We can’t wait any longer: get homebuilding going in Ireland

Things are pretty bad. Two public servants are moving to Abu Dhabi, so they can afford to buy a home in Dublin. We spend tens of thousands of euros to educate and train people, then they have to go to a tax haven to be able to afford to even live in our country.

We have to provide housing, and quite a lot of it, and fast. We are not building anywhere near enough. The basic problem we face is that when all costs are taken into account, new homes are too expensive to provide without government support. It is cheaper to buy a house (even at high current prices) than to build a house. There are a number of reasons for this and we need to address them for sure.

But we also need to get homes built, starting now. We need to be thinking in terms of hundreds of thousands of new homes over the next few years.

On the sidelines, there is an ideological war going on about house-building. Should the houses be built by the private sector, or by the state? The problem is that nobody at all is building houses at the moment at any scale. It is unaffordable for everybody.

There is one good thing however: the country is awash with young people ready and willing to buy a house, and with a strong economy, many of them are creditworthy and have deposits ready.

Here is what I would do:

Firstly, a straight incentive – €15,000 for every bedroom in a new build completed in accordance with building regulations and occupied by 31 December 2019 in the case of a house and 31 December 2020 in the case of an apartment. (There would also have to be conditions to avoid subsidising houses already underway). The figure would go up to €20,000 where more than 100 units are provided on the same site.

Why €15,000? Well, because for a three-bed semi, that’s enough to cover the shortfall between the price of an existing house and a new house in Dublin. The cost overall for 25,000 homes would be over a billion euros, sure, but all of that would be recovered through VAT and PAYE from the increased economic activity.

Every year after 2019, the amount of the incentive could be reduced if it is no longer required.

Secondly a finance structure is needed. Prospective home purchasers should be encouraged to put down a deposit, now, on their future home. Rather than putting the deposit with the builder, they should place it with a government scheme which would provide a guarantee for the prospective purchaser that their deposit was safe. The government could then loan the value of the deposit to the developer, secured on the land.

The government would also guarantee to purchase the property if the original purchaser ‘fell through’ and didn’t go ahead with the purchase, and if a replacement purchaser couldn’t be found. If it did exercise this option, the government would get a small discount (say 7.5 percent).

But if the economy keeps storming on, that is unlikely to happen. And even if the economy weakens and the government has to buy the houses, the country is still going to need these new homes for the long-term. These will be modern, high-quality houses. The government can rent them for the short term, and rent them later on.

Now the builder has a rock-solid, guaranteed purchaser, rain, hail or shine. With this guarantee, the builder can go to the bank and borrow the money they need to actually build the complex.

This scheme is really designed with private housing built by private developers in mind. But it can work for local authorities too. They can use this funding mechanism to build social housing, or they can use it to build houses for resale.

It can also potentially be used by people who want to buy property to let it, though the structure would need to be tailored to avoid abuse.

Is this the full solution? No. We also need to address the problem of land costs. And to do that, we may ultimately need to replan our transport networks to open up new land. We may need more flexibility in the planning laws. But it provides for immediate action and will mobilise the talent and capital we have available already.

Combined with a plan to utilise vacant housing in the most sought after areas of the country, and perhaps some form of site value tax to incentivise use of vacant or underused land, this would put us well on the way to building hundreds of thousands of homes for our growing population.

By the end of the year: providing some relief in the Dublin property market

The Dublin rental property situation is desperate, with population growing but little being built. Here is a simple first step to provide immediate relief, through a change in the tax code. It could be in place before the end of July if there is the political will.

Despite the crisis, there are reckoned to be 20,000 vacant homes in Dublin alone. If these could be brought onto the rental market, it would make an immediate difference to the housing problem.  Continue reading

Housing 160,000 more people in Dublin

There is a somewhat lily-livered leader in the Irish Times today about housing. I say that because it is big on telling us what we must avoid, but it doesn’t face up to what we do in order to avoid it. There are some ‘right-on’ ideas about the government having to play more of a role, but that’s about it.

There is a shortage of houses. Dublin’s population is growing at a pretty fast clip, and has been for decades, through good times and bad. There are 160,000 more people in the county than there were 10 years ago, and yet we have build hardly anything. We could easily absorb 100,000 extra housing units in Dublin.

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Why water meters were a bad decision (still)

Lots of spin going on today about why water meters are a good idea and how many leaks they are finding. Apparently, Irish Water has already identified 20 houses that were using loads and loads of water. But this is only one million litres a day of water.

That is obviously great, but greater savings, and a lot less aggravation could have been had by taking much simpler and less expensive measures in relation to finding leaks, and by using the 600 million euros to replace water pipes. The 539 million euros being spent on this metering program is enough to replace thousands of kilometres of water mains (and incidentally, meter boxes could be inexpensively fitted at the same time as doing this work).

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The political price of complexity.

When will politicians learn the political price of complexity?

Look at Irish Water.

First things first. Establishing a national utility out of a local authority patchwork of pipes and personnel is complicated to begin with. There are a lot of people to satisfy, a lot of metaphorical buried bodies, and a whole load of politics.

But layering on even more components makes the project even more complex. Look at how Irish Water has made a complicated assignment into a labyrinthine project.

Firstly, there’s the accelerated meter installation program. The plan was to have a large proportion of the two million remotely readable domestic meters installed by the beginning of this month. That didn’t happen. Installing and commissioning one of these meters requires many steps and a lot of things can and do go wrong. Dodgy pipes, bad workmanship and shared water supplies are just some of the obstacles. At the wider system level, these remotely readable meters are a new technology in Ireland and there is relatively little expertise in making them work. There are no statistics that I know of on how far Irish Water has gotten with its meter project, but it looks like they are less than half-way there.

There was really no need to install such complex meters on the first go out. A simpler in-home non-digital meter which water users could opt into having installed would have been cheaper and faster. The fancy meters could have been rolled out over a number of years, as the mains got upgraded.

Secondly, there is an ultra-complex system of charging, based on a structure of allowances and estimated assessments of water use (these assessments are critical because the meter program is so far behind schedule). The official description of the charging structure is some 31 pages long.

The simple alternative to this charging system and was described by Richard Tol in 2011. With this system, meters would be opt-in. The same allowances for children and usage could have been provided through increases in social welfare and through adjusting tax credits to put more money in people’s pockets to pay the charge.

Finally, the two factors above have converged to create a requirement for an extremely complex IT system. The requirement to collect personal information to assign allowances to individuals means that there are extremely complex issues around privacy, which Irish Water does not seem to have fully grasped.

This complexity has also resulted in a pretty odd website, a disastrous PR campaign based on some pretty dodgy conceptual work described in this fascinating PowerPoint presentation. There are ‘tribute’ sites inspired by and devoted to the topic of Irish Water and which give (un-useful) tips on what to do if Irish Water should happen to try to install one of their new fangled gadgets outside your house. The long term comedic value of the Irish Water ‘ecosystem’ should not be underestimated.

The end result of this is that Irish Water is wasting a lot of money on effort on a metering system that doesn’t really do anything to help it achieve its goal. Instead of focusing on driving down the cost of water, encouraging water saving and fixing the leaks in our rather dodgy national water network, Irish Water has gotten itself bogged down in an expensive, unpopular and ultimately unnecessary project which is going to deliver a lot of problems and very few benefits. But it isn’t Irish Water who will have to bear the cost. It will be citizens, and their elected politicians, who will pay the price.

A short guide to buying health insurance in Ireland

There was an interesting article in the Irish Times today about health insurance in Ireland by Fiona Reddan. It was interesting, in that it addressed some questions and queries about health insurance, but not that helpful in that it didn’t provide any answer to the question of how to get the best value for  your health expenditure. It also stepped around the obvious conclusion: private health insurance is good value, if you can afford it. So, here is my short guide to buying health insurance. Continue reading

Charging for Postcodes and the Legendary Ryanair Toilet Levy

Yesterday we got some information about how open the Irish postcode system will be funded. Essentially the idea is to pay for its setup and operating costs out of a charge to end-users for the database – charging for access to the ‘facility’, if you like. This ‘licence fee’ is a rather humdrum traditional idea about charging for things to do with computers and information.

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Too many bad decisions – why the Seanad matters

The Seanad debate trundles on with discussion of power grabs, costs, referendum powers and so on. What is getting lost is the issue we should all be obsessed with – the consistently bad quality of decisionmaking at the highest levels in Ireland -.

As a nation, we make too many bad decisions. Our political machinery makes these decisions apparently without being fully informed of the full range of options available, or indeed of the consequences of the options chosen. And sometimes we just seem to sleepwalk into these mistakes. The job of a well-formed Seanad should be to awaken us and our politicians from our stupor.

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Patronage not profit. The future of Irish news media

As a nation, we are mad for opening up media outlets. We have over 20  daily or weekly newspapers of national scope (see lists for Ireland and Northern Ireland) and countless local and specialist publications. The Internet is a facilitator for new publications and there are plenty there too. This continued expansion seems like the future.

Some optimists in the industry believe new revenue streams will open up as web users get used to paying for their content. (see this report about the Irish Times’ plans and this one in relation to the Independent.)

I think that on the whole, the opposite will happen to Irish media on both scores. Continue reading