We will ignore, for the purposes of this article, one simple fact. That fact is that the people behind the latest “transformational” proposal for the Irish housing market – Peter McVerry, Rory Hearne, et al – are the same people who promised transformational impacts from their previous proposals, like rent caps and eviction bans. I note it here only because it seems to me that if you have the right politics and your heart can be said to be in the right place, then there is no consequence at all in Ireland for consistently promoting and championing ideas which have not worked, and probably made things worse.
Nevertheless, ideas should be judged on their merits. And for the sake of being fair, here is the guts of the proposal set out in the Irish Times yesterday. Read the full thing here:
“A new approach is urgently required. A key solution is the Irish State getting back into delivering housing on a major scale through local authorities and housing associations and also new approaches that can deliver rapid results.
The way to do this is through the formation of a State-owned national sustainable home building agency.
This public agency – our suggested name is Homes for Ireland: the Irish Sustainable Home Building Agency – would directly build new homes and employ directly all the expertise required to deliver housing from preparation, planning, architectural design, financing and building. The agency could attract construction workers (professionals and trades) with permanent contracts of employment in a singular enterprise, in contrast to the wider precarity in the construction sector.”
There are four problems with this proposal which you probably won’t hear discussed anywhere else:
The proponents of this idea wish to hire as many builders and plumbers and electricians, and so on, as they can, and put them on exclusive full time contracts to work for the state. The immediate consequence of this will be a shortage of such skilled workers for private sector projects, which will add to the delays and costs in building private homes, or even in securing a tradesman to fix a leaky pipe. The idea here is to take our most skilled construction workers and have them focus on one thing to the exclusion of all others: This will naturally and consequently cause shortages and cost increases in other parts of the economy. Further, it is likely to drive inflation in another way since the state will have to pay large salaries to attract already in-demand workers into exclusive contracts with the state. Those wages will in turn become the private sector benchmark. The process itself will drive up wages for already expensive workers, driving up costs for everyone else.
The state, you may have noticed, is not only in the business of building new houses. It is also committing billions to the rebuilding of MICA homes in Donegal, and billions more to the retrofitting of millions of older homes around the country. This state building agency will be directly competing with other state departments for the services and supplies of builders and construction materials.
Simple question: Would you put the people in charge of building the national children’s hospital in charge of building your house, and give them a blank cheque?
One of the reasons that private construction is better than state construction is that you, as a private homeowner, have every incentive to oversee a project closely and keep costs down. The builders are answerable to you, and if they get it wrong, you can sue them.
A state building agency cannot sue itself. There is no incentive to keep costs down, or projects on schedule, because the state agency will not take the blame: The Minister for Housing will. There is also no incentive to keep costs down because the Government is incentivised to throw as much money as it can spare at housing and a Minister seeking value for money would be attacked as heartless if that seeking value for money could be argued to be slowing things down.
The agency is not incentivised, like a private owner would be, to shop around for the best price on bricks or mortar: Instead, it’s likely we’ll get inflated spending like we already see, for example, in the absurd overpay for modular homes for Ukrainians.
A State Housing agency is a licence for suppliers to print money, and bureaucrats to waste it.
As the census figures showed last week, much of the demand for housing in Ireland is being driven by inward migration. In this respect, a state housing agency would just be a hamster running furiously on a wheel. The more you build, the more people will come here from elsewhere.
If you exclude migration, the state is actually already building enough new homes annually to satisfy demand. The problem is the demand keeps growing, and that demand is coming primarily from inward traffic.
A state housing agency gets you all the problems I mentioned above if it does not work. And on the off chance that it does work, house prices will not fall anyway since the demand for them from people moving here will simply increase to match the increased output.
This is a dumb idea, and the public should run a mile from it.