Friday, 22 January 2010

Counting Vacant Houses (And Their Cost)

Nat O'Connor: A lack of reliable information about the housing market contributed to the housing bubble and subsequent crash.

The National Institute for Regional and Spatial Analysis (NIRSA), based in NUI Maynooth, estimates that 302,625 housing units lie vacant. Yet, Michael Finneran TD (Minister for State with responsibility for Housing) is reported as recently telling cabinet that there were 100,000-140,000 empty housing units. And the construction industry claims there are only 40,000.

This level of disparity about the basic facts is madness.

You can read about the NIRSA report in the Irish Times and more details of their calculations in a blog piece by the report's authors (one of whom is NIRSA's Director).

We knew something was going badly wrong in the housing market when supply grew, yet prices also rose enormously. The growth in land prices fuelled this, but in hindsight the lack of public information on the housing market allowed developers to time the drip-fed of new housing units into the market to maximise profits.

Accurate statistics about the number of empty housing units in the country could have helped people calculate realistic house prices before and during the bubble. Such statistics might also have helped planning. Instead, we have now ghost estates where few people want to live.

Like the follies built by poorhouse workers during the famine, it seems that these estates have no real utility and there has been talk of demolishing some of them. I'd like to know more about the arguments for this. Are they so sub-standard? Are they so far removed from good roads and potential jobs? Knocking down some of these estates could also be seen as an attempt to decrease supply in the market and thus bolster house prices across the board.

What is the loss to the State if NAMA accepts some of these estates (even with a discount) in exchange for writing off bad bank debt? If even a small number of them are demolished, than the remaining land value (minus the cost of the demolision and waste disposal) will not be worth whatever bad debt NAMA would write off against them at a 30 per cent discount. Alternatively, the long-term consequences of trying to make some of these estates viable will also involve annual costs to the State. For example, if planned badly (or with inadequate resources) the human and financial costs of turning some of them into social housing ghettos could be high.

Then again, many housing units acquired by NAMA could be an important element in moving thousands of people off the waiting lists. However, if it can be shown that it is better to demolish some of them, it would also be better to plan this rationalisation through a coherent national housing strategy, and for NAMA to be barred from accepting them into State ownership in exchange for bad debt.

Meanwhile, for ordinary workers who are living the consequences of the failure to regulate the housing market, Citizens Information have teamed up with MABS to put the most salient advice on a microsite:

It is obvious that many families are under serious pressure to keep their homes. Many more will be paying rent and mortgages (for years to come) at rates that are way over the one third of net income threshold for 'affordability'.

Yet, at the same time, there are over 300,000 vacant housing units in Ireland.

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