Thursday, 25 August 2016
Housing and homelessness crisis worsens
Rory Hearne: This week’s figures on homelessness and rent increases provide further evidence of the on-going housing crisis. Unfortunately the Government’s recent Action Policy for Housing and Homelessness provided no significant change in direction from the policies that caused the current crisis. Therefore, issues of homelessness and housing unaffordability are going to worsen in the coming months and years with harsh results for those most affected.
Firstly, the number of children and family who are homeless in Dublin continues to rise dramatically.There are now 2,020 children homeless in Dublin, a 70% increase in the last 12 months. Of the 993 families who are homeless, 731 families and their 1,490 children and living in hotels. Some of these have been living there for over 18 months. This homelessness will have lasting damaging effects on these children for their lives.
This level of homelessness is directly related to the other figures released during the week – the rising private rents. The Daft.ie report shows that rents rose by an average of 3.9% between April and June this year which matches the biggest three-month rent increase in the Celtic Tiger boom in 2007. Both nationally and in Dublin, the second quarter of 2016 saw annual inflation in rents return above 10%, for the first time since late 2014. The average rent nationwide has risen by 39.7% since 2011 and for the first time exceeded its 2008 peak (by 0.8%). In Dublin, rents are now an average of 5.2% above boom time prices. Average rents in Dublin City Centre are now €1,505 per month.
This begs the obvious question. If inflation is so low, and there is no evidence of wages increasing anything near these figures, what is the rationale for rising rents? There is no justification. Landlords are taking the advantage of the housing crisis and the lack of rent controls to increase their profit (or in the case where landlords are in mortgage arrears to cover that cost).
It is important to note that landlords are not a homogenous group and that increasingly we are seeing vulture funds and large international property speculative funds buying up Irish residential property. These have been encouraged by the government’s tax break for Real Estate Investment Trusts (REITs) introduced in 2013 by Michael Noonan, where rental profits arising in a REIT are exempt from corporation tax. Speaking at the recent Oireachtas committee on housing and homelessness Minister Noonan extolled the virtues of the REITs:
“I introduced the real estate investment trusts, REITs, tax regime in the Finance Act 2013. This intervention has been successful in encouraging large scale investment into the commercial and residential property markets”.
Yet these REITs are playing a role in fuelling the crisis by pushing up rents and house prices further. Furthermore, the issue has been raised of large vulture funds using Ireland’s low and zero tax regime to pay little or no tax on its speculative residential activities here. It appears that Irish taxpayers, and particularly the most vulnerable citizens, are paying for the cost of the financial and property crash over and over again.
There are a number of different but interlinked solutions to the on-going housing crisis, which is a national emergency.
At its most fundamental level, the current crisis results from decades of housing policy that followed the private ‘free-market’ approach which treated housing primarily as a commodity and speculative investment asset. It also resulted from the focus within macro level government economic policy on ‘fixing’ the banks through a strategy which included re-inflating the property market through attracting foreign speculative investors into residential property (as I explained above).
Another policy decision that contributed very significantly to the current crisis was the obliteration of the social housing capital budget during the austerity years by the Fianna Fail, and then Fine Gael lead governments. Contributing also has been the privatisation of social housing by its increased delivery through the private rental sector.
Unfortunately, the government’s Action Plan for Housing and Homelessness provides no meaningful change on these policies. Despite the statements of commitment to a ‘return’ to social housing provision and acknowledgement of the failure of the private market approach - the actual policy within the Action Plan remains centred upon re-igniting the private market, commodity finance and developer-led property model.
For example, there is no rent control in the Action Plan, despite the obvious and clear role it could play in halting spiralling unaffordable rents. The recent rent increases show that the existing two- year rent freeze will not stop rents rising further. Nor is there a proposal to change landlord’s ability to evict tenants if they want to sell the property which is a leading cause of homelessness.
Rents should be set (as they are in many other European countries that have no issue with ‘supply’ by local authorities and linked to inflation, standards or a maximum increase (eg 10 to 15 per cent) over four years. Greater security of tenure should be provided through longer leases (say 10 to 20 years) and removing clauses allowing landlords to evict tenants to sell their property.
The other main area where the plan fails is the issue of state (Exchequer) funding for new building of social housing by local authorities. The plan claims to be providing 47,000 units of new social housing by the end-of 2021 (an increase on the 35,600 new social housing units planned in the 2014 strategy).
However, just as with the 2014 strategy these social housing units are dependent on various forms of private financing, ‘off-balance sheet’ mechanisms, Public Private Partnerships, acquisition from the private market and delivery from Part V mechanisms (10% of new developments are to be available for social housing). The figures for what number of units are to come from these mechanisms is unclear in the Action Plan but my analysis of the 2014 social housing strategy showed that less than a third of the new social housing building was going to come from exchequer funded local authority housing. The rest was to come from the various forms of private finance and privatised housing provision mechanisms outlined above.
The Action Plan appears to be no different. You can see in the graph below that the direct 'build' of social housing (represented by dark blue shade at the bottom; and it appears only a proportion of this will come from direct exchequer capital funding. This will be clearer from the figures in October's budget) will only be a small proportion of new social housing up to 2021 with a strong reliance on private rental sector provision of social housing through HAP and RAS.
Yet the mechanisms which the plan relies on to provide social housing- the private finance, investor and developer led initiatives - have failed over and over again to provide affordable and quality housing. Yet here we are, continuing this failed neoliberal approach that further commodifies, commercialises and financialises the provision of, and access to, the basic need that is housing.
Funding and promoting the private building industry is the priority in this approach through further privatising and commercialising the delivery of social housing. As a result, the only mechanism that can guarantee the provision of affordable and accessible housing - direct state funding through local authorities - is given much too little a role in the Action Plan.