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The failure of capitalist policy

According to Lenin, for a revolution to take place, it is usually insufficient for “the lower classes not to want” to live in the old way; it is also necessary that “the upper classes should be unable” to live in the old way; when it is impossible for the ruling classes to maintain their rule without significant change.

Nothing could more clearly illustrate that failure in Ireland than the crisis in housing and the inability of Irish capitalism to resolve that crisis.

Irish gombeen capitalism has always been much more focused on assets and on speculation than on industrial production. Before the Celtic Tiger boom the picture was of bulging brown envelopes exchanged in hotel car parks as land was rezoned for construction.

One of the central elements that ended the boom was the housing bubble. The workers paid three times: subsidies to speculators, tax breaks for banks and finally for an inflated mortgage.  When the bubble burst they paid again.  Public house building, already at a low level, came to a halt. The European Central Bank and the Troika oversaw wages, pensions and public services raids to pay the bankers.

They kept on paying. The National Asset Management Agency (NAMA) was set up to buy largely overvalued properties with public money. The government, with Michael Noonan as spokesperson for finance, came up with the bright idea of a firesale of the assets to garner dollars that could be used to pay the ECB.

The firesale saw massive corruption as ministers, government supporters and NAMA administrators in both administrations all joined the free for all.

A new pattern was established. Housing was abandoned as a public service and was increasingly funded by Vulture funds. Local capitalists, again including government ministers, joined in the stampede to the trough with the legalisation of Real Estate Investment Trusts (REITs).

The outcome was a mass influx of homeless onto the streets. This saw the first major protest movement, culminating in 2016 with the occupation of Apollo House in Dublin, a NAMA property owned by the public.  The courts forced an end to the occupation by threatening to sequester the funds of the unions supporting the occupation. The government offered some concessions, although these were less a solution to homelessness than a way of making it invisible.

Three governments came and went; Fine Gael supported by Labour, Fine Gael supported by Fianna Fail and the current Fine Gael/Fianna Fáil coalition supported by the Greens. Housing was one of the main factors in the ousting of the first two and in the current government Fianna Fáil support has collapsed, but the basic model of housing investment does not change.

Following the 2018 October Raise the Roof protest at the Dáil the government allocated in the 2019 budget €1.25 billion to fund 10,000 units of social housing, a figure immediately attacked as insufficient by housing experts. The 2020 budget saw €80 million allocated for Housing Assistance Payment, a subsidy to landlords.

Overall, the policy was a continuation of the long running Rebuilding Ireland policy which was launched by the Fine Gael-led minority government in 2016 and aimed directly at housing developers, the new policy did not resolve the crisis but led to a feeding frenzy by speculators and developers without producing anything remotely resembling a response to housing need.

Firstly, we had the scandal of Vulture funds - transnational funds operating tax free with charitable status and buying up large blocks of housing.Instead of seeing this as a problem, the government changed the law to allow the creation of Real Estate Investment Trusts (REITs), allowing local capitalists to get their nose in the trough.

This May saw an explosion of anger over the discovery of "Cuckoo Funds" that were block buying housing estates, with the effect that young people could not buy homes and were then locked into high rents set by the funds. As with the vulture funds, the cuckoos had tax relief.

There then followed weeks of anger, when the coalition scrambled to find a solution.  They failed.

In a mini budget they proposed a series of measures. Purchasers of 10 or more houses in a year would face a ten per cent stamp duty, while all houses in newly built estates must be made available for purchase by individuals for two years. Up to 30% of housing schemes were to be set aside for first-time buyers.

Apartment purchases were exempt from the new rules. Ministers were told exempting apartments would ensure investment in the sector was continued.

There was a storm of criticism. The rules would apply to new projects, delaying their effects for years. Extra stamp duty would simply be passed on in higher rent. Reserving properties for individual buyers would have little effect when most people were already priced out of the market. Overall, the decision would push investors towards build to rent, locking a generation into unaffordable rents.

The Minister for Housing, Local Government and Heritage, Darragh O’Brien TD, welcomed the passing of a stopgap Affordable Housing Bill in July.

“Cost Rental is a model where the tenant pays the cost of delivering, managing, and maintaining the homes only. Tenants will pay monthly rents which are up to 50% lower than local market rates”.

“Under the Affordable Housing Bill, Local Authorities will also now be empowered to build, acquire and make available, homes at prices which are below open market levels. increase in Part V provision which amends the current 10% minimum requirement for social homes and increases this to 20% for social and affordable homes."

What was not made clear was that the free for all for speculators would continue, with public money flooding in to offset the market costs of private construction.

Behind the brave words stood government division. The Government’s Summer Economic Statement promised €1.5 billion per year over the next four years. Fianna Fail promoted this as a new deal for housing, but it turned out that much of the money was double counted, that it included tax cuts and that there had been no separate figure for housing.

Amid furious infighting the Government’s major plan, Housing for All, to tackle the housing crisis was delayed, and was finally published in September.

Underlying economics

When there is a crisis, when special assistance is made available by the state, eventually the bill becomes due and the working class is asked to pay it.  Irish workers continue to pay for the credit crunch through public sector wage restrictions, pension cuts, the mass sell-off of land through NAMA and relentless privatisation of state resources and services.

We have not yet cleared the debt from the last crisis, but Minister for Finance Paschal Donohoe, in the stability programme update, a budgetary document submitted to the European Commission in April, had pencilled in an €800 million deficit for 2025 - for all intents and purposes a balanced budget.

In the review of the Summer Economic Statement Donohoe was overruled.  It was agreed that it would be impossible to stabilise the economy without much more extensive capital spending, although current spending was to be fixed at 5% - advance notice to workers that covid supports will be quickly withdrawn and the squeeze on public sector pay would remain in place.

As a result of these discussions sovereign debt is to peak at over 108% 0f GNI in 2022 and fall to 106% of GNI by 2025.

This shift should have settled things. It did not. The capital budget is not for housing, but for all infrastructure. Many ministers, especially in Fianna Fail, believe that this will not be enough. The internal row pushed a final figure back.

The budget is being squeezed from a number of directions. A broader infrastructure and development programme is needed. This is constrained by European rules on government spending. Ireland's share of the EU development programme is quite small. The overall economic figures, which include the transnationals, paint us as one of the wealthiest of the European economies in defiance of reality. The door is closing on our role as a tax haven and on the low 12.5% corporation tax.

In any case, the housing plans of the government have increased in scope but not changed their nature.  Plans for more public, social and affordable housing disguise the fact that the process is to be driven by private developers. Smaller houses, subsidised by local and national government, will be labelled affordable. Those leased directly by authorities will be labelled public. In many cases the local authority will hand the property back to the developer on completion of the mortgage term. Essentially the programme will see the transfer of billions from public to    private hands, with the belief that eventually the market will deliver a surplus of housing and prices will fall.

So Irish capitalism is riven by contradictions and fears the electoral response to their failure, but even in the internal government battle for survival they are unable to change direction.

So, the Irish Housing crisis meets the first part of Lenin's formula. The ruling classes are unable to live in the old way. However, the possibility for substantial change requires that the workers are no longer willing to be ruled in the old way. Is this the case?

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