HOW MUCH SHOULD an ‘affordable’ house cost – €200,000, €300,000, €400,000?

Does it change depending on what part of the country you’re in? Common sense would, of course, suggest yes.

But if so, by how much? And perhaps most importantly – what do we mean when we say we want homes to become more affordable?

Do we want house prices to fall?

These are some of the questions which should be answered by those trying to solve Ireland’s crisis.

But too often, those tasked with improving the problem – politicians, business groups, researchers – deal in terms which are too vague when referring to making housing more ‘affordable’.

It makes it more difficult to see what problem we are actually trying to address and how it will be solved.

The Journal asked every political party for a figure that they would consider to be affordable housing and how that number was calculated.

Three – Fine Gael, Labour and Aontú - did not respond to our questions. 

Of the parties that did, each one had a different definition of affordable.

To get a sense of how malleable the word ‘affordable’ is, let’s first look at how it’s defined by two parties currently in government together – Fianna Fáil and the Green Party. 

The Greens referred The Journal to its Housing Policy document published in December 2020, shortly after the government was formed in June 2020.

This linked affordability to employment. The most recent figures for salaries at the time put average pay in Ireland, as of 2019, at €37,500. 

“[This means] that only approximately 40% of workers can afford to buy an apartment worth €150,000,” it said, based on the Central Bank’s then-lending limit of 3.5 times salary.

Linking affordability to pay would seem fairly logical – although this is based on just one worker’s income rather than two. 

Based on more recent figures which put the average Irish salary at about €45,000, the new Central Bank lending rules of 4 times income and the need for a 10% deposit, it would suggest the Greens currently consider an affordable home to be in the region of €225,000 – a number which is obviously a long way from the median house price of €333,000 nationally as of March and €446,000 in Dublin. 

Fianna Fáil in its response notably did say that there is “no single or universally applicable definition denoting housing affordability”.

Asked to provide a number on what it considered affordable, it said affordability is linked “to the specific individual circumstances of the household rather than an arbitrary set amount”.

Further asked for an example, the party referred The Journal to examples of properties delivered under the state’s First Home Scheme. As part of this initiative, the state and participating banks pay up to 30% of the cost of a newly built home, in return for a stake in the property.

This reduces the size of the mortgage the buyer has to pay, although the homeowner then does not own 100% of the equity unless they later buy back the state’s holding.

Minimum sale prices for multiple homes delivered in the Fingal County Council area under this scheme tended to be in the region of €300,000. Eligibility criteria published by the County Council also suggested that those with household incomes below €50,000 would be unlikely to afford the homes delivered under the scheme.

Moving onto the Social Democrats, the party cited homes delivered by the O’Cualann Housing Alliance, a not-for-profit Approved Housing Body.

“Three-bed affordable purchase homes in Dublin have been built by O’Cualann and sold at a price of €260,000.

“Outside of the greater Dublin area, similarly delivered affordable purchase homes are available at a cost of €230,000.”

However, this is again a different model compared to the First Home Scheme, where O’Cualann is provided with subsidies that incorporate build costs, land costs and a waiving of development levies. 

“The Social Democrats want to significantly expand this form of housing delivery as it is the most cost effective,” the party said.

It said the build costs are based on data from the Society of Chartered Surveyors Ireland, a building industry group which tracks the cost of developing homes, which shows how much homes can be built for.

The group has found that ‘hard costs’, ie the price of materials and build out, to be about half of the end price of a house. The rest is made up of factors such as land costs, developers’ profits and government levies and taxes.

The party then used data Approved Housing Bodies to get an estimate on how much the subsidised cost would be. 

Sinn Féin’s method of calculating affordability was similar, in that it looked mostly at hard delivery costs and planned on certain state subsidies.

The party differs from the Social Democrats in that it plans for a type of ‘leasehold’ system, where the homes would be built on state land.

Land costs would not be included in the price of development, lowering the price that homeowners would have to pay. The trade off would be that the state would retain the ‘leasehold’ – ownership of the land on which property is built.

Under this leasehold system, people would only be able to sell on their affordable homes to other affordable buyers, rather than at the normal market rate.

“Under this you’d be able to deliver homes at between €250,000 to €300,000,” Sinn Féin housing spokesman Eoin O’Bróin told The Journal.

That’s to ensure that households in that €50,000 to €85,000 range can buy.”

‘Households’ here can be made up of either one worker or multiple – the point if that the entire household income would be in this range.

Asked how Sinn Féin decided that this income range needed help to buy affordable housing, O’Bróin said: “As they’re the groups that are really struggling with house prices and are being locked out of the market.”

He added that the estimate is based on looking at various income and affordability indicators in the market, such as the SCSI figures and the price local authorities can deliver homes at. 

So what does all of this tell us?

It shows that, ask four different groups what an affordable house is, get four different answers – even when two of those groups are working together in government.

While some of the ‘affordable’ prices suggested by parties were relatively close, such as Sinn Féin and the Social Democrats, all had different methods on how they arrived on their numbers.

As previously covered, Ireland’s economic system is not generally set up in a way where house prices easily fall.

Therefore, if everyone can agree that we want homes to become more ‘affordable’, it would likely be helpful to get some agreement on what exactly that means and how it could be achieved.

What gets measured gets done – and not having a clear measure of what an affordable house means or should cost means that ‘affordable housing’ is a goal we are less likely to reach.