For a century Ireland’s ‘private’ home ownership has been largely protected by taxpayers through grants, subsidized loans and tax breaks.
n 1960, the £3,000 price of a newly built suburban house, which today’s renters can only dream of, was subsidized by national and local government with £890 – much of it in advance.
Support has been removed since the 1990s, but “liberalization” of financial markets and looser mortgage rules allowed banks to close the gap between construction costs and actual affordability, masking reality until the credit bubble burst.
With credit now limited and construction costs rising, mass housing is again only viable with significant taxpayer support.
It pays off socially by helping to build stable communities, and financially by reducing the cost of caring for the elderly, but it doesn’t come cheap.
However, not supporting mass housing does not come cheap either.
In the coming decade, large numbers of people will retire and spend decades renting in the private sector.
Their prospects are bleak – they compete for an inadequate housing stock with working-age tenants with higher wages or are forced to return home as relatives of parents in their 80s and 90s.
Nothing in Irish public policy is designed for this – not the housing market, not the pension system and not the welfare system.
What are the alternatives? Increasing private rental supply is an obvious option, but only the most naïve will believe that supply and demand dynamics can really deliver enough affordable and reliable rental offers to ensure a comfortable retirement for a large number of people on fixed and low incomes.
The supply of social housing can also be increased, but is already insufficient to meet current housing lists, so adding older tenants who are currently ineligible for housing assistance will not be a quick fix.
Is mass housing still an option? Based on current construction costs, this is just an option with sustained taxpayer support. That should raise big questions about fairness and funding.
Homeownership is great for homeowners and, by and large, it pays off socially and economically, but not everyone benefits, and as house prices have risen, the windfall gains for winners and their descendants have sometimes become huge.
That could be a good place to start when it comes to funding the next generation of buyers.
Stamp duties, property taxes and inheritance taxes have been kept extraordinarily low for those who have made the most of Irish housing policy over the past few decades, even as the ladder of home ownership has been dragged behind them.
Smart taxes on real estate — particularly on unexpected inheritances — could create a sustainable flow of funding to fund future homebuyers and literally spread the wealth.
The collapse of home ownership is not inevitable. It’s a political decision.
Reversing them or learning to live with them also requires political choices. One way or another, we have to be clear about what’s at stake.
https://www.independent.ie/opinion/analysis/taxing-property-windfalls-is-the-best-way-to-fund-new-home-buyer-supports-41817109.html Taxing unexpected home gains is the best way to fund new homebuyer assistance