Recent years have witnessed a significant incline in state expenditure on housing, with an analysis conducted by this paper revealing €8.3 billion in state funds being allocated to housing in 2024. Day-to-day supports for those living in accommodation, state investments, and tax relief and incentives collectively contribute to this substantial total. This figure does not include spending that cannot be quantified fully, such as subsidies pertaining to local authority tenants who pay under market value, or tax revenues lost when excluding the family home from capital gains tax calculations. Add in expenses related to further areas like roads and water infrastructure, primarily intended to facilitate house-building, clearly demonstrates a hefty state commitment.
Drawing international parallels is challenging due to varying housing systems, however, OECD data indicates that state spending on housing has undergone a transition from being amongst the least to one of the highest within the previous decade. The most recent statistics from 2022 place Ireland fifth out of 32 countries surveyed in relation to housing expenditure. Since the figures were obtained employing a GDP-proportional calculation technique and multinational businesses inflate Ireland’s GDP, it is likely Ireland’s position could be higher.
An ongoing endeavour to catch-up is evident following post-financial crash investment reductions. Supply of houses in Ireland trails behind most international standards, primarily a consequence of years of underbuilding. Add to this a ballooning population caused by a robust economy, resulting in increased housing rates. Consequently, housing prices, in comparison to incomes, are far higher here than in a majority of other nations.
The scale and effects of the crisis socially and economically justify the necessity for major state investment. Nonetheless, immense issues persist within the housing sector. Is this merely an inevitable progression delay, given high investment sectors typically require time to exhibit outcomes? Alternatively, could funds be put to better use? It is crucial these questions feature prominently in the upcoming general election debate. It is anticipated that the debate will be informed by the Commission on Housing report, believed to be under review by Housing Minister Darragh O’Brien.
Modest scope exists for budget tax reductions and financial aid for households, which will undoubtedly make the pre-election package challenging to agree on.
It is evident upon reflection that governmental funding is crucial as the private domain, if left to its own accord, would falter in providing an adequate amount of affordable housing. It’s worth investigating further several notable points – the potential insights of the Housing Commission into the rationale behind exorbitant construction costs might be insightful. One significant measure that has supported housing availability over the preceding year was an economic discount for developers via a waiver of development levies and connection fees – a saving of approximately £10,700 per residential unit. This waiver has seen an extension for a further year.
However, deeper-seated issues persist. Regulatory complaint is a common refrain among builders. Urban development planning certainly requires more promptness, though changes to the system implemented last year and the closure of the Strategic Housing Development application process – under which developers would directly apply to An Bord Pleanála – seem to have provided some relief. Noteworthy hold-ups occur between governmental structures and local councils in green-lighting projects and making funds available. These setbacks contribute to increased expenses and critically, an elevation in development risk. This translates to difficulties in securing financing, particularly from Irish financial institutions which are hesitant to lend to the sector following the prior property crisis.
But even if expenditure can be mitigated through a reduction in planning delay and other financial burdens, there remains a sustainability divide needing to be bridged, prevalent in many market sectors. Developers have voiced that without the State effectively guaranteeing or backing a significant quantity of apartment plans, they would not come to fruition. State funds also play a key role in the provision of social and affordable housing, enabled through financing and funds for local councils, sanctioned housing societies and the Land Development Agency. In an effort to bridge the sustainability gap, the State also aids potential homeowners through a selection of programs and continues to subsidise those renting council housing or in newer cost-rental properties.
Reflecting on the Current Regulations
The breadth of the current aids offered is astonishing. The State is likely to subsidise a typical flat development – likely through initiatives like Croí Cónaithe, which aids flat development where developers can demonstrate a viability gap, or the Land Development Agency’s support for cost-rental flats, or a distinct state setup assisting developers with cost-rental projects.
Developers constructing residential properties gain assistance through levies exemption and occasionally, contracts made in advance by recognised housing bodies or local councils for the purpose of social homes. They have the option to take a loan from the Home Building Finance Ireland, a state-backed agency. Otherwise, if it’s an affordable housing project, it could be managed by a certified housing organisation on behalf of the local authority, financially backed by the Housing Finance Agency, which also enjoys state support.
The Help-to-Buy scheme and the First Home Scheme are there to provide financial aid to first-time home buyers. In cases where obtaining a loan from a bank is not possible, there’s a likelihood of receiving one from their local authority. Cost-rental residents will enjoy rents below the common market price. Affordable housing buyers receive assistance to buy homes at prices lower than the market value. The presence of state assistance is rampant. Whether these funds are utilised efficiently is the crux of the matter.
To the degree that such support encourages developments that otherwise wouldn’t have existed and allows people access to housing, it definitely yields social and economic benefits. However, concerns arise. Schemes like Help-to-Buy and the First Home Scheme stimulate demand in a market already suffering from supply shortage, making house prices potentially more expensive. The various programs designed to enhance supply certainly have an effect, especially with an expenditure exceeding €5 billion. However, there seems to be a tendency to layer one plan over another as the government attempts to make a difference. A judicious evaluation is essential to determine if the funds are used effectively and are specifically targeted at the actual issues obstructing housing development.
The general election debate is expected to bring to the spotlight a discussion on the necessity for change versus continuation of the current situation. With housing as their focal point, Sinn Féin will likely present a comprehensive plan of their prospective progress, chiefly emphasising their earlier vows to enhance social and affordable housing. Expectations range from the Government playing a larger role in construction on State and local authority property to the party confirming its intention to discontinue demand-side aids such as Help-to-Buy and the First Home Scheme. It will be intriguing to see how the party plans to bring this about and whether they stand by their immediate termination or opt for gradual reduction. All this might of course be impacted by coalition discussions following the general election.
Alterations have its complexities
The housing market is a testament to the reality that decisions tend to bear trade-offs and there is little simplicity. While rent control aids those settled in rentals, it apparently plays a part in reducing new availabilities as property-owners withdraw from the market. Government provision of financial aid assists purchasers but poses potential for a short-term surge. Yet, prices of newly built homes have climbed up about 9 to 10 per cent. Development is nudged towards the outskirts of Dublin and commuter regions, where construction costs fall within the €500,000 limit of the Help-to-Buy scheme.
The incoming government will face heightened expectation for a fresh approach in resolution of the crisis. However, that entails overcoming complexities tied to reassessing current implementations. Numerous housing projects have commenced relying on one of the State-backed development support schemes or the prospect of qualifying for one. The Property Price Register and developer information infer that many housing schemes bank on the availability of Help-to-Buy, and sometimes the First Home Scheme, to maintain demand at certain prices. Removing these supports does not necessarily guarantee a prompt decrease in costs.
This implies that any fresh or updated housing strategy, contingent upon the governing body, necessitates a methodical implementation with emphasis on expansion of affordably priced, suitable accommodation. This is not to say that the scheme can’t be audacious. Yet, no strategy can instantly or imminently yield changes. The encouraging aspect is that, currently, resources are at hand and the main responsibility is to utilise them efficiently. With a significant amount of capital being expended, it’s crucial to realise substantial returns.