December 19, 2016
Coveney needs courage to let go of ‘market will fix it’ chestnutPosted in Sunday Business Post · 101 comments ·
Let’s talk about housing.
Walking around Dublin city, whether on the Luas line between Museum and Smithfield, or over the river at the Coombe and the Liberties, you notice the number of vacant sites in prime positions for building homes. The city centre is pockmarked with overgrown zones of dereliction – hemmed in, away from our eyes, by cheap hoarding. These sites are waiting to be developed.
There are obvious sites that could be redeveloped immediately and would not only add to the housing stock and thus be part of the citywide solution to the housing crisis, but where the very development itself would contribute enormously to the city’s visual environment. Dublin should not have such eyesores. No continental city suffers such blight; it simply isn’t tolerated in most city centres.
In terms of the feel of a place or an area, dereliction is contagious. One derelict site leads to more dereliction, because as a site is left to go to rack and ruin, it sends a depressing signal to the rest in the area and dereliction spreads.
The opposite is also the case: regeneration leads to further regeneration as it sets the tone for the whole area. This is the alchemy of renovation. Each new development sets off a process of renewal which has untold benefits. These residential, commercial and environmental upsides have a self-reinforcing nature.
Therefore, it would seem obvious that the second phase of housing minister Coveney’s moves to address the rental crisis and housing shortage in our urban areas should be some penalty for those landowners that allow these pivotal sites to slide into dereliction.
The reason I say the ‘second phase’ is because I believe that the rental moves announced earlier this week have to be only the first part of an overall strategy to get to grips with the housing crisis.
This strategy, if it is to be successful, will involve carrot and stick: carrot when it comes to nudging or coaxing more investment from the private sector into housing, and stick where nudges are far too gentle and aren’t sufficient to shift apparently interminable problems like unsightly dereliction.
Having faced down his opponents, the minister has tipped the political scales in his favour and he can use his newfound political capital to accelerate his plans for the housing sector.
Let’s just recap what was announced on Tuesday. The main proposal will result in a 4 per cent annual limit on rent rise in designated areas. The system will last for a maximum of three years.
The limits will first be introduced in the “rent pressure zones” of Dublin and Cork city. These zones are neighbourhoods where annual rents have risen by at least 7 per cent in four of the last six quarters and where the average rent in these areas is above the national average in the last quarter.
In terms of politics, Fine Gael is not supposed to do things like this, which makes the minister’s intervention even more interesting.
If this came from the left-of-centre, that would be one thing. But coming from Fine Gael — the party that has traditionally represented the interests of landowners — it means that things are out of control and this is a minister who wants to fix things.
Some argue that rent controls are incompatible with building.
I don’t buy this argument, because it is based on the assumption that the free market was providing accommodation. It wasn’t.
Therefore, if the market isn’t working, it means that, socially, the minister had to move to stop rent rises by decree. So he issued a short-term decree. By omitting new builds from the rent freeze — albeit a double-digit rent freeze over three years — the minister is trying to separate existing supply from new supply. It seems logical, and there is an internal coherence to it.
Another phase of the minister’s plan has to be an acceleration of the building of social or cooperative housing to actually bring down, rather than maintain, the current price of accommodation in Ireland.
At its most simple, the state has to get back into the housebuilding game, as was the case for all of my youth, when hundreds of thousands of Irish people lived in council or corporation housing, where the state acted as the landlord and the houses were provided cheaply.
There are many ways that we can improve on the council house model if we wish to tinker with the basic model. But the basic model has to be the same: designed to provide affordable housing for people. This could be done by creating housing co-ops as they have in Germany, Scandinavia and Holland. By cutting out the developers’ profit, because the cooperative owns the houses and every homeowner has a stake in the cooperative, costs are brought down immediately. This model works perfectly well in countries that have less zoned land than Ireland does per head, have higher wages on average and have no housing problem.
The credit unions in Ireland are the obvious source of initial financing for a nationwide cooperative housing movement.
The credit unions are sitting on €14 billion of deposits and can’t use this to finance housing. Inexplicably, the central bank prevents these community-based credit unions from operating in the housing market – while it is happy to license foreign vulture funds to buy up the housing stock. Figure that one out.
Now that the minister has the political wind behind him, he can press on with a full strategy. There are options once he frees himself from the tyranny of free market dogma when it comes to housing. The market has delivered a recent boom-and-bust cycle to us. It is not the answer in housing. It never has been.
Housing is too important to be left to the short-term calculations of bank lenders, rental yield spreadsheets and the chance of a quick buck. Let’s think long term for once, where development delivers housing, commerce, creativity, investment and social equity. It can be done; let’s do it.