Opinion: Right now, the policy focus in this country appears to be on helping people to pay for unaffordable accommodation
Ireland has one of the largest gaps in home ownership rates between young and old people. An ESRI report on the matter estimated that individuals in the 25 to 34 year old age bracket have a far lower likelihood of home ownership in the future than their older counterparts. The reason provided for this in the report is that the 25 to 34 year old generation's life-cycle earning prospects are unlikely to outpace the growth in house prices.
In light of this concerning issue, I would like to offer an economist's view on the matter of making housing more affordable. Classic economic theory can offer us a way to decrease the cost of housing. The price of a good will fall if, all else equal, there is an increase in the supply of that good - meaning increasing the supply of housing should result in cheaper house prices.
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From RTÉ Radio 1's Today with Claire Byrne, Irish Independent Personal Finance Editor Charlie Weston on Irish house prices
But the problem is we're not very good in Ireland at increasing the supply of housing. As of 2021, Ireland’s total government expenditure on housing development as a percentage of its’ GDP was below the EU average. Additionally, we seem to suffer from a fair bit of nimbyism (not-in-my-back-yard) when it comes to our attitudes towards building accommodation.
We don't seem to be very good at getting accommodation plans into action, as seen by the rejection of proposals for housing in Poolbeg in Dublin or the rejection of apartments in Bessborough in Cork. Some of the reasons for rejection of these proposals can be quite legitimate in that politicians might believe the proposal is a bad deal for citizens, but only being able to propose unsatisfactorily accommodation plans is just another obstacle for the supply of housing in this country.
We also seem to have an issue with the standard of accommodation that we provide and the preferences of citizens. As many as one in five offers of social housing are turned down in Cork due to issues like lack of garden space or bedroom size. This means we have issues with providing accommodation and the quality of the accommodation that we provide.
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From RTÉ Radio 1's Late Debate, the latest government planning proposal: No more NIMBY or too little oversight?
In Ireland, a lot of policy is focused on demand-side factors to help people afford to buy a house. Some current measures which look to help aspiring home owners include the First Home Scheme where the Government and a bank will pay 30% of the cost of a new home. Additionally, there is the Help to Buy Scheme which provides individuals looking to buy a newly-built house or apartment with a refund on the income tax and Deposit Interest Retention Tax they paid during the four years prior to their application.
But despite such schemes, it is estimated that Ireland will still need 33,000 new homes before 2030. This is an issue. The above measures help people to afford high-priced accommodation rather than help to reduce prices. This could mean the government are further facilitating the prices being kept high without necessarily solving any of the structural issues relating to accommodation prices.
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From RTÉ Radio 1's Today With Claire Byrne, Barry McDonald from estate agents REA McDonald and Dr Rory Hearne, author of Gaffs, on the urban-rural divide in Irish house prices and supply
The housing crisis is too complex an issue to begin to trivialise, but I feel a simple metaphor may help better communicate how we should be solving the issue. Say, you get the same takeaway every Friday night. The first Friday it costs you €10, the second Friday it's €15, the third Friday it’s €40 and, on the fourth Friday, it’s gone up to €70.
Do you continue to try and meet the ludicrous prices by applying for loans, tax credits or even grants/schemes? Or do you start to question why buying a takeaway has become so expensive? At what point should we start to think that the solution to our accommodation crisis might involve reducing the price of expensive accommodation rather than helping people to pay for unaffordable accommodation?
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
