I fear a very different kind of property crash

Current housing metrics are worrying. A recent Sherry FitzGerald study found just 11,050 second-hand properties listed for sale nationally in January, a 27 per cent drop on the previous year and an incredible 46 per cent decline on January 2020, pre-Covid.

BNP Paribas, describing the outcome as “dismal”, found the Irish investment property market down almost 70 per cent in 2023 compared with the previous year.

We could be heading for a new form of “crash”, not this time in terms of falling prices but in social solidarity and social cohesion. The shape of this one, should it be allowed to happen, will be very different from that of 2007 to 2010. There has been a 19 per cent increase since 2011 in the number of adults aged 18 and over living with their parents. Despite 10 ECB interest rate rises since July 2022 house prices are rising, not falling.

For those aspiring to home ownership, particularly on average incomes, it has become a moving target. Ownership rates are already down substantially, and if allowed to drop further will see dreams and hopes unrealised, and could potentially lead to mass emigration of the most productive elements of our population. Last year the ESRI found that while 80 per cent of people over age 40 own their own home just a third of adults under age 40 do.

Moving back to Ireland would mean working till 10pm, no home of my own and bad coffee

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Demand for homes continues to increase as our population expands rapidly. Yet the Government’s Housing for All plan is playing catch-up, and an upward revision of requirements is due at a time when investment would appear to be in reverse.

There have been few compelling alternatives. Most such policies tend to focus on initiatives such as rent freezes and a ban on no-fault evictions, which would squeeze supply further by disincentivising existing property owners. The focus should be on positive initiatives to encourage the building of homes on a much larger scale, and encouraging new landlords into the market.

Despite the best efforts of well-intentioned Ministers advised by well-intentioned civil and public servants, combined they don’t have the requisite specialist input when devising initiatives

The potential scenario is truly worrying, economically and socially. To understand what has got us to this point let’s look at how the “system” works.

Despite the best efforts of well-intentioned Ministers advised by well-intentioned civil and public servants, combined they don’t have the requisite specialist input when devising initiatives.

John FitzGerald, adjunct professor at the department of economics in Trinity College, outlined the problem four years ago in a piece in this newspaper entitled: “The shift from specialist to generalist skills in public service is a mistake”. Making the case that specialist knowledge is essential for good policymaking – whether in relation to climate change, housing or health – he said: “Despite the lessons of the financial crash, senior-level recruitment and promotion continues to favour generalist competences over specialist knowledge and skills, to the detriment of truly valuing and harnessing expertise to enhance policymaking.”

One consequence of the generalist system is that it facilitates frequent movement of personnel, with each new appointee having to learn the relevant brief afresh. We’ve seen this in housing. While there has been much public commentary on the ministerial changes over the last decade, little if no emphasis has been placed on those behind the scenes who have tremendous influence when they prepare the options to satisfy government policy and how it is administered.

When specialist skills are absent it shows. We can see it in the vast array of unintended consequences of a host of policies: rent pressure zones; the divergent treatment of private and institutional landlords; discordant planning; the structure of the residential zoned land tax; the absence of effective practical measures for the restoration of vacant and derelict properties.

The theory is that governments and ministers dictate the policy and the Civil Service implements those decisions. Civil servants are supposed to bring all the relevant options to ministers for decision. The problem is that in a generalist system civil servants rarely have sufficient knowledge to make truly informed decisions. And ministers largely depend upon them, along with their own advisers, who are often appointed on the basis of communications/media skills rather than having brief-appropriate specialist knowledge.

The political system undertakes consultations with a host of bodies, including the Institute of Professional Auctioneers and Valuers (IPAV), which I represent. However, apart from Dáil consultations, which are genuinely democratic and transparent, public-sector-organised consultations often feel more like box-ticking exercises in which advice to Ministers is largely predetermined.

The extent of the problem is visible in the move by companies, including Ryanair, to buy properties to house staff.

Changing this system of policymaking requires a government to act in a way that may be uncomfortable for some. Governments have a horizon of no more than five years, and the housing issue requires long-term planning.

The Department of Public Expenditure and Reform was intended to tackle some of these problems. According to its website its remit is to “drive the delivery of better public services, living standards and infrastructure for the people of Ireland by enhancing governance, building capacity and delivering effectively”.

So how is the challenge of delivering homes for people in 2024 and beyond going to be met? The extent of the problem is visible in the move by companies, including Ryanair, to buy properties to house staff. Ryanair has, justifiably, defended its right to do so.

IPAV has long articulated its views on how to improve supply and sustainability, including changes to rent pressure zones, tax treatment of private landlords, encouragements for SME builders and developers and much more.

But let’s look to an organisation that played a major role in our recovery from the last financial crash: the International Monetary Fund. In a report in November, the IMF recommended the removal of rent caps saying: “Reducing the complexity and restrictiveness of rent legislations, notably replacing rent caps with more targeted housing support for poor households, would help increase rental housing supply.”

It recommended increasing urban density, improving land use and enhancing construction productivity, as well as providing greater certainty to developers by improving the transparency and certainty about approval processes, and accelerating them.

Given we’re entering a series of elections, including a general election to be held no later than March 2025, will we be facing more heat than light on housing?

We’re snowed under with reports and inundated with State- and State-supported bodies, often with overlapping responsibilities, not to mention a Housing Commission of which we’ve heard little. Perhaps the best we can hope for from any new programme for government agreed following the next general election is a taskforce established with specialist expertise, with a tight time frame to implement a series of urgent actions.

Pat Davitt is chief executive of IPAV