The Edmund Honohan plan, in a nutshell, it’s bad policy

Last night on Claire Byrne Live the Master of the High Court, Edmund Honohan said that the constitution didn’t stand in the way of the state being able to pursue certain social agendas when it came to property and property rights.

This hinged on the back of an article in which the Minister with responsibility for housing Alan Kelly apparently said that the constitution blocked his ability to resolve our housing crisis, Honohan rebutted this with an open letter in the Sunday Independent.

What follows is an extract of the letter: Consequently, if the Oireachtas is of the view that the State should itself (or its local authorities) provide public housing “in the Common Good”, the State can (and probably, legally, should) decide not to wait the two/three years needed to build social housing but instead to immediately acquire houses now in private hands.

If the owners of these refuse to sell, acquisition can be by compulsory purchase with full compensation assessed by the arbitrator.

It so happens that there is a stock of such housing which has recently been bought by “vulture” property investment funds from Anglo, Irish Nationwide, Nama etc. at knockdown prices. “Compensation” for these funds would be that they would be repaid the price they paid for the housing portfolios. That is the extent of their Constitutional entitlement.

Now consider the ramifications. We won’t go into the whole ‘Ireland’s reputation’ area because that’s giving the plan too much credibility, instead consider some of the basic facts.

  1. These are not all empty homes, so it isn’t as if we have some vast supply of excess houses just waiting to be occupied, if we ‘acquired’ them and hoped to use them other than how they are currently used then people would need to be evicted. So we won’t be solving existing homelessness.
  2. If the idea is that we ‘prevent more homelessness’ then you have to ask yourself if the only people who might become homeless are the inhabitants of whatever properties are bought, that of itself is unlikely so at best we could create a transfer of wealth from taxpayer general to whoever occupies said properties (the idea being that they don’t face any rent increase that would otherwise occur).
  3. What is forsaken in this process? Money is not infinite so what aspects of our budget would be sacrificed in order to realize this plan?
  4. Perhaps worst of all are the implications, if the state gets into the habit of being able to take property away from people with relative ease then where does it stop? Do we then move on to older people who live alone and who are under-occupying homes? Should they be told to move on and compensated at whatever level the state deem fit? This would certainly free up tens of thousands of under-used assets?
  5. Honohan himself has likely seen how it has worked in places like California, but taking that lead is questionable at best because there are still ongoing lawsuits there regarding values, in particular because the estate agents are inherently conflicted, if the person having their property taken from them gets a high value the agent is unlikely to get hired again so they are often (rightly) accused of having a bias and this results in court cases that don’t end.
  6. If we signal to the property market in general that you could lose out any time the state takes a dim view of your plans then it will encourage earlier profit taking and could also have other knock on effects which Honohan has clearly not thought about.

His idea might make for fun television, but in practice it’s just an ill thought out, un-costed, untested, risky and perhaps even reckless idea – unless you are a die hard utilitarian in which case anything is OK as long as you get the result you want.

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