One sector of Ireland endures housing as a crippling monthly cost while another enjoys it as an appreciating asset

While not agreeing with the economics of it, I could see the politics behind Bertie Ahern’s housing-banking Celtic Tiger policy. Build loads of houses, reward developers, allow the banks to over-lend, look the other way and garner the political premium associated with a burgeoning class of first-time buyers who thought they were getting richer. A popular housing boom generated social effervescence and tax revenue, as banks lent and developers lined their pockets. The Galway tent rocked, and the vast majority of economists, the experts, reassured us with a promise of a soft landing.

This is how you win three elections on the trot. Enlist a young generation of home buyers into your club and they, like their parents, will “do the right thing” come election time. Young and youngish people voted for Fianna Fáil in their droves during the 1990s and 2000s. Bertie’s strategy made political sense until the music stopped and it didn’t. Up to that point, creating a home-owning democracy, however fragile, was rational. Bertie was cynical but clever, shoring up the political centre. In a sense, everyone got something.

Politicians in English-speaking democracies, which are anchored by home ownership, share a little secret: they want house prices to go up, despite claiming they want them to fall. As former Australian prime minister John Howard said, he never met anyone who complained about their house going up in value. But this situation pertains as long as the majority own their own homes or have a chance to do so. If those numbers or that aspiration changes, the equation that links higher house prices and the resulting feelgood factor to electoral success breaks down.

Armed with these observations, contrast the Bertie Ahern world, in which everyone in the centre seemed to own a home or have a chance of doing so, with the Simon Harris universe, in which many people have no realistic prospect of ever owning a house.

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One sector of Ireland endures housing as a crippling monthly cost while another enjoys it as an appreciating asset

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We are faced with a different vista. If many Irish first-time buyers – once Bertie’s Fusiliers – are locked out of the house party, the housing issue could be converting them from potential supporters to potential enemies of the centre. If this is the case, limiting a significant chunk of the political upside associated with the first-time-buyers apartment market to foreign funds who don’t vote seems bizarre. A key political reality is that capital doesn’t vote, people do.

When one sector of the population endures housing as a crippling monthly cost while another sector enjoys housing as an appreciating asset, then we are on an electoral collision course

If a political organisation or coalition favours the interests of foreign capital over local people, it automatically narrows its political base. If, in addition, the presence of foreign capital pushes up prices, the political fallout is made much worse because the very existence of the buy-to-let market becomes an electoral red rag to voters locked out of the house party.

[ It's funny how 'unintended consequences' always benefit landlords ]

We know that Ireland is moving towards a renting culture. Home ownership peaked in 1991, when 79.3 per cent of Irish households were homeowners. It’s been falling ever since, crashing to 66 per cent two years ago. However, the dilemma for the political centre is that while the reality of the housing market means many people see housing as a cost, the collective political and social memory regards housing as an investment and the house as an asset.

When one sector of the population endures housing as a crippling monthly cost while the another sector enjoys housing as an appreciating asset, then we are on an electoral collision course. Rather than unifying the electorate around housing as previous politicians such as Bertie Ahern did, the present coalition is dividing the electorate over housing.

In electoral terms, a ruling coalition putting the interests of foreign funds over local people constitutes a schoolboy error, even if the figures tell a different story. Interestingly, this Government has lost control of the story rather than the actuality on the ground. Latest figures reveal that institutional investors bought only 18 per cent of new homes last year, whereas first-time buyers bought 32 per cent, owner-occupiers 24 per cent and the State 22 per cent. The so-called “buy-to-let” players are not as big as people think, but that barely matters because it is what people think that matters.

[ House price inflation accelerates to more than 6% ]

When you dig a bit deeper, we see that these large landlords, the bete-noir of the Left, are only a small percentage of the landlord base. According to the Residential Tenancies Board’s 2021 Large Landlords Report, large institutional landlords (those with 100+ residential tenancies) accounted for just 6 per cent of all private tenancies registered with the board. In contrast, small-scale property owners with one or two tenancies account for the vast majority of landlords (85 per cent) and private rented tenancies (53.5 per cent).

Again, this barely matters; what counts is perception. The “accepted view” is that large landlords are buying huge swathes of new builds and are pocketing exorbitant rents, while local people are frozen out.

A property wedge is driven between young and old, which is splitting the electorate. Two decades ago, the property conveyor belt aligned the interests of parents and young adult children

This narrative is extremely powerful. It doesn’t really matter if economists argue that in the absence of these foreign buyers, apartments wouldn’t be built and the housing crisis would be more acute. The reality is that house prices are rising and rents are higher than they’ve ever been. To give you a sense of how this is polarising opinion, 61 per cent of people in Ireland cited housing as one of the two most important issues facing the country, compared with 10 per cent of people across the rest of the EU.

[ Interest rates may be coming down. That's not entirely good news in a frothy property market ]

A property wedge is driven between young and old, which is splitting the electorate. Two decades ago the property conveyor belt aligned the interests of parents and young adult children. Even further back, we see that Irish democracy anchored itself around home ownership, which – rightly or wrongly – has been the defining social-policy goal since Independence. Council houses in Ireland were subsidised by the State, and residents were encouraged to buy long before these policies caught on in other places. Think about all the grants, tax reliefs and interest reliefs which encouraged home ownership over the decades.

Housing and home ownership was a huge part of the social contract of Old Ireland. Today, a New Ireland of unprecedented immigration, foreign funding and burgeoning prices means the old social contract has been, if not torn up, significantly amended. The perception is that the Government has lost control of the housing market, even if the figures are less clear-cut. In politics, perception is everything. Two decades ago, a rising housing market solidified the centre ground; today it divides it.

We are in a very different world.