ANY MILTON FRIEDMAN fans in the house?
The late American Nobel Prize-winning economist could spit some fire – a particularly memorable quote goes: ‘Nothing is so permanent as a temporary government program.’
Great quote, what a great quote… Now, apropos of nothing – who else was absolutely floored that Ireland decided to extend mortgage interest relief (MIR)?
The measure costs about €125 million a year and has been largely derided by economists, who say it transfers money to the wealthy. (The details of how MIR works are explained here, but essentially it refunds part of the interest paid on mortgage loans up to a maximum value of €1,250 per homeowner.)
Knowing the measure was somewhat controversial, the government promised that the measure was a strict one off. In Budget 2024, it was called a “one-year relief”.
Of course, this one-off has now become a two-off, with MIR extended for yet another year in Budget 2025.
Given that we’re due a new government in the next 12 months, it would not be shocking for MIR to be extended in Budget 2026.
But the manner of how this was done – with so little public discourse – is also concerning.
How did the government decide MIR was needed in the first place?
How did it decide it was needed for another year?
Well, to go back a year, there was general grumbling when mortgage rates started rising in 2022. Sinn Fein then started putting pressure on the government by repeatedly calling for MIR.
Last year before the budget, Finance Minister Michael McGrath wrote to Department of Finance officials saying that some people were really struggling with rising mortgages “and we have a duty to see if we can provide some help”.
He asked if MIR would be a good fix. The answer couldn’t have been clearer.
“There is no evidence base to introduce the measure,” Department of Finance officials told the minister.
When the minister pushed back, asking if there was a way to make MIR work, he was told: “As previously advised, the department is strongly of the view that the mortgage interest relief is not the best policy approach.”
He was told that the measure “runs counter to established international research”, could contribute to inflation and could also be just a complete waste of money, as it would likely go to people who were largely not in financial stress.
Well, case closed then.
An easy choice for Budget 2024 – bring in MIR!
Justifying the announcement last year, McGrath said rising mortgage rates put “many mortgage holders under considerable pressure”.
The references by government officials to their policies helping ‘many people’ or ‘some people’ are great for politicians, as they’re incredibly vague.
‘Some’ people can be basically any number the person speaking wants it to be.
For example – is 1,000 people ‘some people’? Yes, probably. What about 100,000? Also yes.
Did 1,000 people or 100,000 people truly need MIR? We’re not sure – but it was ‘some’ people, and that’s good enough.
While there was very little public commentary about why MIR got extended in Budget 2025, the little amount we did get tended to include similar cryptic references to non-numbers.
For example, an anonymous Fianna Fáil figure told the Irish Examiner that MIR is an “effective measure for many households” who faced steep mortgage increases.
There again is ‘many’ – how many? Is it enough to justify spending €125 million of taxpayers’ money to help these ‘many’ people?
It’s unclear and, as pointed out by the Department of Finance, isn’t based on any evidence.
Look at many of the government’s housing policies and a similar pattern emerges.
This column has long pointed out similar issues about the government’s Help to Buy (HTB) scheme.
Similar to MIR, it was also extended in Budget 2025, and will now operate to the end of 2029.
The amount of taxpayer money being poured into this scheme has been rising year-on-year, going from €50 million in 2017 to about €200 million in 2022.
Extending it to the end of 2029 will result in likely more than €1 billion being spent on the initiative between now and then.
This is despite multiple independent reports from the likes of the ESRI think tank finding that HTB tends to go to people who are relatively well off financially and don’t need it. Ie. – a big part of the HTB spend is likely a waste of money.
There are numbers on how many people have used HTB – about 50,000 at last count. But how many of those actually needed the scheme and wouldn’t have been able to afford a home without it?
Answering that question last year, Minister McGrath again referenced the mythical ‘many people’ when he said: “Many people will sleep in homes tonight who would not have those homes if this scheme did not exist.”
Then there’s the likes of the Housing Assistance Payment (HAP). The government’s main rental subsidy scheme, it is essentially a payment by the state to private landlords to ensure people on lower incomes can afford soaring rents.
An enormous amount of money has been poured into the scheme, with more than €2 billion spent on HAP payments over the last four years.
Critics have said the government has become increasingly reliant on the scheme as it is not building enough social housing, and have said the scheme has just funnelled cash from the state toward private landlords for little long term benefit.
This view received further weight during the week, when a Public Accounts Committee report said that HAP payments don’t provide value for money and recommended that the government should instead be focused on ramping up social housing delivery.
There are a string of other housing decisions which fall into the category of being based on very little evidence – such as choosing to link cost rental homes (a type of affordable housing) to 25% below market rates. Rather than having the rents cover the cost of building and maintaining the housing – as is suggested in the name.
To look at another example, how about landlord tax relief which will cost about €160 million a year.
We could go on – but the point is there are now an alarming number of government housing initiatives which appear to be based on very little evidence.
This is not a small amount of money involved either – the annual spend on the policies mentioned just in this piece adds up to more than €1 billion.
Following a weeks-long national outrage over €330k being spent on a bike shed, barely anyone batted an eye at the likes of the MIR extension is somewhat surprising.
While it is understandable that bigger headline numbers are harder to relate to, it is something the general public should be increasingly conscious of.
This is your money – and it looks like much of it is being spent based on little more than vibes.
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