Coalition talks, the Left & Housing Policy
The Week in Housing 02/12/24
Just when you thought you’d escaped my election coverage, I’m back with some ideas about where housing policy might go under a potential right-left coalition Government. At this stage it is far from clear what will happen, but assuming there will be some negotiations between the Government parties and either, or both, Labour and the Social Democrats, what might this mean for housing? Where is there room for compromise and where are the sticking points? And what would success look like for the left parties? I also want to let readers know that I have turned on ‘paid subscriptions’ for this Newsletter. Fear not, the Newsletter will remain free. But I do put a lot of time into this, and that means there are other areas of research and dissemination activities, such as writing for newspapers or giving talks, that I am unable to do. So I’d like to test the water and get a better understanding of how much value readers actually get from the Newsletter. I’m asking readers who find the content here valuable to take out a subscription at a reduced rate (20% off, so €4 monthly). I don’t expect most readers to sign up for paid subscriptions, but if I get a decent number who do, I will likely focus more on the Newsletter in the future to grow it further as a space for evidence-based analysis and knowledge exchange. I passionately believe our housing policy can be improved by sharing evidence and clarifying analysis, so if that is something you would like to support, please consider taking out a paid subscription by clicking the button below.
If the next Government includes one of the left parties, specifically the Social Democrats or Labour, what can they realistically achieve on housing? Obviously any junior coalition party will pay close attention to housing as, according to exits polls, it was the number one political issue in this election. The challenge for either the Social Democrats or Labour is twofold. First, given the consensus across Government and opposition on scaling up social and affordable housing (what I call non-market housing), how can a smaller left party distinguish itself from Fine Gael and Fianna Fáil (a Table detailing where the parties stand on housing policy can be found at the end of this post)? Second, given their small number of seats, what areas can the left parties move the dial on?
Let’s start with the first of these. As mentioned, FF/FG and the left parties are singing from the same hymn sheet when it comes to expanding the non-market segment and associated Government spending (see Table below). FF promised 22,000 non-market housing units per year. They didn’t specify the break down in their manifesto, but it looked like around 12,000 social and 10,000 between cost rental and affordable purchase. Fine Gael promised 24,000 not-market units per annum, with 11,500 social housing units and the remaining from the affordable tenures. This is very similar to Labour who promised roughly the same in terms of non-market overall output, but wanted slightly more emphasis on social housing. So very little difference there. The Social Democrats were a bit more ambitious, or unrealistic if you’re more of a cynic, looking for 29,000 non-market in total per year. So overall there is lots of scope for an agreement and very little comprise needed here.
Beyond the targets, there are a couple of interesting points of difference. On Cost Rental, both Labour and the Social Democrats want to bring rents down by further subsidising costs. Labour want longer loan terms and the Social Democrats want a larger direct grant (€150,000 per unit). Neither Government party promised anything in this regard. There is scope for agreement here, because it would make sense for Fianna Fáil and Fine Gael do so something in this space. Cost rental is their policy, and it is widely believed within the sector that some kind of additional grant is needed as the AHBs, the primary providers of Cost Rental, are very concerned about the level of debt they are taking on (what is referred to as ‘gearing’). My understanding, from talking to those involved in the policy making process, is that the Department of Housing are receptive to this idea. So perhaps we could see some lengthening of the loan term or, more likely in my view, an additional grant to subsidise Cost Rental. If the Soc Dems €150,000 is too much for the Government parties to stomach, a compromise position could be a lower figure, say €75,000 per unit.
Affordable purchase will be more tricky. Sinn Féin’s ‘land lease’ policy was very much a focus of debate, and strongly opposed by FF/FG. The Government parties made it clear that they feel strongly that households who purchase affordable homes should own them on fully private basis, and be able to sell them at market costs. Labour don’t take a position on this in their manifesto, but the Social Democrats proposed an Affordable Housing Zoning model that would limit the price at which such houses could be re-sold, thus ensuring they remain affordable in perpetuity. I don’t think FF/FG would go down that road, so that is likely to be a sticking point and something the Social Democrats might need to give up on.
The Social Democrats also proposed reducing prices in Affordable Purchase housing via, once again, a grant, this time to the tune of €95,000 per unit. There might be more scope for compromise here as the prices are too high and Fianna Fáil and Fine Gael could surely make some political capital from bringing them down, especially given how much they focused on homeownership in the campaign. Having said that, FF/FG seem wedded to their Shared Equity model, which is currently used in this segment, and they would likely be reluctant to offer a further subsidy. So a question mark hangs over this one.
Help to Buy will definitely be a sticking point. Fianna Fáil and Fine Gael are committed to maintaining it and have said it would be a redline. Fine Gael want to increase the maximum subsidy from €30,000 to €40,000. Labour and the Social Democrats both want to phase out the scheme. The ideal compromise for the left parties would be to maintain Help to Buy, but without increasing the level of subsidy, and limit its eligibility to houses below a certain price, say €400,000. This would target the scheme more effectively at those who need it, as currently as many as a third of recipients of Help to But don’t actually need a subsidy to buy their first home. But I think getting the second of these over the line will be a tall order for the left, and they may have to settle for the scheme being continued on the same basis as it is currently offered.
One area where I see a lot of room for agreement, and which would allow Labour in particular to score a big victory on a policy they can really own, is their Save to Buy policy (also promised by the Greens). This would establish a savings fund, along the lines of the old State Savings Scheme, that would have tax advantages and possibly an attractive interest rate. This would help those saving to buy and create a pot of money from which affordable housing could be funded. I don’t see any reason why the Government parties would object to this, and I think policymakers will like the idea because it is well known from the international evidence (especially France’s ‘Livret A’ model - see page 8 of this report) that these schemes can be very effective.
Moving on to the PRS, things might be a little more tricky but I still see scope for compromise. In terms of affordability, all the parties being discussed here are committed to rent regulation. FF/FG want to extend the RPZs (their due to expire next year). Labour and the Social Democrats want to introduce a temporary rent freeze and then replace it with a ‘reference rent’ system (the German model). A rent freeze is a non-starter as FF/FG will never agree to it. Reforming rent regulation, on the other hand, would be much more attractive to the Government parties. The RPZs are currently under review by the Housing Agency, and the Housing Commission has already recommended that they be abolished and replaced with a reference rent system. Threshold, the main advocacy body in this space, have also come out in favour of reference rents. Experts widely believe that the RPZs are past their sell by date. So maintaining the RPZs and then transitioning to ‘reference rents’ seems like a no brainer for a coalition Government.
The weird thing about this is that reference rent systems give significantly more scope for rent increases then the current ‘hard rent control’ RPZs. So in compromising with the left, Fine Gael and Fianna Fáil would in effect be moving to the right on rent regulation. Welcome to the topsy turvy would of Irish housing politics!
On security of tenure there is clear blue water between the parties. Labour and the Social Democrats want a temporary eviction ban followed by what would in effect be lifetime security of tenure via the abolition of ‘no fault’ evictions. An eviction ban is once again a non-starter because FF/FG won’t go there. But we have seen in the past that the Government parties are more than happy to offer some ‘fudges’ on security of tenure. In the last two administrations they have introduced longer notice of termination periods, more paper work around the issuing of notices of termination, indefinite tenancies etc. So their might be a fudge that works. Two versions of this are worth considering, the first would in my view be a failure for the left, the second would be a major win.
The first compromise on security of tenure would be to introduce some kind of strengthened protections for tenants, but which would be targeted. There are two ways of doing this. First, removing ‘no fault’ evictions for the institutional landlord segment, around 11% of tenancies nationally. This could work for FF/FG because it is unlikely to effect the business model of institutional landlords, so a win-win of sorts. I’m pretty cynical about this. The tenants of institutional landlords are generally better off than those in the ‘mom and pop’ sector, but more importantly they are also not at all likely to be evicted for property sale, and even less for family use (for obvious reasons). So in effect the tenants who need it least would get full security of tenure, while those who actually need it, including those at risk of homelessness, would be left to fend for themselves. There’s an obvious equity issue here.
Nevertheless, Labour and the Social Democrats might go for it on the basis that at least they can say they achieved something in relation to security of tenure. In defense of this position, there is an argument that such a move would introduce the idea of real security for the first time, and allow tenants’ advocates to make a strong case that security of tenure should be extended to all tenants.
The second targeted security of tenure measure I can see coming out of negotiations is some kind of additional tax incentive for small landlords, in exchange for longer tenancies. A version of this was already introduced in Budget 2024, so it’s easy to see how it could be extended to make it more meaningful for both landlords and tenants. I would be very skeptical of this as it would mean, yet again, kicking the can down the road in terms of finally sorting out the security of tenure issue in a robust and lasting fashion.
So what would a good outcome on security look like for the left parties? The answer here is really promising: remove ‘no fault’ evictions but within a given tenancy period. So for example, for the first four years (or six years or whatever) of a tenancy ‘no fault’ evictions would not be permitted. In this way, tenants would have a defined period of meaningful security for the first time, while landlords could rest assured that they could recover their property at the end of the defined period if they wanted to sell it. I have been advocating a more developed version of such a proposal.
Overall, I feel there is plenty of scope for a compromise that could potentially be quite positive for housing in Ireland. Of course I’m a mere policy analyst and have no real understanding of the real politick of Government negotiations, but I’m hopeful that if a left party does go into coalition, it won’t be in vein.
