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Why the Michael O’Leary of housing is calling for fundamental shift in homeownership in Ireland

Lack of housing is forcing young people to leave and the Government has a responsibility ‘to play a bigger role’, Michael Stanley says

After announcing record financial results and saluting the patience of investors at a press conference last week, Cairn Homes boss Michael Stanley pivoted into something of an assault on the industry, suggesting housing, or the lack of it, was destroying the economy.

He said that as well as choking off investment and limiting the productive capacity of firms, the lack of affordable accommodation was driving our youngest and brightest abroad in a sort of housing-triggered brain drain (my words, not his).

“We are an affluent society [but] this feels like the mid-’80s” a period blighted by mass emigration, he said. “These kids are leaving because there is no housing.”

He noted that home ownership rates among 25-39-year-olds, once considered a prime homeowning age, had dwindled to just 7 per cent. It was 22 per cent back in 2011.


“We have to wake up and realise this ... we are destroying our economy because of our housing shortage for young people,” Stanley said.

It was an interesting tack to take after announcing your company had just generated a record €667 million in revenue on the back of selling into the sector.

Outspoken, at times brash, but nothing if not colourful, Stanley might be described as the Michael O’Leary of the housing industry here. Like his airline counterpart, he is quick to rubbish arguments he doesn’t like and has a knack of making his own sound too self-evident to be questioned. He also says things other company bosses won’t.

As dismal as it is to state, housing has become a premium product that young people and people on average salaries can’t afford

On “the disconnect” between house prices and average salaries (average house prices here are now about 10 times average incomes), “there’s no immediate future for that coming back,” he says.

The implication being that increasing supply, the solution that so many here hang their hats on, is unlikely to bridge the affordability gap at the heart of the market.

“We’re now faced with a challenge in every developed economy where housing cannot be delivered at four to five times the industrial wage ... that’s just a reality,” he says, citing the high cost of materials.

“You can live in a dream world if you want where people can pick numbers and say housing can be built for X or Y, we’re a plc, our numbers are transparent, as are our margins, as is our land cost,” he says, noting the company’s land cost per unit, often seen as a key driver of prices in Ireland, is less than 10 per cent.

Most western economies are mired in housing crises, even ones with better supply numbers than Ireland, suggesting there is a structural shift globally away from homeowning and into renting. As dismal as it is to state, housing has become a premium product that young people and people on average salaries can’t afford.

Stanley appears to agree with this. “In that scenario, what is best for the economy? Do you just say to those people your only solution is now to rent from the private sector?

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“Or do you say to a very significant number of students coming out of college or people that want to leave home, you can actually rent an apartment from a local authority or an AHB [approved housing body] not for the €2,200 market rent but for €1,300.”

The solution, as he sees it, is a more nationalised, State-owned rental sector.

If we move from producing 30,000 homes a year to 50,000, as many are advocating, Stanley believes the State should buy up most of the additional 20,000 units and rent them at subsidised rates.

This would provide home builders such as Cairn with the necessary capital investment to sustain their activities, particularly with the current fall-off in private rented sector investment from abroad, while delivering rental accommodation at more affordable rates.

The State currently owns less than 10 per cent of the 2.1 million residential homes in the Republic, a level that lags most of our European peers where state ownership is typically 20 per cent and higher.

One of the other interesting titbits to fall out of Cairn’s results was its average selling price for apartments last year, which was €377,000

“If the State are to going invest our capital into the housing sector they should own the asset,” Stanley says. “I would much prefer to see the State owning housing rather than paying HAP [housing assistance payment] payments to private landlords.”

One of the other interesting titbits to fall out of Cairn’s results was its average selling price for apartments last year, which was €377,000.

This appeared to be at odds with industry estimates. The Society of Chartered Surveyors Ireland (SCSI) has estimated the development costs of medium-rise apartments in Dublin at €411,000 to €619,000 including VAT.

If the Government has a responsibility “to play a bigger role”, the industry has responsibility to build more and when it comes to this there is a problem with scale, Stanley says, citing a recent report by Goodbody Stockbrokers which indicated the industry here is comprised largely of smaller builders with limited capacity.

“We delivered 4,500 apartments over the last five years. Number 10 in the league table of output delivered 800, number 20 delivered 169 ... there is no industry, once you get below eight or nine companies, 80 per cent of housing in Ireland is delivered by very small businesses that really don’t have a sustainable business model,” he says.

For Stanley, we have the policies and the players, everything just needs to be on a bigger scale.