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Sean Defoe: Political pass the parcel on housing lets young people down again

This week it seems the Dáil discovered people under 30 exist. And, amazingly, those people for s...
Sean Defoe
Sean Defoe

10.00 15 May 2021


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Sean Defoe: Political pass the parcel on housing lets young people down again


Sean Defoe
Sean Defoe

10.00 15 May 2021


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This week it seems the Dáil discovered people under 30 exist.

And, amazingly, those people for some reason want a better quality of life.

They're not content with avocado on toast, skinny lattes and skinnier jeans: young people appear to have developed the precociousness to want their own homes.

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It's almost as if paying €2,000 rent a month to an investment fund for a home that would command a mortgage of €1,200-€1,300 a month isn't all that desirable.

So naturally, our esteemed political system kicked into high gear and did what it did best: started a blame game.

Micheál Martin took great glee in reminding Labour leader Alan Kelly he was part of the Government that invited cuckoo funds in the door.

Talk about glass houses.

"The Taoiseach and his colleagues damn well destroyed this country with their housing policies," Kelly stormed back. "He did not have the guts to stand up to his own party.

"It took him until the very end, when he knew everyone else had fallen, to do that. He has some cheek."

It was worse when it came to blaming Sinn Féin. In Housing Minister Darragh O'Brien's ten minute speech on investment funds on Tuesday he mentioned Sinn Féin 16 times - a rate of a Shinner every 37 seconds.

Leo Varadkar joined in when taking Leaders' Questions on Thursday, saying Sinn Féin was speaking with a forked tongue when it comes to housing by calling for one thing in the Dáil then voting against developments at council level.

Micheál Martin then took the baton: "Sinn Féin is more about rhetoric and sloganeering than about substance around housing.

"I will not be deflected by its sloganeering or the degree to which it wants to exploit the housing crisis for its own electoral and political advantage."

What he's driving at is it would suit Sinn Féin down to the ground politically if the latest plans fall on their face and not a single house was built between now and the next election.

The forgotten caveat being Sinn Féin, questionable as some of their policies are, are not the ones that have been in power the past 20 years.

This Dáil has become a tedious shame circle where casting judgement is far more common than usable solutions.

The truth is no-one hunting for a house at the moment gives a damn about the political pass the parcel - they want gaffs, not gaffes.

Fed up

It's no surprise young people are fed up either: the ESRI now notes my generation is set to the the first to be worse off that our parents.

Leaving school into a crippling recession. Betrayed by Ruairí Quinn on a promise not to increase student fees. Joan Burton cutting the dole for under-26s at a time of record youth unemployment. Watching all our friends emigrate. Soaring rents. Little hope of a pension.

Add to all that a year of a pandemic that disproportionately hit industries more likely to employ young people and took away all the activities that make being in your 20s fun.

To have to go through a second recession by the time you're 30 is bad luck. To also have to go through the only recession in living memory where house prices have gone up is something else entirely.

Solutions

For what it's worth, I do genuinely believe Minister O'Brien and the Taoiseach when they say housing is their number one priority.

The Affordable Housing Bill got more bad press than it probably deserved and - if it works - it could make a significant long term difference.

Let's take what it could mean for people on median wages in Ireland. The Government has worked off average full-time salary figures for 2018 in much of its modelling, which the CSO says was €47,596 in 2018.

However, the median salary can be more reflective of actual earnings.

My colleague Paul O'Donoghue recently explained it using this example.

Five people work in an office. Lowest to highest, their wages are €20,000, €30,000, €40,000, €50,000 and €110,000.

The median is the middle number, €40,000, while the average is skewed by the larger salaries and would be €50,000.

The median salary in 2018 in Ireland was €36,095. Let's round that up to an even €38,000 to account for inflation somewhere in the 5-6% region since then.

Taking two median salaries of €38,000 a couple could expect to borrow €266,000 between them based on mortgage lending rules of 3.5x salary.

When you add in the Help-to-Buy scheme worth €30,000 then a property worth €370,000 becomes available to that couple - as long as they can provide €7,000 of their own cash.

In this case, the State would take an 18% hold in the property, valued at €67,000.

So the scheme will have the effect of making more expensive housing available to people on median wages.

Supply, supply, supply

One of the problems is whether this is accompanied by the needed increase in supply.

Head of Mortgages with Finance One Cian Carolan told Newstalk it "creates a scenario where you've more people in a position to buy".

He said that's great for those few people, but it "doesn't necessarily increase the supply to what we need".

I put this to officials in the Department of Housing. Their hope is that by guaranteeing more money will be in the hands of prospective buyers reluctant developers that are sitting on some of the 80,000 granted planning permissions will start to build.

They believe developers are reluctant to start without knowing what market prices will look like in 2 to 3 years' time when the homes are finished and giving them certainty of making money gets those builds started.

They hope this will ease pressure on the market while the affordable housing and cost rental programmes - driven by local authorities - get off the ground.

It's not without risk of the extra capital from the Shared Equity Scheme being baked into even higher prices, as the ESRI and the Central Bank have warned.

It's also a sad state of affairs that many people will need two state subsidies (Help to Buy and Shared Equity) just to be able to afford a roof above their heads.

"Fianna Fáil builds houses," the party has told us repeatedly over the last week. But the political and social cost if they fail this time is higher than its ever been.

Main image: File photo. Picture by: Sam Boal / RollingNews.ie

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