There have been three Bacon reports and two special Finance Bills, and yet it is clearer than ever that there will be no quick fix for the housing shortage.
House prices are set to double again by the year 2005. The 200,000 immigrant workers needed over the next seven years will add to the already excessive housing demand. The State needs 54,500 new houses each year for the next five, and if it manages to achieve this target it faces a major problem in trying to develop public transport, water and sewerage schemes in equally short time.
The issue has potential to have a major political effect, with many voters casting their ballots at the next general election with a very sour taste in their mouth over house prices. Huge numbers of young people who have been priced out of the housing market may not listen to a Government telling them they have never had it so good.
The Government has recognised both the economic need to act and the political need to be seen to act. It has effectively accepted the Bacon recommendations designed to increase housing supply, while it has gone even further than Bacon in attempting to eliminate speculative demand from the market.
In his speech yesterday the Taoiseach recognised that Irish people will not resign themselves easily to the idea that they must rent their homes. "We have as a nation had a historic attachment to home ownership which is as strong today as it has ever been," Mr Ahern said. "People see it as a core part of the quality of life to which they aspire and it reinforces a sense of personal and family independence."
In a declaration that he may find quoted back to him many times in the future, he added: "We believe that workers and their families have a right to affordable accommodation in sustainable and well-serviced communities."
In an attempt to vindicate this right, the Government has adopted significant measures designed both to increase housing supply and to reduce demand.
The measures will not produce significant results before the next general election. The Government hopes it will at least be seen to have begun easing the problem.
Hitting investors and property speculators hard will prove a crowd-pleaser. It is also likely to remove from the property market some of those who have been pushing the price of modest homes beyond the reach of many potential first-time buyers.
Cutting stamp duty for first-time buyers will prove politically popular as well, although many economists argue that such cuts simply increase prices. Various changes will also be made to accelerate the construction of social and affordable housing.
The most robust Government action is that designed to push investors out of the lower end of the market where they currently compete with first-time buyers.
The Government's determination to be seen to act is evident in its decision to take even more radical steps to curb investor activity than recommended by Bacon. Property investors have influence, but they have nothing like as many votes as the tens of thousands of disgruntled potential first-time buyers.
So the Government sees the recommended 3.75 per cent stamp duty on houses and apartments worth under £100,000 rising to 9 per cent for properties worth over £500,000 as too soft.
Instead it has taken a much more drastic option. From yesterday anyone buying a property for investment or speculative purposes will be hit with a 9 per cent stamp duty bill, no matter how cheap the house or apartment.
The second blow for speculators comes with the anti-speculation property tax. The prospect of paying a tax of 2 per cent of the property value each year for at least the next three, on top of the 9 per cent stamp duty, will make short-term property speculation appear very unattractive indeed.
Should a speculator or investor decide to buy a £200,000 apartment or house, he or she will first have to hand an £18,000 cheque to the Revenue Commissioners and pay a further £4,000 per annum for at least the next three years. Of course, such purchasers can avoid the property tax by registering as landlords, but they will then lose the option exercised by many landlords of operating in the black economy.
Opposition parties were quick last night to point to the danger that, in damaging the speculative property market, the Government may damage the private rental market as well. Long-term landlords will be exempt from the new property tax, but they will still have to pay the 9 per cent stamp duty. This will act as a significant disincentive to the increase in the supply of new rental accommodation.
The political danger of this backfiring was apparent last night as landlords and the Combat Poverty Agency formed an unlikely alliance to predict that rents would now rise again.
Mindful of the furore of past property taxes, the Government has warded off any outcry from the well-heeled by ensuring the tax has no retrospective effect. Such investors will not be penalised for investment properties and holiday homes they already own. The change will merely discourage others from getting involved in what has proved to be a very rewarding investment activity.
The tax changes will prompt well-off people thinking of buying, say, a single apartment for investment purposes or a holiday home to think again. Houses used primarily for renting to tourists will be exempt from the tax. Lively correspondence between holiday-home owners and the Revenue Commissioners is likely to ensue, as new purchasers seek to characterise their rural retreats as rental holiday homes.
Causing such inconvenience to a relatively small sector of the population is well worth it for a Government seeking to calm tens of thousands of angry would-be homebuyers.
The supply-side measures will take longer to have an effect, and they are unlikely to have made a significant difference before the next general election. The planned Strategic Development Zones for residential development will not be available for building for over a year. The Opposition will be able to point to a continuing crisis for some time yet.
Finally the cuts in stamp duty for first-time buyers, implemented by the Government exactly as recommended in the Bacon report, will give such purchasers a sense that the Government is taking action on their behalf. However, it may simply give such purchasers more money with which to bid prices up further.
