WE’LL GET TO Albert Einstein in a minute, but in the meantime let me point out a missed opportunity: in 2009 or so, when things in housing were starting to implode, we had a chance to review and reform the manner in which housing was provided, what was provided, and if we needed to change things for the future.

We didn’t, of course, instead plodding along with the same policies and practices, tinkering around the edges at times, but making no real fundamental changes to the way things were done or, crucially, who did them.

Roll on a few years and we are again beset by the destructive dichotomy of the two-horse race that is renting or owning, with now both options being seen as unattractive through high rents and insecure tenancies, and large deposits and limited choice.

The issue of supply – what, where, and how – is at the heart of many housing issues in Ireland.

Potential home-owners are being held to ransom

Currently, potential home-owners are being held to ransom by Irish house-builders who are refusing to start building in sizeable numbers until profit margins reach a level they are happy with. A conflation of the roles of both developer and builder has led to expectations of large profit, and high levels of indebtedness have led to a need for it.

However, the industry’s estimate of around €1,900 per square metre to build residential property is over-inflated. Many European countries can do it for closer to €1,000. New – and welcome – regulations (already being rolled back on) apparently add to the cost. I’ve no doubt they add some cost, but our regulations are not unusual in those €1,000 per square metre countries either.

So, to get supply back in the housing market, let’s bypass this obstruction.

There’s enough land out there shovel-ready which will be attractive to other house-builders, and not necessarily Irish ones. To make house-building viable at normal profit margins, agencies such as Nama and local authorities need to identify land for housing and package it in bundles. Building 50 houses here, and 80 houses there, is not going to have much impact on the 25,000 or so units required each year, so we need to add scale, hence the bundles of say 500 or 1,000 units at a time.

Private and social housing needs must be catered for

Tenders to design, build and manage private and social housing on these lands are issued – for housing that is needed, not just three-bed semi-Ds (in the next four years, 57% of households in Dublin will be one or two person). As each bundle of housing is worth more than €5 million they will have to be advertised across Europe. This is crucial in getting the best value possible. This is nothing new: about 90 years ago, successful places like Marino in Dublin were built like this.

The winning building consortium (for it probably will be a consortium, including Irish companies) then has its contract managed by the National Development Finance Authority who have an excellent track record in providing value for money and speed in delivering schools, courthouses, and other accommodation. The consortium keeps the sale price of the houses and annual management fees, and we get housing in volume (which is not the same as huge housing estates).

The advantage of the contract is the degree of control it offers, which will ultimately lead into increased housing affordability. PPP variations like this are controversial, but so is housing affordability. We seem set on helping people afford what is on offer, rather than making what is on offer affordable.

We need a new zoning category: long-term residential renting

At the same time, we need to cater for all those who don’t want or need to buy a property, but yet need decent long-term rental accommodation. Ireland has never constructed dedicated ‘build-to-let’ properties; nearly all rented accommodation was originally built for sale, and not for rent, which is why a lot of it is unsuitable for renters’ needs, especially families.

Here we need a new zoning category of ‘long-term residential renting’, or equivalent. This would no doubt have an immediate impact of reducing land values, but would also attract professional residential investment companies who are interested in the long-term returns from such a venture, rather than short-term capital gain.

This practice is common in Europe and the UK, and one of the reasons companies haven’t set up in Ireland, despite the obvious demand, is this lack of certainty surrounding planning.

There is also the thorny issue of encouraging (and by encouraging, I mean forcefully persuading) Irish pension funds to invest in residential property, which such a zoning proposal would also help facilitate. It is somewhat disappointing to think that Irish pension funds invest in residential property abroad, but not in Ireland where the need on their home turf is obvious. It’s not necessarily their fault – they have to invest wisely – but we should make better use of their potential.

Temporal ownership could help both tenants and distressed landlords 

Finally, let’s add a third horse to the renting or owning race. Temporal ownership is something we are currently writing the legislation for here in Catalonia. In short, this is where ownership of a property is passed to somebody for a specified period of years. The new temporal owner pays up front the present value of the rent they would normally pay for those years to the original owner (as the value of money declines over time). Taking a property renting at €1,360 per month, the temporal owner would pay c. €80,000 up front to own that property for ten years, with repayments on an 80% LTV loan at 6.3% of about €900 per month.

Monthly repayments work out cheaper than rent, and the temporal owner gets security of tenure for five, 10, 20 years as they agree with the seller. The original seller gets an upfront lump sum and the knowledge they never have to go near the place again until it reverts to them – all duties and obligations, including repairs and maintenance are the responsibility of the temporal owner. The original owner can sell on the temporal ownership as many times as they can in a lifetime.

This would be a very attractive proposition for the 40,000 or so buy-to-let landlords in distress, as they get a lump sum to help them out of difficulty and still retain ultimate ownership of the property. Its significance is as a potential alternative tenure option.

So, back to Einstein: it seems we are insistent on using the same methods and practices to get us out of the housing challenges we face now as got us into them – the same lobby groups are complaining, the same affordability issues are arising – and yet we persist with the slow, expensive, piecemeal methods of delivering housing and tenure that have failed us so far, and insanity, as Albert once quipped, is doing the same thing twice, but expecting a different result.

Dr Lorcan Sirr is a lecturer in housing at DIT and currently Professor Associat at the Faculty of Legal Sciences, Universitat Rovira I Virgili, Tarragona Spain.

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