31 August 2015
“The chances of us getting to grips with the housing crisis in Ireland in the next two years are almost non-existent because of the approach we are taking.”
Mick Wallace T.D. is a public representative from a contractor/ developer background. He has been a consistent critic of Building Control Regulations introduced in 2014 (BC(A)R SI.9. In a Dáil debate on 8th July 2015 he raised serious concerns about the ineffectiveness of the State’s persisting with “self-certified” Building Control and the continued absence of any independent oversight of construction (see post here). In previous Dáil exchanges with former Minister Phil Hogan, Mick Wallace noted Building Control sections needed to be strengthened to make any impact on defective buildings (see post below):
“…the major problem is that all along, the Construction Industry Federation and not the State appears to determine what is happening. Public building control must be strengthened if these problems are to be addressed in the future….The Minister’s system of assigned certifiers will crack up within the next couple of years…The Government remains reactive, not proactive.”
As an experienced developer he is only too aware of the many factors that are at play in the market currently. Here are some extracts from recent Dáil statements on the housing crisis published on Mick Wallace’s blog (link to Mick Wallace blog here):
“It is horrendous that NAMA could not deliver housing units for Dublin, in particular where there is such a serious housing crisis. It beggars belief. The argument was spun that certain property was not really suitable. The funny thing about that is that NAMA did not want to give much of the property that was suitable to the State because it was attractive to investors. What has happened is that vulture funds, mostly from the US, were allowed to cherry pick the best of it because NAMA sought to sell the best of it to them. It then considered some of the other property, which was not quite as attractive to the vulture funds, for social or affordable housing.
…The Minister of State said NAMA sold land that would allow 10,300 units of housing in Dublin alone, but whom was it sold to? Many assets are being sold in parcels so large that Irish individuals, including builders and developers, have not been able to buy them. The people with the deepest pockets have mainly come from places outside Ireland, such as America. NAMA refused to divide assets and sell them in such a way that private investors in Ireland could afford to get involved. I will not go into the decision to sell all of the Northern Ireland portfolio in one block; it is an argument for another day.
The Minister of State referred to land that would allow 10,300 units of housing. When will they be built? It is not attractive for a builder or developer to build a serious number of units in Ireland today. It would be difficult to get the money from a bank because the figures do not add up; too many assets have been sold in fire sales, particularly by NAMA and the banks. Units were bought too cheaply, for less than the cost of building them. How can one build and compete with such units? It is a major problem.
I am not sure where the idea to levy the local authority is coming from. Putting a levy on a land-banker who sits on his land and refuses to develop it is obviously a great idea, but I do not see why the Government wants to do the same to local authorities, except that it thinks the local authority will sit on it as well. If a private investor has a site that is zoned for development and he decides not to build on it, there is a reason for it. He is deciding that it is a better idea not to develop it just yet. He is making a financial decision. If the local authority decides not to build, or is not building, I imagine it is because it does not have the money…
…I agree with the Central Bank’s new rules, but the result is that up to 50% of people, young people between 20 and 30 years, who might be looking to buy a home in the near future if they settle down and start a family will not be able to afford to buy a property. That is for a number of reasons, including the Central Bank regulations. They are sensible, but the result is that the State must take more responsibility for providing housing for those who need it and who cannot afford to buy it. That number is going to grow. Some local authorities have land and are not developing it because they could not get State money because the State did not want to invest any more in the construction of housing than it had decided. Sadly right now there does not seem to be an appetite for the State to start building many houses.
As the Government’s so-called strategy specified before Christmas, it will remain very dependent on the rental market for its housing. The lack of joined-up thinking is a bit scary… As I pointed out before, I have seen the rent for a rental property in a working class area of Dublin city centre on the north side of the river go from €1,000 a month to €1,400 a month in three years. The reason is that there are now so few players controlling the rental market. They can dictate the price. Whatever influence they have on the price currently, it will increase because these guys bought land at a fire-sale price, they had the deep pockets to do it because the land was sold in large parcels, and now they are going to build on it and rent out units.
…Currently, rent supplement does not meet the rent, because rent is too high and the State does not want to pay too much in rent supplement. That gap is going to grow. If the Government wants people to avail of the private market, because there will not be State-built houses for them, its bill for rent supplement will be so large that it cannot be a sustainable way forward. The Government will have to rethink it. We have so many issues around it. It does not look likely that we will introduce serious rent control and even if we did, it would take a couple of years before it would work properly.
The chances of us getting to grips with the housing crisis in Ireland in the next two years are almost non-existent because of the approach we are taking….We should start building houses ourselves now. I do not agree with the public private partnership model. One of the most outrageous laws in the European Union is that an EU state is not allowed to borrow money at market rates to invest in infrastructure…
…Although money is so cheap – one can borrow significant sums for less than 2% on the markets – the Government will not borrow it for social housing because the EU rules do not really allow that. There are different mechanisms to get around this. … What happens is that the State can only invest X amount in social housing or other infrastructure because it is confined by the rules. If it wants to do something else in the public sector, it must go to the public private partnerships, PPPs…We want the work done but we have exhausted the borrowings that we are allowed to work into the system without breaking EU rules so we must now go to the PPPs. PPPs can cost anything up to approximately the 15% mark. Thanks to EU rules, instead of the State borrowing money for less than 2%, it will give private investors 15% over a longer period of time for their investment.
…When in years to come people read the history of the period from 2008 to date, and probably later, how NAMA has operated, who has benefited from it and who is picking up the tab, they will find it hard to believe. We have serious problems and, as I keep saying, our housing crisis is not disconnected from that. The failure to build State housing now and the strategy of over-dependence on a rental market, which we are not able to control and which we will even struggle to ensure is affordable for many people, will be a massive problem.”
Other posts of interest: