Five main takeaways from the bombshell Housing Commission report

23/05/2024

A BOMBSHELL REPORT from the Government-appointed Housing Commission was leaked to journalists yesterday.

The report skewered Government policy, saying that only a “radical strategic reset of housing policy will work” to address chronic issues in Ireland.

The Housing Commission was set up as part of the Programme for Government and was tasked with examining various housing issues. Its members include housing experts, industry leaders and economists.

Michael O’Flynn Chairman and CEO of the O’Flynn Group, a large construction company sits on the Commission. As does Dermot O’Leary, the Chief Economist at Goodbody Stockbrokers, economist Ronan Lyons and others.

Its report doesn’t just deal with the current Government, but goes back decades. The authors pull no punches:

“The Commission’s work has identified as core issues, ineffective decision making and reactive policy making where risk aversion dominates,” the report states.

“These issues, together with external influences impacting housing dynamics, contribute to volatility in supply, undermining affordability in the housing system.

Should these issues persist, there will continue to be insufficient progress on the issues our society faces. These problems have arisen due to the failure to successfully treat housing as a critical social and economic priority, evident in a lack of consistency in housing policy.

The Opposition were quick to jump on these findings as proof of a complete failure of Government policy, with Sinn Féin’s Mary Lou McDonald calling it a “damning indictment”.

However, Simon Harris said that the Government “is making progress when it comes to housing supply” and had already taken a number of “radical steps”.

The headline finding from the report that caught the most attention yesterday was the statement that as a result of policy failures Ireland has “by comparison with our European partners, one of the highest levels of public expenditure for housing, yet one of the poorest outcomes”.

But drilling down into the specifics, what are the main takeaways from the report?

Anyone looking to buy and rent in most places in Ireland doesn’t need to be told that there is a severe housing deficit in the country, but the Housing Commission lays out the figures in stark detail.

“A major issue of concern to the Commission is Ireland’s housing deficit,” the authors state, saying that emergency action is needed to combat it.

The Commission estimates a deficit of between 212,500 and 256,000 homes in Ireland as of the 2022 Census.

The report finds that this deficit is manifested in bigger than normal household sizes, as people are unable to move out and begin a new household; the ongoing lack of affordable housing to buy or rent; and ever-increasing numbers of homeless families and individuals.

“Urgent consideration must be given to addressing the current housing deficit (pent-up demand) to bring down the accumulated housing supply deficit,” the Commission states.

This requires exceptional and radical measures to deliver a substantial amount of housing in the shortest time practicable.

The Commission states that a decade should be enough time to address the housing deficit if immediate and urgent action is taken. It recommends a number of measures to increasing housing supply, including:

Measures to facilitate the completion of non-activated planning permissions.
Establishing high-yielding Housing Delivery Zones at agreed strategic locations to deliver housing in short to medium term
The conversion of vacant commercial properties into housing (and under-utilised business parks)
Delivering essential infrastructure and expand capacity of the construction sector

2. Wicklow, Dublin, Kerry are the least affordable counties

The report also looks at housing affordability and what policy measures can help people to buy or rent their own homes.

In an analysis of affordability by county, the Commission compares average annual earnings data for couples in each county looking to buy a home with house prices there.

The analysis finds that Wicklow, Dublin, and Kerry are the least affordable counties for people looking to buy. On the other end of the scale are Clare, Leitrim and Roscommon.

The report looks into measures designed to assist first-time buyers in purchasing their first home. It finds that the First-Time Buyer Scheme is “effective in boosting the liquidity position of eligible borrowers across all income levels”.

It also finds that a more generous scheme probably would not add to inflation in terms of the cost of housing. The Commission recommends that measures to help first-time buyers should be reviewed regularly to ensure they are effective.

3. Dublin is struggling

The Commission focuses on issues facing Dublin that it states have come about as a result of contradictions between the National Planning Framework and patterns of Foreign Direct Investment.

Under the NPF, the Government is focused on regional growth and expanding the capacity of the cities outside of Dublin. Under this scenario, these cities will grow at a greater rate than the capital over the coming decades.

The Commission finds however that this focus on regional growth is not shared by foreign capital and job creation, which is still focused disproportionately in Dublin.

“Economies of scale and resulting agglomeration effects in sectors such as tech have led to greater consolidation of employment opportunities in Dublin, rather than greater regional distribution of such opportunities,” the report states.

The authors find that by placing constraints on Dublin’s growth, the NPF has “driven patterns of development and internal migration that have resulted in urban sprawl, traffic congestion and long commute times for workers”.

It found that the policy around regional growth should be reviewed to see how it could function more effectively, and that a range of housing option should be built to “facilitate the growth of Dublin City and the broader metropolitan area”.

4. A significant increase in social housing is needed

The Commission also recommends an increase in the proportion of social and cost-rental housing to meet current needs.

The proportion of this housing should be 20% of the national stock and ensure “an appropriate tenure mix”. This would ensure that social housing “will provide a substantial source of rented housing for lower and middle-income households in future”.

Increased social housing should be supported with a long term commitment to stable public funding as well funding from private sources, the Commission states.

It also recommends the establishment of a Social Housing Act that would ensure the sector remains “social” and is not privatised. The report also says procedures should be reformed in order to remove barriers to the delivery of social housing.

The Commission recommends that all finance, rental income and public subsidies in the social housing system should be retained for future housing delivery, management, maintenance and upgrading, and that local authorities homes should not be sold to tenants at substantial discounts.

5. The rental sector needs to be reformed for both tenants and landlords

The report states that the private rental sector should be reformed in order to balance the rights of tenants and landlords and to make the sector “more attractive to both parties”.

Cost-rental housing should be delivered “at scale” and should become the main form of supply for social and affordable rental accommodation.

According to the Commission, this should address challenges in maintaining the supply rental housing, address affordability in the private rental sector and enable social housing providers to accommodate households with a wider mix of incomes.

The Commission also states that market rents should be regulated “fairly and effectively by reforming the current system of rent regulation and establishing a system of ‘Reference Rents’.

The report states that current Rent Pressure Zones should be reviewed as they might lead to “potential inequalities, inefficiencies or other outcomes that are contrary to policy objectives”.

It states that the RPZs were initially introduced on a temporary basis but seven years later the system needs to be made “fit for purpose”. The introduction of annual registration with the RTB means there is more data to create a better system for rent regulation, the report states.

The Commission also recommends reforms to the Housing Assistance Payment (HAP) and the Rental Accommodation Scheme (RAS), in order to reset them as short- to medium-term support measures for households eligible for social housing.