THE REAL COSTS of New Apartment Delivery 2020, published today by the Society of Chartered Surveyors Ireland, highlights that unaffordable housing prices remain the key obstacle for many people who would like to own their own home.
The report found that the all-in cost of private developer-led delivery of medium-rise two-bedroom apartments in the Greater Dublin Area ranged from €411,000 for a low-spec unit in the suburbs, to €619,000 for a high-spec one in the city.
These findings confirm that affordability remains a critical issue and that a first-time buying couple would require a deposit of €38,000, and a joint income of €98,000, to purchase the lowest priced apartment type.
Empty promises
Insofar as there has been a change of housing policy between this Government and the last, the change has been rhetorical.
It would be fair to say that the language around housing has changed. The new Housing Minister is happy to deploy words which imply a more directive, more hands-on role for the State.
But the change has been cosmetic and the State’s policy remains as it has been for many years: a framework which puts the interests of people seeking to buy and rent affordably at the back of the queue.
The Affordable Housing Bill, which was published this month, is this Government’s first major test on housing. The flagship policy of the Bill announced by the Minister for Housing is an import of a UK model of shared equity loans for new homes.
Not only are these equity loans likely to fail to deliver an increase in the supply of affordable housing, but they may also well lead to house price inflation, as has been flagged by Robert Watt, the outgoing Secretary-General at the Department of Public Expenditure and Reform.
Equity fuelling developers
Even in its country of origin, this equity loan scheme has been judged to fail in a number of ways. A 2019 report by the UK Comptroller and Auditor General found that the UK equity loan scheme increased profits for developers.
It also resulted in first-time buyers paying a premium for new build homes and was availed of mainly by people who did not need help purchasing a home in the first place.
The 2019 report found that the UK scheme was mainly used to purchase larger and more expensive new-build homes compared to properties bought by other first-time buyers without the scheme.
In the East Midlands, the average purchase price for a first-time buyer of new-build property in 2018 was £157,558. At the same time, first-time buyers who availed of the equity loan bought homes at an average cost of £235,470.
In North-East England, where take up of the equity loan was highest, the gap was even wider. The report also found that three-fifths of those availing of the scheme did not need it in order to purchase a home.
Between the introduction of the scheme in April 2013 and December 2018, prices paid for new-build properties increased in England by 41 per cent.
Independent analysis of house prices in ten towns and cities across England found that homes available under the equity loan scheme were an average of nearly 15 per cent more expensive per square metre than comparable homes not eligible under the scheme.
Developer wins
This is the direction of travel here for new build housing under the Affordable Housing Bill: higher prices than otherwise would have been the case, availed of by people who would have been able to buy a home in any case – with the extra money being spent benefiting only the developer.
The Government is in effect implementing evidence-based policymaking in reverse, introducing a policy which is shown to have failed and one whose demerits have been pointed out already by one of Ireland’s most senior civil servants.
One group that the UK policy did not fail are the British property developers who availed of the scheme and who have announced record profits. The last thing we need in Ireland is another bonanza for developers.
The Affordable Housing Bill will achieve the opposite of what it supposedly aims to do. Its title is in effect a form of Orwellian doublespeak, which promises one thing but delivers another.
If it is passed unamended, there should be no surprises if it turns out to be a costly, ineffective instrument which does little to address the core problem: the chronic lack of affordable housing to buy and rent in Ireland.
Cian O’Callaghan TD is the Social Democrats spokesperson for Housing.
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