Housing for All: homeownership is good for you

My initial analysis of Housing for All

After our summer break The Week in Housing is back and will once again go out each week on Friday mornings.

It has finally arrived. Housing for All was launched yesterday afternoon, with the leaders of all three Government parties, as well as the Minister, getting behind what they are labelling a 'whole of government' approach to tackle what the Taoiseach referred to as Ireland's biggest challenge. Right from the off they aimed to communicate that (a) we get how bad it is and (b) we get how having a stable home is of supreme importance to individuals and households. Micheál Martin began by talking about housing as more then shelter and as 'fundamental to the life and progress of our nation’ and how housing was central to allow creating what he called a society of 'engaged and contented communities' (he was sounding a bit De Valera at this point). Martin and the others also made clear that they recognise the scale of the crisis and promised that Housing for All was unprecedented in its ambition and would be the biggest investment in housing in the history of the state.

It was strong stuff. But what does the substance of the policy look like and in what ways does it mark a significant departure from Rebuilding Ireland? There will be lots of coverage of Housing for All over the next few days, but this issue of The Week in Housing will look at what I think the most significant aspects are.

In my view, Housing for All is most interesting in two respects. First, homeownership is back at the heart of housing policy, at least at rhetorical/ideological level. Second, the policy recognises the structural problems in the housing system and, to some extent, attempts to tackle these problems at their roots, but is there the financial fire power to pull this off? Let's look at these issues in turn.

Homeownership is good for you

I expected Housing for All to contain a fair few subtle nods to the importance of homeownership. What I didn't expect was that any pretence of tenure neutrality would go out the window and countless, explicit statements to the effect that homeownership is the best form of housing for Irish people. At yesterday's launch, Leo Varadkar welcomed 'the focus on homeownership' which, he argued, is 'part of our culture and society'. O'Brien was even more effusive: 'I believe in homeownership and this plan supports it'. He went on to reference research which shows that the vast majority of tenants aspire to be homeowners (I assume he was referring to research like this from the Dept. of Housing, or this recent research by Clúid Housing).

The Housing for All document is just as clear, as in these quotes from the Minister's Foreword:

"It’s a Plan for the squeezed middle, to give them the opportunity to buy their own home while ensuring we have the kind of society that helps those who need it. The breadth of ambition in the Plan will help to stop and reverse the decline in homeownership and break the rent trap that so many people are caught in"

"The State will move ambitiously in order to break the rent trap and prevent homeownership becoming a relic of the past and the preserve of the few. It will give the squeezed middle a real chance to realise their dreams of homeownership…. I believe that investing in the future now, by broadening homeownership to a wider circle of citizens, while eradicating homelessness and addressing social housing needs, will deepen the roots of our democracy, improve the lives of those families and the long-term health of our communities. It encompasses our best traditions of a strong and compassionate State by supporting homeownership and assisting the vulnerable."

My interpretation of this, at least at the level of discourse, is that it is an unashamed return to what Ronald (2008) calls the ‘ideology of homeownership’, with social housing and measures to tackle homelessness as a residual feature of the housing system for those who cannot be helped into owner occupation. Homeownership is not just a better tenure, seemingly, it is the basis of our democracy and society. Later the document says it straight out: "The Government believes that homeownership is good for individuals, families and communities".

To get a sense of how significant a break with the recent past this is, it’s worth returning to Rebuilding Ireland. Some readers will no doubt remember that back in 2014-2016 there was quite a lot of talk about how Ireland’s housing system needed to 'grow up’ by weaning itself of its dependence on homeownership (which was thought to have led to the financial crisis) and to work towards a European style rental sector. This attitude permeated the Rebuilding Ireland document. For most of the period in which that plan was in effect all the focus was on its social housing targets, and many commentators missed the significance of a major Irish policy document so clearly promoting rental housing.

One of its core objectives was 'Maturing the rental sector so that tenants see it as one that offers security, quality and choice of tenure'. The plan emphasises the importance of 'the delivery of more and better rental options'. Rebuilding Ireland was tenure neutral in tone - at no point does it suggest that homeownership is the preferred tenure of government or that it is a better tenure for most households. Indeed, one of its five pillars was 'Improve the Rental Sector'. The following paragraph captures the plan's vision for the PRS:

"Falling home ownership levels and increasing demand for rental accommodation on a long-term basis raises another key housing challenge - that of changing attitudes such that the advantages of rental as a form of tenure are more widely recognised. A strong rental sector should support a mobile labour market that is better able to adapt to new job opportunities and changing household circumstances. The rental sector must also cater for a diverse range of households, including students, low-income households and mobile professionals. The appeal of the rental sector as a tenure type of choice must be developed, which means increasing standards, security of tenure and altering some of the norms and expectations which characterise the sector."

To achieve all this, Rebuilding Ireland established a national strategy for the rental sector (which went on to introduce RPZs as well as some minor enhancements in security of tenure), and perhaps most importantly supported Build-to-Rent as a major new component of housing delivery and one that would (it was claimed) deliver high quality, professionally managed PRS dwellings, suitable for long-term homes.

Obviously we can debate how successful Rebuilding Ireland was. But that's not the point here. What I'm trying to highlight is the stark contrast with Housing for All which jettisons any talk of 'maturing the rental sector' or recognising its advantages, and returns to the traditional moral and political preference for homeownership long associated with Irish housing policy.

My guess is the rationale here is that there are no votes in reforming the PRS. The Government are no doubt targeting first time buyers and their parents because that's where they think the votes are. Many renters are young or non-Irish born and most of them don't aspire to renting long term anyway. It's easy to see the political calculation here.

In terms of concrete policies to support homeownership, in addition to generally promising to increase housing supply to over 30,000 per year between now and 2030, the plan sets out the following:

1. An Affordable Purchase scheme - Local Authorities delivering homes for purchase on public land in areas of acute demand, targeting prices of €250,000

2. The shared equity scheme (seemingly rebranded as First Home)

3. Local Authority Home Loan (Rebuilding Ireland home loan 2.0): income limits raised from €50,000 to €60,000 for single applicants, and interest rates reduced

4. Part V extension - 10% for affordable purchase (and cost rental) on top of existing 10% for social housing

Having spent many years researching the PRS, I am sympathetic to the preference for home ownership because in my view it offers real advantages. That said, there is a potential for this new departure to entrench tenure inequality in our housing system. If the Government focuses on supporting those households who are in the 'rent trap' but has sufficient incomes to buy with a little support, what happens to those left behind? People with low incomes may remain stuck in a PRS which still needs reform and which is now going to be perhaps further stigmatised by an official preference for homeownership. Moreover, it is crucial we remember that PRS tenants in receipt of HAP are not eligible for cost rental, so this avenue of escape will be cut off to them too. The PRS is already characterised by important social inequalities. Non-Irish born households make up 40% of renters despite being only 13% of the population. More than 60% of Non-EU born households are renters. Just 12% of Irish-born households are. Are we going to see disadvantaged households, such as migrants and HAP recipients, trapped in a poorly regulated PRS, while Darragh O'Brien supports our famed 'two-income couples' to get their feet on the 'property ladder' and live the 'dream of homeownership'?

In terms of policy substance, there is very little here for renters. Admittedly, the Minister has already introduced a major reform of the RPZ system which will give Ireland some of the most stringent rent regulation in Europe (by linking rents to the CPI). This is important and I don't want to underplay it. However, new PRS dwellings in the market will be able to set rent at market rate and, perhaps most importantly, we know that the enforcement and compliance are just not there. This measure will help many tenants, especially those who have compliant landlords. But it does not go far enough. Most importantly, there is nothing here of any substance on security of tenure. A vague reference to creating 'indefinite tenancies' is included (as it was in Rebuilding Ireland, although it never materialised).

The big change in terms of renting is a funding and roll our plan for cost rental housing. The aim is roughly 2,000 units per annum and 18,000 over the course of the plan. The aim is to achieve rents at 25% less than market rate, which is reasonable in my view (although many will feel it's too high). This is very welcome, and hopefully support for cost rental can grow once we see it in action over the course of the next couple of years. That said, it is too low. Most disappointingly, the target  for affordable purchase is 4,000 per annum, twice that of cost rental. In my view, it would have been better to have 6,000 cost rental units a year and ditch the affordable purchase aspect, especially the shared equity scheme (for the life of me I cannot see what benefits this scheme offers over the already established Rebuilding Ireland Home Loan).

It's the system, stupid

Housing for All appears to recognise that the issues in the housing system are structural. One could summarise the underlying rationale of Rebuilding Ireland as follows: 'Supply is not where we would like it to be but the market will get its act together. We will help it along and once supply increases affordability will look after itself. In the meantime, we have plenty of sticking plasters like HAP and helping the homeless'. That plan never really took seriously the underlying systemic problems which led to a structural imbalance between supply and demand. Housing for All talks about 'the creation of an enabling framework of a more sustainable housing system that will meet the housing needs of a generation'. In perhaps the most interesting passage on this issue, it references a really important NESC report from a few years back:

"To build housing, we need land… Recent reports by the National Economic and Social Council (NESC) highlighted dysfunctional aspects of our system of urban development, land management and housing. The report called for a ‘whole of system’ approach to bridge the gap between supply and demand. Housing for All provides this approach."

The NESC report in question is one of the few documents that tries to grasp housing at a systemic level and particularly to integrate land into their analysis, and it is very interesting to see that referenced here. At a more concrete level, Housing for All's systemic focus manifests in three main ways:

1. It recognises Government's responsibility in taking control of the housing system as a whole, reflected in various 'whole of Government' committees and other aspects which will be central to the delivery of the plan;

2. It puts the Land Development Agency in the spot light as an agency which can (a) coordinate active land management; (b) actively fund and deliver housing on public land; and © take a national and strategic view of housing delivery.

3. The overall target is 300,000 units by 2030. Almost half of these are to be public/affordable. This brings us back to the heyday of Irish housing policy in the mid-twentieth century when half of new housing was delivered by the state.

To be clear, I am not endorsing this plan or making a comment about how realistic any of this. My point here is just to analyse what is significant in terms of how Housing for All is framed, and the ways in which this marks a new chapter for Irish housing policy.

We will have plenty of time to critique this plan over the coming months and indeed years, and as the detail becomes more clear. But one early concern is, unsurprisingly, the funding issue. The plan commits to average annual fundings of €4 billion. I presume that this is €4 billion of capital for investment in housing, rather than including current spending on things like HAP. Over the life time of the plan, €12 billion will come from the exchequer (presumably Dept. of Housing's capital spending budget), €3.5 billion from the LDA and €5bn from the HFA. More detail and time is needed for a full analysis of these figures, but €12 billion in capital investment from the Department over 10 years is obviously just €1.2 billion per annum which is disappointing. Moreover, it seems most of the increase in funding will go to affordable rental and purchase because the social housing targets (10,000 per year) are reasonably modest. At this stage, my main concern with this plan is that the financial firepower is just not there to create the systemic change required.

This has been a longer than usual issue of The Week in Housing and I promise to return to shorter pieces from next week! We will no doubt return to Housing for All many times over the coming months.

Events

Padraic Kenna of NUIG is delivering a seminar on Applying housing rights in contemporary housing systems on the 17th of September. You may recall that he recently published this report which dealt with a lot of the current major issues in the Irish housing system, from affordability to the viability of the cost rental model. Eoin Ó Broin is launching his new book Defects, register here. On the 14th of September the ESRI are hosting a webinar to launch their research (in conjunction with IHREC) on monitoring adequate housing. This looks to be an important piece of research, especially for those interested in the more technical aspects of measuring housing outcomes.

What I'm reading

Many people who follow international research on the PRS will be familiar with the work of the Australian Housing and Urban Research Institute. They've been leading the way in terms of empirical research on the PRS and have just published an exciting new piece of research on discrimination in the PRS. One of the interesting things about this particular report is that the lead author is Sophia Maalsen, who has been doing some really cutting edge work on digital technologies, platforms and house sharing in the PRS. The report incorporates a particular focus on digital technologies and I'm sure will open up a lot of new avenues for research in the area. Brett Christophers is probably one of the most well-known geographers working on financialization internationally and he has recently published three articles on Blackstone and investment funds, focusing on the US. The pieces are available here, here and here.