3 crucial issues facing the Government on housing

RTÉ News​

2 days ago

In a week when the minister responsible for housing admitted that meeting the Government's own target for the delivery of new housing this year would be "extremely challenging", RTÉ's Economics and Public Affairs Editor David Murphy examines three key issues that must be addressed if progress is to be made.
The Government is facing the most significant decision during its tenure on housing - what to do about rent caps.
The limits on how much landlords can charge are blamed by some in the industry for a downturn in home building last year, although they protect thousands of financially stretched tenants in an already expensive market.
The current Rent Pressure Zones were introduced as a temporary step in 2016 and continuously extended.
In 2021 they were tightened, reducing the maximum increase from 4% to 2% and making them some of the most restrictive in the world.
The current rent caps expire at the end of this year, and the Government has to decide if it plans to retain them, alter them or abandon them altogether.
Last month the Minister for Housing James Browne received a report from the Housing Agency which looked at options on the issue for the Government.
The report highlighted significant problems with retaining the existing 2% cap and looked at alternatives including moving to a higher limit.
Another option, suggested by Paris-based think tank the Organisation for Economic Cooperation and Development, is allowing to landlords freely adjust rents when tenants move out.
But the downside is that it could act as a financial incentive for property owners to evict tenants.
The feeling in government circles is that any change is going to require a lot of work to make it clear to the public why an adjustment to the rent caps is being planned.
That would likely see ministers preparing the ground by explaining the drawbacks with the existing restrictions, which are partly blamed by the industry for a 24% fall in apartment construction last year.
Obviously fewer new homes leads to higher rents at a time when the population is growing, the economy is expanding and there are plenty of jobs.
It is important to note that the cycle of higher interest rates, now being reduced, made some building projects unviable for investors over recent years and that too was a factor in the fall in house building last year.
Many observers across the political spectrum and housing sector believe the Government will have an exceptionally tough decision to make on rent caps and will face vocal opposition.
Sources within the Coalition say that high level talks are continuing and a decision is possible in the coming weeks.
Completions
During the General Election last year, the Government controversially misled the public over how many houses would be built in 2024.
A number of figures, including then Minister for Housing Darragh O'Brien said about 40,000 would be completed last year.
When the final figures were published only 30,000 were built.
This year the Government has a target of 41,000 homes.
The Economic and Social Research Institute forecasts it will fall short, and that 34,000 will be completed in 2025.
This week, Minister Browne admitted meeting the Government's target would be "extremely challenging".
He added there were "different numbers out there and they are all trending to the ESRI's number".
But the Government's own target of 41,000 is far short of the approximately 50,000 or 60,000 homes other experts, including the Central Bank and the Housing Commission, say are needed to address the existing shortfall and future needs.
This week, Minister Browne said the State is now involved in supporting about 50% of the housing output.
He argues that if completions are to increase "we have to activate the private sector".
That means getting more private investor involvement - which explains why the Government is reviewing the rental caps.
Water connections
Homes can't be finished without connections to water and wastewater networks.
Late last year, Irish Water/Uisce Éireann said it could only connect 35,000 properties a year over the next five years.
The utility has become notably vocal about key issues which it feels are hampering urgently needed improvements and expansions of the water network.
At the Oireachtas Committee on Infrastructure this week, Uisce Éireann CEO Niall Gleeson forecast it would spend €10.3bn on capital projects between 2025 and 2029.
But he said the organisation required a further €2bn to achieve the Government's objective of building 300,000 homes over the next five years.
He also criticised the existing funding model and said providing additional money annually creates uncertainty. He suggested multiannual funding to help deliver long-term projects.
The Department of Housing says Uisce Éireann's request for an additional €2bn is being considered in the context of the revised National Development Plan which is expected to be published in July.
Mr Gleeson also highlighted issues with the planning system and said some complex projects are taking more than a decade to get the green light. He called for reform of legislation to tackle the issue.
The Government continually repeats that dealing with the housing crisis is the number one issue for this administration, but it has a lot to do before it can convince observers that significant progress is being made.