The Economic and Social Research Institute has this morning published a paper by one of its economists Kieran McQuinn on the likely short term future of the housing market in Ireland.
The paper is largely technical regarding budgetary projections, but its main focus is on how state intervention in the housing market could be increased in order to boost supply.
The problem identified is that “ .. a long-lasting impact of Covid 19 on Irish society will be the reduced pace of housing supply” (p10). Of course, everyone is aware of this, so how will that problem be addressed?
The context is the failure to meet demand, which was already apparent before 2019, but which has been exacerbated by the Covid restrictions on the construction sector. The effect of the lockdown on the overall economy of course reduces the ability of people to pay for housing, and will leave many with perhaps unmanageable mortgage and rental arrears.
Interestingly, McQuinn refers to recent research which sets the structural demand for housing at 35,000 per annum (p2.) That represents a huge increase on the 25,000 target set in the National Development Plan up to 2040, and the ESRI’s own projection of 29 – 33,000 as reported here in December.
The higher figure in the ESRI report, Regional Demographics and Structural Housing Demand at County Level, now being referred to by McQuinn is actually based on the same report by Bergin and Garcia. Their upper range projection was based on the premise of a high level of migration, so that is clearly the scenario that is being expected and accepted. Indeed, it has increased.
McQuinn now refers to an annual average target of 47,000 per year up to 2029. So, whatever else is clear it is that the ESRI’s own projections have varied pretty erratically, even over the past year. As Gript pointed out at the time, all of the housing forecasts are based on unquantifiable factors, chiefly migration, that are increasingly outside of the control of the Irish state.
The fact that the state only plans to deliver 12,750 social housing units in 2021, with just 9,500 of them new builds, and with private supply estimated to be 10,000 for both this year and 2022, it is clear that there is no way that the projected radical increase in demand due to migration, apart altogether from current demand, is going to be met within the frameworks set either by the state or the main opposition.
McQuinn seems to opt for what some would regard as an unfeasibly optimistic short term scenario of “expected strong post-Covid performance of the Irish economy and the likely continued low cost of sovereign debt.” Given the details set out this week in the Government’s post recovery plan in the context of an already sharp increase in debt exacerbated by an incompetent “deal” on the EU recovery plan, one wonders how accurate this will turn out to be.
Assuming that there is annual growth of 4.5% up to 2030, then McQuinn suggests that the current capital spend on housing of €2 billion could be doubled to €4 billion. That would ensure the delivery of 18,000 units per year. Of course, that would still not be sufficient but he hopes that it would also serve as a stimulus to the private housing market. He also refers to savings on the current €1.4 billion in housing assistance payments if social housing supply increases.
It’s all a bit tenuous really. It also seems to be part of a narrative which combines an ostensibly prudent fiscal approach – whereby state borrowing is only for capital rather than current expenditure – with a touching faith in what the winds of corporate driven globalisation might wash up on Erin’s green shores.
The randomness of supposedly scientific projections regarding the likely levels of migration, suggest that Irish economists who affect to forecast what might happen here are somewhat on the same level of certainty as a punter wagering on how many goals the Kilkenny hurlers might be likely to put past Sligo were they to meet.
And lest we gain the impression as to what the priorities in all of this are, McQuinn states that any possible harm done to competitiveness “would have to be mitigated in some way by, for example, facilitating greater inward migration of workers with the requisite skills for the construction sector” (p10).
At the risk of being tiresome, it is pretty evident that any state which prioritises the needs of global capital and radical demographic change driven by economic migration above the well being of its own citizens and society, is failing on a fundamental level.