Andy: It Worked When Local Authorities Could Borrow to Build Housing

In April of last year, it was announced that more than 11,000 tenants of Dublin City Council were to be allowed to buy their homes at a price discount of up to 60 percent of the market value.

Good luck to the tenant purchasers themselves, but the housing organisation Clúid criticized the move as tantamount to “selling off the family silver at a knock-down price”.

My UCD colleague Mick Byrne makes the point that, given the long history of such schemes, “A large part of investment in social housing in this country is thus actually an investment in subsidised home ownership.”

In 2015, the then Minister for Housing, Alan Kelly, claimed that such tenant purchase schemes were useful because not only did tenants benefit, but local councils gained resources that could be used for new social housing, though there is no guarantee local authorities will use the funds for housing.

Clúid has pointed out that even if all the money raised did go to new social housing, because of the discounts on offer, councils may not recoup enough money to replace the public housing being sold off.

As an important new paper by Byrne and another UCD colleague, Michelle Norris, makes clear, this particular issue forms part of a wider and deeper pattern of change in how social housing is (or is not) supplied by the Irish state.

The crux of that change is the switch from public provision of public housing – commonplace for most of twentieth-century Ireland – to a deeply problematic reliance on market provision.

From the 1930s to the 1950s, 52 to 65 percent of all Irish housing output was accounted for by local authorities, and by not-for-profit housing associations, usually borrowing the money to build the homes and then using the rents to repay the debts. By 1961, over 18 percent of Irish households lived as tenants in social housing.

As well as providing people with houses, this activity also constituted state-led stimulation of the economy, with many of the tradespeople directly employed by the public sector. In particular, social housing acted as a compensating factor (what economists call a counter-cyclical force) during times of economic downturn, such as during the emigration-blighted 1950s, when investment in the construction of public housing rose sharply.

A crucial turning point came in 1987, when it was decided that the funding of social housing would only come from grants from central government, meaning that local authorities could no longer borrow on their own initiative. This meant that when overall government spending came under pressure, spending on social housing would likely suffer also.

Government funding for the provision of new social housing duly fell by 88 percent between 2008 and 2014, and the output of dwellings by 91 percent. With private-sector house building nosediving at the same time, the policy had now become disastrously pro-cyclical rather than counter-cyclical.

The overly close correlation between public- and private-sector provision had been compounded by other factors. One was the introduction of rent supplement, allowing, in theory, low-income households greater access to the private rental market, though the later abolition of rent controls worked against that.

Meanwhile, existing social housing was almost continuously being sold off to tenants, long predating Alan Kelly’s initiatives, as Conor McCabe has documented.

But the most important change from the late 1980s onwards was that, rather than build houses themselves from scratch, the state was increasingly asking private developers to include social housing in their plans.

Or it was asking some of those same developers to rebuild social housing in parts of Dublin as one element in public-private partnerships that, dodgy as they were to begin with, would bite the dust when the crash came.

As Byrne and Norris explain, “the delivery of social housing through market mechanisms and the state subsidization of the private rental sector” largely substituted for the state’s own provision of social housing, with the additional disadvantage of its adding “further fuel to the property market furnace”.

As the available supply of private rented accommodation is now limited, and as rents have soared in Dublin in particular in recent years, the stage has been set for the current crisis of unaffordable housing and homelessness.

Immediate measures to solve this crisis should include bringing into use currently vacant properties – as with the Home Sweet Home initiative vis-à-vis Nama’s Apollo House. A punitive and timely tax on unused private properties would be an important policy instrument here also.

But, more fundamentally, it is important to reassert housing as a human right and a public good, built where necessary by the state and allocated on the basis of social need.

If you want to get involved in campaigns along those lines, then check out the group Housing Action Now. And happy new year to you all!