfellows.  The former represent the interests of developers and builders, the latter is charged with relieving the banks of property loans to try and address the banking crisis, and to manage and offload those loans on behalf of the state and taxpayers.  Whilst most citizens view NAMA as a bailout to developers, keeping them afloat when most of them would have gone to the wall a couple of years ago, CIF views NAMA as a predator that is trying to radically overhaul and restructure the building industry, is trying to gain at the developers’ expense and country’s best interests, and is a punative instrument that is inflicting more harm than good on the property sector.

As reported in some of the papers today (here and here), Lombard Street Research have just published a report commissioned by CIF, attacking the rationale and practices of NAMA (which makes interesting reading).  NAMA has responded by arguing that the developers are living in denial and they need to wake up to the new realities of property development and the market. Whilst there is undoubtedly a number of issues concerning the formation and operation of NAMA, CIF’s principle problem is that there is little public sentiment for their views given that they’re clearly a vested interest who seem to care for little else other than the interests of its members (which they try to spin as, what is good for us, is good for the country – the same as they did all through the boom).  From NAMA’s perspective it is finding its work tough because the banks and developers seem very reluctant to work with it, they are economical with the truth, are slow in coming forward with documentation and workable business plans, and are clearly more interested in their own self-interests than acting as good citizens in dealing with the present crisis.  No doubt the spat will continue to run and run.  There are unlikely to be any winners and ultimately citizens will pick up part of the tab.  Sounds about par given the history of the crisis so far.

Rob Kitchin

Brian Lenihan’s full statement on banking released this morning also has a section on NAMA.  Interestingly it states:

The Government has decided, having consulted with the NAMA Board and the European Commission, that where the total exposure of a debtor is below a €20 million threshold in AIB and Bank of Ireland, that debtor’s loans will not now be transferred to NAMA. The threshold had previously been set at €5 million. … I have been advised by NAMA that there are 650 debtors with property-related debts of between €5m and €20m in these two banks. They account for just €6.6bn of the aggregate €80bn volume of NAMA eligible loans.”

So, €6.6bn worth of smaller loans will not be transferred to NAMA after all, as “Loans of this size can be efficiently managed by the banks themselves through their network of local representation and relationships.”   Which makes one wonder why they needed to be transferred in the first place?

It would be interesting to know the geography of these €5-20m properties.  One assumes that there is a lot of housing and land outside of the principal cities which have just exited the potential NAMA portfolio.  What will be left is the more viable, larger developments in more prime locations (along with the more marginal stuff transferred from Anglo, Irish Nationwide and EBS).  One assumes this means that a large chunk of the marginal sites and the owners who have less experience and weaker or no business plan have fallen out of NAMA’s remit.  This will certainly make the life of NAMA easier, and make it more likely to succeed, with the banks themselves left to work out what to do with the properties.  Presumably they will either try to make them going concerns or off-load them at a loss.  It will be interesting to see how such offloading might affect the work of NAMA given that these impaired assets will no longer be coordinated by a single entity.

Rob Kitchin