Sir, – I would like to comment on the article "The housing crisis is Europe-wide – the EU must help fix it" (Anne Barrington, Opinion & Analysis, December 22nd).
Although well-intentioned and containing some noteworthy elements aimed at alleviating stubbornly high – and rising – housing accommodation costs, the principal theme of forcing the European Central Bank (ECB) to act on this important social dimension is frankly ludicrous.
The ECB mandate is prescribed along two objectives: euro area price stability which is inflation targeting of 2 per cent over the medium-term below but close to 2 per cent; and acting to support general economic policies in the euro area and the EU.
At no stage is there any eventuality to deal with unaffordable housing, be that purchase price for assets or private dwelling rental sector. It simply does not have competency to do so. I don’t know of any central bank globally that has responsibility in that domain.
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I’d be inclined to say that the officials in Frankfurt are disturbed by the property fiasco here and elsewhere but there is practically zero they can contribute in meaningful terms due to the confines of their remit.
Whilst it is true that ECB negative rates and ongoing quantitative easing have contributed to misallocation and concomitant overheating in domestic and transnational property markets, this is a sad, unintended consequence of ECB attempts at stoking consumer price inflation in the “dis-inflationary” pre-Covid years especially.
Hence, finding a workable solution to the intractable problems of Ireland’s endemic housing crisis starts – and ends – at these shores.
It is well accepted that much of the legislation and bureaucracy including taxation on homes, land and individuals involved in property transactions is woefully unfit for purpose and urgently needs sweeping revision by our political masters
One vignette may help illuminate matters: a recent piece in your newspaper, pre-budget, indicated that under the Fair Deal scheme there are some 25,000 family homes which are lying vacant because the State is wrongheadedly levying a disproportionately high tax on those homes being rented out. Consequence: hardly anyone availing of this scheme does so!
Hence, the asset is tied up indefinitely, depending on the length of nursing homecare term, which is impossible to determine ex ante.
There are many more examples of daft legislation which punishes investment, weakens buyer’s market power and rewards land hoarding, misuse and regressive behaviours – all to the detriment of the general public wishing to buy or invest at a reasonable price.
Furthermore, rapidly escalating, even runaway, prices, underscored by so-called “flipping”, are a current trend stemming from the dysfunction. This needs a tailored solution of its own and fast.
For instance, I know that in Austria there are strong rules which mitigate against property speculation and these have worked to stabilise the market pricing outcomes in a satisfactory way over the past 15 years.
In sum, the best way to tackle our property malaise is through a suite of domestic measures targeting supply constraints, taxation misincentives and non-cooperation.
Finally, it would be advisable for the Irish Central Bank to enable borrowers to have a little more leeway on some of the overly-tight limits for mortgage approvals, on a case-by-case basis depending on ratio of mortgage repayment to net incomes, rather than crude simplistic loan-to-value ratios and loan-to-income limits solely.
This would facilitate borrowers to get started and ease pricing pressures more broadly.
The solving of the housing crisis is largely dependent on strong decisive political leadership on a cross-party, inclusive yet realistic basis. If the will is there it can be achieved.
But please leave the ECB to fight inflation.
That’s more than enough for it to be tasked with! – Yours, etc,
KEVIN
NEWMAN,
Ringsend,
Dublin 4.