Fianna Fáil's love affair with developers prompted a departure from the view that housing is a social need, writes FINTAN O'TOOLE
OF ALL the wrong-headed orthodoxies that got us into the hole we now occupy, perhaps the most pernicious was the belief that social justice and economics are two entirely different questions. The idea, espoused most explicitly by Michael McDowell, was that social inequality is an inevitable side-effect of economic growth and, as such, does not matter very much. The market, in all its untrammelled glory, produces wealth and the State’s job is merely to redistribute some of it.
To understand how deeply mistaken this view is, and why we must get rid of it if we are to reconstruct our economy, it is necessary to look no further than a single issue: housing. For a long time, even in conservative Ireland, housing was understood to be a social need first, and only, secondly, a commodity.
This idea was made real in a literally concrete way – local authorities built houses. In the 1930s, 60 per cent of all housing built in the State was constructed by local authorities. In the mid-1940s, when the house in which I grew up was built by Dublin Corporation, the figure hit 70 per cent. With increased prosperity, the proportion declined but well into the late 1980s, over a quarter of all new houses were built by the public sector.
The reason this was done even in very tough economic times was that housing was understood primarily as a social need. Public policy assumed that it was a good thing for privately-built houses to be as affordable as possible and for the State to shape the housing market in the most direct way by building homes for those who could not afford to buy their own.
One of the changes that came with the economic boom of the 1990s was a revolution in both of these assumptions. Housing was no longer a social need – it was a commodity and an investment. It ceased to be a good thing for house prices to be kept low, since that would mean that those seeking super-profitable returns would be disappointed. And it ceased to be acceptable for the public sector to “distort the market” by building houses on a large scale. From 27 per cent in 1985, the share of local authority housing in the overall production of new homes sank to just 6 per cent. Lip service continued to be paid, in the form of targets for 35,000 local authority houses in the first national development plan, but only 21,000 were actually built.
This new policy, driven by Fianna Fáil's passionate love affair with developers, wasn't just socially unjust in the way it ignored the housing needs of around a quarter of a million people. It was also economically disastrous. As Michael Punch of UCD shows in an excellent new publication for the Jesuit Centre for Faith and Justice, The Irish Housing System: Vision, Values, Reality,bad social policy went hand-in-hand with the makings of a predictable crash.
Thus, while vast numbers of houses were being built, the numbers of people officially recognised as being in unfit or overcrowded accommodation, homeless or unable to afford a house, increased by 105 per cent between 1996 and 2008. This happened for two reasons. Firstly, money that should have been spent on public housing was given, in the form of vast tax subsidies, to developers and land owners – €2 billion up to 2006 alone.
Secondly, the ability of a small number of developers to inflate the price of building land (sometimes with the help of a corrupted planning process), allied to the availability of cheap and poorly regulated credit, pushed house prices up to ludicrous and ultimately suicidal levels. Beneath the hysteria generated by the availability of credit (personal debt went from 58 per cent of disposable income in 1996 to 175 per cent in 2007), Punch shows that houses really did become steadily less affordable. In 1994, the average price of a new home was €72,000. If this had increased in line with average earnings, it would have been €124,000 in 2007. In fact, it was €323,000.
By reversing the notion that State policy should be centred on the belief that cheap housing was a good thing, we puffed house prices up to 2½ times what they should have been.