A capitalist offensive, feeding on the legacy of the Troika
The housing crisis housing is not a natural disaster or a result of mistaken policy but rather the result of changes in the economy - reinforced by specific housing and economic policies pursued by successive governments - that have favoured one class over another. It is this theme of class inequality that runs through every aspect of the housing crisis.
The figures on inequality and housing are stark. In 2016 there were 1,400 homeless families and 2,500 children in emergency accommodation across the state. At the same time 198,358 homes (about 13% of total housing stock) lay empty. In Cork, there were 269 people homeless, 21,287 vacant units and in Dublin, 3,247 people homeless and 35,293 vacant homes. Waiting lists for social housing and private rental accommodation grew as the price of housing was inflated higher and higher. At the most exclusive end of the residential market so called “trophy homes” exchanged hands for over €4 million. Over 77,000 households were still in mortgage arrears while the debt of the developers that owed billions has been written off by NAMA and the banks. In the same year, 2016, we saw the number of millionaires in Ireland rise by five thousand.
The critical point here is not just that there is inequality in housing but that the prosperity enjoyed by one class is dependent on the relative poverty of another. While this is true in all capitalist societies it is especially true in Ireland where housing and property have been a key source of wealth for the capitalist class. This is reflected in concentration of ownership with the richest 10% of the population owning 82% of all land (by value). Just 10% of households own 28% of the private housing stock. Within this top bracket ownership is concentrated even further - a mere 6,400 people own 156,500 properties. This means that just 0.004% of the population own 8% of the houses. In recent years the anti-capitalist slogan of the 1% may have become a bit of a cliché, but in Ireland - at least in relation to land and housing - it is not so far from the truth.
Elements of the crisis
While the term “housing crisis” is useful as a general description we also need to examine the distinct elements of the crisis to get a better understanding of it.
It is in the private rental sector that the crisis is at its most acute. The main diver for this is rising rents. This trend - which is making renting increasingly unaffordable and insecure - is also feeding into other elements of the housing crisis such as homelessness and overcrowding. Between 2011 and 2016 the average weekly rent paid to private landlords rose from €171.19 to €199.92, an increase of 16.8 per cent. The number of households paying at least €300 per week rent to a private landlord has increased 166% since 2011. It is also the case that rent rises in urban centres have been significantly higher than the national average. For example, over the same period Dublin City saw a rise of almost 30% with the level of rents now 23% higher than they were at the peak of the “Celtic Tiger” property boom in 2008. Daft.ie, an Irish property website, reported that the average monthly rent in central Dublin was €1,819 ($2,155) - more than 60% of the average pre-tax private-sector income. And it’s not just Dublin - rent rises of over 20% have also been recorded in Dún Laoghaire– Rathdown (26.2%), Fingal (22.8%), South Dublin (22.7%) and Kildare (20.3%).
One of the consequences of rising rents is that an increasing proportion of people’s incomes is going towards housing costs. For example, a single person on the average wage paying the average rent for a one bedroom apartment in Dublin was allocating 41% of their net income to the cost of renting. For a person on €25,000 (just above the median wage of €23,000) the proportion of net income going towards rent rose to fifty five percent. A further consequence of rising rents is the growing gap between the limits on housing benefit available for people on low incomes and the actual level of rents - a trend has put more that 80% of the homes available for rent beyond the financial reach of people in this category.
The other main feature of the private rental sector in Ireland is a lack of security for tenants. Regulation is minimal and enforcement of the few regulations that do exist is very weak. Landlords can evict tenants on the back of a claim that they are selling a property, moving in a family member or simply on the basis that a tenant is unable to pay an increased rent. These rules have increasingly been used by landlords as a means to evict tenants and get in new ones on higher rents.
Rapidly rising rents in the private sector are the most important driver within the housing crisis - not just because of the high number of people directly affected but also due the impact this had on all the other elements of that crisis. It is not a coincidence that over the period of rising rents from 2011 onwards there also has been an 81% increase in the number of people who are homeless; or that that number of people living in overcrowded homes has risen to 10% of the population. These statistics do not sit independently alongside one another - rather there is a direct causal link between them.
The second element of the housing crisis relates to house prices and affordability. From a trough in 2013 house prices across the state have increased by almost fifty percent. In urban centres that rise has been even greater with prices in Dublin increasing by 65% over the same period. This has major implications for the affordability of homes. While the term “affordable housing” is often used very loosely it is technically defined as three and half times a person’s gross income. For two people on the average wage, this is about €245,000, and for two people on the median wage, €189,000. Currently the minimum price nationally is €250,000, while in Dublin it is €400,000. Both figures are well beyond the affordability ratio with the latter figure equating to seven times the gross income for a couple both on the medium wage.
A consequence of rising house prices (as with rising rents) is an increasing proportion of people’s incomes going to housing costs. The point at which this is considered onerous - known as the Housing Cost Overburden Rate - is a household where the total housing costs represent more than 40% of the total disposable household income. Even households that are below this rate (where spending housing is more than 30% of disposable income) are considered at risk of facing an affordability problem. It is also the case that the extent to which housing is unaffordable is closely aligned to economic inequality with significant differences in the housing affordability rates for lower income households and higher income households. For example, the proportion of households below 60% of the median income affected by a housing cost overburden is nine times that of households above 60% of the median income. Over the period of the crisis the proportion of households in the low income category affected by cost overburden has increased from 12% to 18% (some 150,000 households). While affordability is often presented as a generational issue that affects young people, the old economic inequality still cuts across age differences with young people on lower incomes more severely affected by the issue of housing affordability than young people on higher incomes.
The third main element of the housing crisis is homelessness. This is often the aspect of the crisis that gets the most attention given the dire circumstances that people in this category find themselves in - whether that is living in emergency accommodation or sleeping on the streets. Homelessness had increased dramatically in Ireland over recent years. The number of people homeless in Ireland increased from 3,226 to 7,421 between July 2014 and December 2016. A significant portion of this increase was accounted for by growing family homelessness. Of the families that were homeless a majority were lone parents who comprised 70% of the families in emergency accommodation. In the last year alone the number of homeless families increased by forty per cent and this category now numbers nearly 10,000 people including 3,755 children.
The number of homeless families in Dublin increased by 289% over the period of the crisis with almost 700 families living in temporary and emergency accommodation. Much was totally unsuitable with families being unable to access cooking facilities and having to travel extended distances in order to bring their children to their school. Despite its designation as “emergency” and “temporary” this type of accommodation is becoming a long-term response to the problem of homelessness.
The critical point to be made about homelessness is that it does not exist independently from rising rents and affordability. Indeed, it is evictions from the private rental sector and repossessions linked to mortgage arrears that are the main drivers of homelessness. In the interaction between the different elements of the housing crisis homelessness is more of a consequence than a cause. Of course, the implication of this is that the crisis cannot be addressed by focusing solely on the issue of homelessness.
Despite the overwhelming evidence - in the form of objective statistics and the subjective testimony of individuals and families - of the existence of a housing crisis in Ireland there are still those at an official level who deny this reality. In 2018 we had the claim by the chair of the Housing Agency (the government body set up in 2010 to advise on policy for housing), Conor Skehan, that the problems Ireland was experiencing with housing were “completely normal” and just a phase of a market cycle that would soon correct itself. This followed on from an earlier claim by the same official that many people in emergency accommodation were not in genuine need but actually gaming the system. Such a dismissive attitude had also been echoed at a government level with the assertion by then Taoiseach Leo Varadkar that homelessness in Ireland is low by international standards.
While the denial and downplaying of the housing crisis flies in the face of reality it does reveal the character of a political elite who are completely subservient to the demands of a class that has benefited enormously from the hardships borne by others. To acknowledge the severity of the crisis would be to concede not only their inability to tackle it but also their complicity in pursuing policies that brought it about and are currently making it worse.
Within mainstream commentary the property boom, the financial crash and now the housing crisis are often put down to an Irish obsession with owning property. However, this superficial explanation bears little resemblance to reality. Up until the early 1960’s home ownership in Ireland was quite low. In fact, in 1961 only 25% of the population of urban areas lived in private housing; by 1986 this figure stood at 75%. This reason for this shift is not to be found in the Irish psyche but in the changes that were taking place in the capitalist economy in the 1970’s and 80’s which, in response to a decline in profitability, saw a shift of capital from production to finance. A key element of this was the transformation of homes into financial assets through privatisation and deregulation. This was epitomised by Margaret Thatcher’s counter revolution in Britain, involving an all-out assault on public ownership and organised labour. The same process was also underway in Ireland, only here it was called Social Partnership.
The roots of the current housing crisis lie in this earlier period of public spending cuts and privatisation. During this period developers and banks consolidated themselves as the dominant wing of Irish capitalism which exerted huge influence on every level of government. It is no coincidence that so many of the scandals of this period related to the sell off and rezoning of publicly owned land. For example, around 30% of zoned building land was owned by local authorities in the Dublin area in the 1970s. In 2006, just prior to the crash, the proportion had fallen to just nine per cent. This was not just a consequence of corrupt relationships between politicians - although those certainly did exist - but part of a conscious effort to convert land and houses into financial assets.
This process of financialisaton continued on through the 1990’s and reached a frenzy during the property boom of the early years of the current century. The governments of the period were instrumental in fuelling a speculative bubble through the introduction of property related tax breaks and the further deregulation of the banking sector. Spurred on by tax breaks, speculation and profiteering, house prices rose from a ratio of four times the average industrial wage in 1996 to ten times it in 2007. Despite warning signs, the government continued to maintain that the problem was lack of supply and that builders and developers must be incentivised to build more houses as they rushed to get in on the pyramid scheme before it inevitably collapsed. The end result was ghost estates and 230,000 empty houses.
Despite this experience the very same arguments – of the need to incentivise capital investment in order to increase supply – are still being made today. However, the number of vacant properties testifies to the bogus nature of such claims. The housing crisis is not a question of supply and demand or of the market not operating correctly – for the class of people who own financial assets the market is working – the value of their assets is rising and profitability is increasing. The Irish government is doing all it can to ensure this is the case through tax breaks, the sale of NAMA assets and guarantees on rental incomes for landlords.
Rather than increasing supply,
an inflated housing market requires new house building to be severely restrained.
In 2016 there was a new build output of approximately 14,800 compared with
14,602 in 2010. So, in the period of the so-called recovery new house building
was only marginally higher than in the depths of the recession. Even as
recently as 2009 when GDP was contracting significantly, output was 26,402.
Another of feature of the new build figures is the very low rate of the social housing building. Despite lengthening waiting lists - which now stand at 100,000 people across the state - new social housing is now almost non-existent. The total of local authority and housing association house-building construction in housing output has sharply contracted – going from 28% in 1985 to 6% in 2012. A total of just 75 were built in the year 2015. In Dublin city only 96 new homes have been finished over the past two years, despite the fact that the council owns enough land to accommodate 18,000 new units. The city centre has a waiting list of 22,203 people and accounts for 67 per cent of all homeless people in the country. At this rate of building, it could take over 40 years to provide a permanent home to those on the Dublin City Council housing waiting list!
Between 2007 and 2015, real expenditure on public housing fell by nearly 63%, from a high of over €3.5 billion to approximately €1.3 billion. Gross capital formation by Government fell from almost €2.5 billion in 2007 to just over €600 million in 2015. However, the cuts to the social housing budget does not mean that there was no spending on housing. There certainly was, but it had shifted to subsidies to owners of private property. So, the collapse in spending on social housing had been paralleled by a surge in housing related benefits such as Rent Supplement and the Housing Assistance Payment as well as public subsidies to local authority tenants. This policy is based on rent supplements or subsidies to private landlords for renting to those in need of social housing. Such expenditure does not add to the stock of social housing but rather keeps a revenue flow to private landlords. The top 20 landlords received €5 million on an annual basis in rent allowance payments from the state. In 2018 the overall amount paid out to hotels by Dublin City Council totalled €46.93m - a 20.5% jump on the €38.94m paid out in 2016. In addition, the council paid €12.3m to hostels and B&Bs. This is a very clear example of how the austerity programme works. It is not just about cuts – indeed in many cases the policies of austerity are more expensive - but about transferring resources from labour to capital, from one class to people to another.
The policies of the government in relation to housing cannot be understood without reference to the financial collapse and the Troika plan for the recovery of the Irish economy. This was based primarily on restoring the profitability of Irish banks and reducing their debt burden (of which developer loans and mortgages are central components). For this to work these financial assets must rise in value - house prices must increase, mortgage arrears must be recovered and properties must generate more revenues in the form of higher rents. This was key not only to aid the banks themselves but - related to this - in attracting international property investors and vulture funds to buy up toxic loans and assets. The main mechanism in regard to this element of the recovery plan has been the sell off of the residential and development land assets held by NAMA at knock-down prices.
Every government policy in relation to housing is designed to inflate the value of financial assets. Any policies that could mitigate against rising asset values such as rent controls, the expansion of public housing, or the transfer of NAMA properties to local councils were rejected. Within the Troika framework there could be no solution to the housing crisis that is favourable to the working class. Indeed, the housing crisis is really just the continuation of the financial crash and bailout under which Irish workers are being made to pay for a crisis that was not of their making.
*The majority of figures
in this section were drawn from economic figures collated in 2018.
It goes without saying that the picture today is much worse, with the exception
of some expansion of emergency accommodation taking families off the streets.