We know what to do but will we do it?

This article first appeared in the Sunday Business Post on the 7th of February 2016

Below is some well-intentioned advice on what could be done to improve the housing situation

That commentary is often critical is a natural by-product of looking at a situation as it is and considering how it could be. Ideals are not the same as standards and what ought to be is often far from what is.

For that reason I hope to look at areas in the coming weeks where improvements could be made in the Irish property market to achieve specific aims of lowering the cost of housing and delivering more housing.

I know the fine folks in the Department of the Environment read this column, as they sometimes are kind enough to complain to my editor about how we deal with subjects, so hopefully this will be taken in the spirit of some well-intentioned advice.

First off, we should end construction levies. These are up-front taxes or development levies based on the square meterage that you intend to build. The issue with them is that they were invented after residential rates were abolished.

Since then, we have re-introduced residential rates in the form of a local property tax, and yet these local contributions persist.

That’s effectively double taxation and should be ceased immediately. In any case, facilitating new buildings increases future property tax income and for that reason this would actually result in greater future income to local authorities than the waiting game of hoping for both has delivered.

Lower value added tax (Vat) is a good idea. The Vat rate on construction is 13.5 per cent. In times of scarcity and low supply, this would probably just result in greater profits for developers. However, if you bring in a lower rate for properties built within a certain time frame, it might convert more unviable sites into workable projects.

Equally, it gives greater ability for the sector to operate in tricky times. Nobody has said that prices of hotels came down or that meals were cheaper after the travel and tourism Vat rate was lowered to 9 per cent, so it can’t be expected that the consumer always wins with a rule like this.

By its nature, Vat rests with the final end user. That means the customer, as businesses usually pass it through and have no liability.

Compulsory purchase could be used. There are large tracts of land within cities that are idle or being used for fairly unproductive farms. While the farmers in question would be unhappy, they could have the land replaced or accept the ‘present use’ value in a compulsory purchase order. If they reckon it is worth more, that’s because they inherently know there is development potential.

If a local area plan had an agenda that was backed with the knowledge that the development would happen in the area and land holders could partake, sell to a developer, or get bought out on a compulsory basis, it would make sure we are not in a position where property rights trump common sense.

It was Thomas Jefferson who said that “Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right”.

We must once and for all set our sights on the rent seekers of society. That we have shied away from this is a social indictment that only we can resolve.

Then there is the thorny issue of the biggest problem that local government and the state face and is a problem they are loath to fix: themselves.

We need to unlock local authority properties, lands and sites. The city of Dublin is littered with them, as are all of our major cities. Sites and old buildings owned by councils, the Office of Public Works, and other branches of the state should be given over to a group with a simple agenda.

They have six months to come up with all of the sites, to fast-track planning ideas for them, and then go to the market (to pension funds, local authorities with building crews, builders, developers, housing associations or whoever) and let them competitively tender for the construction of these planning ready projects.

How is it paid for? You can seek out pension funds who need reliable income for annuities. There could be long-term leases, financed build via social housing programme./s, or co-operative housing. The agenda should be to drive down house prices by swamping supply.

Will we do anything like this? Of course not! Vested interests, a lack of will, a fear of actually doing something of consequence, or getting it wrong will paralyse efforts. The safety in the halls of power is to look but never actually do anything too drastic or results-oriented.

This is the same Ireland where Alan Kelly summed up the loyalty hierarchy perfectly when he said that “your village or your town is everything . . . I am loyal firstly to my family. I am loyal then to my parish; then to my area; my county; my country. That’s the way I am mentally built.” That truly puts the ‘local’ into local government, and is part of the psychology of failure that passes as success in Ireland.

Karl Deeter is compliance manager at mortgagebrokers.ie. Follow him on Twitter: @karldeeter

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