Look, it’s important to use measured language when writing about politics and policy, but at the same time it is utterly embarrassing that a serious party of Government would produce something like Fianna Fáil’s new “opportunity to buy” policy.
In fact, I’ll be honest, it might be hard to knock 800 words out of this, because it’s so obviously in error. We’ll give it a shot anyway.
The majority of renters want to own a home and a new scheme called “Opportunity to Buy” can help that happen.
This would require a landlord selling a property to first offer it to the tenant on an independent valuation basis for sale. pic.twitter.com/DRVc4tGwF0
— Fianna Fáil (@fiannafailparty) March 7, 2023
In the first instance, before we get into the reasons that this is a bad policy, there’s the small matter of it likely (and that is understating it) being entirely unconstitutional. Part of having the right to own property is the right to buy and sell property – a right which this policy directly interferes with. If you cannot sell your property on the open market to the highest bidder, then it poses an obvious question: Do you really own it?
A skilled lawyer – heck, an average lawyer – will argue and probably be successful in making the case that this is tantamount to giving tenants an ownership interest in the home they are renting. After all, how else do you define the monetary discount a tenant would gain from an “independent valuation” as opposed to the open market price? If the open market price is €300,000, but the “independent valuation” amounts to €250,000, then that’s the functional equivalent of the state handing a tenant fifty grand’s worth of equity in a property. It’s very hard (again, understating it) to see how this might fly.
But even assuming this nonsense survived a constitutional challenge, it would still be a terrible idea for all sorts of other, obvious reasons.
In the first instance, it would discourage rental occupancy. If I was a landlord, and intended to sell, I would first simply evict my tenant, then wait six months while pretending to interview other tenants, and only then, having “failed” to find someone suitable, would I sell the thing. Perhaps there are other steps or measures one would have to take to evade this rule, but evade it almost everybody would.
And suppose that it was both constitutional, and that landlords could not evade it?
Well in that case, watch landlords flee the market as never before. Investing in a rental property would become, overnight, an act of financial insanity, since the Government would have the right – and indeed the incentive – to impose losses on you in the name of fairness. This policy will only work, remember, if tenants are getting “good deals”. Which means in turn, Landlords must get bad deals.
Landlords are not the only losers here, though: The other losers are people seeking to buy homes on the open market.
This policy, if implemented, is designed to reduce the number of homes which ever reach the open market. It would create a reserved class of buyers who got first dibs – at a discount – on every property. Assuming many of those reserved class of buyers availed of that opportunity, this would necessarily push the prices up for every other home. Fewer homes on the open market and more buyers (because some who would have bought elsewhere are now forbidden to do so) equals higher prices for everyone. This is not hard – it is basic maths.
The winners, as ever, are the middlemen: While I would never accuse any person of corruption, this proposal creates enormous incentives for corruption on behalf of the “independent” valuer who would likely be an auctioneer of some sort. Either party to the proposed transaction has the incentive to persuade him or her to shift the “independent” valuation in one direction or another.
Finally, consider the incentives this kind of policy creates for tenants: If you have the right to buy your property at an independent valuation, then for a particularly cunning kind of tenant, this creates all kinds of perverse incentives:
Perhaps you don’t cut the lawns. Perhaps you don’t worry too much about damage. Perhaps you make yourself such a living nuisance to the landlord that you leave him with few options but to sell. Perhaps you turn the back garden into a stable.
Were a policy like this adopted, it is a very safe bet that participation in the rental market by landlords in Ireland would simply collapse: Why would you bother?
If the riposte is “that money has to go somewhere”, well, true: But we live in a European Single Market. You’re still able to buy a nice place in the South of Spain and rent it out to English tourists. You’re also still able to buy farmland, or some other asset.
As I said at the beginning, it is embarrassing that this would come from the supposed natural party of Government. If this is their understanding of economics, and the constitution, they should be turfed out of office at the first available opportunity.