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The Main Problem is that the State is not Interfering Enough?

A recent report on housing in Ireland came up with the startling figure that just 28% of homes built in 2021 were available to ‘ordinary’ purchasers.

In that year, most houses and apartments were snapped up by foreign investor funds – kindly assisted by tax breaks from the Irish state – and various social housing bodies and charities, funded mainly by the Irish taxpayer.

Consider for one moment the plight of the ordinary house buyer. As well as funding their competitors in the housing market through their taxes or though tax breaks, they are also endeavouring to fund their own house purchase. In effect, they are competing with themselves. In such a scenario, who can possibly be surprised that just 28% of new builds went to ordinary purchasers?

Of course, by ‘ordinary’ purchasers, we mean those too well off to qualify for social housing and the like. In Ireland, the disqualified super rich will include people like young nurses at the start of their career on a very modest salary. No one needs reminding that in Ireland even those earning below the average industrial wage are means tested out of most housing, education and medical benefits.

Neither has wholesale interference by the state in the housing rental market worked. Measures around rent controls and the like have actually had the opposite effect. When measures such as the grandiosely named Rent Pressure Zones (RPZ) were introduced in 2016, the aim was that rent increases would be kept to a maximum of 4% per year. However, actual rents were soon racing ahead of this 4% figure. In response, the RPZ measure wasn’t reviewed but instead was revised downwards to an even more unrealistic maximum 2% increase last year.

No one, however, points out the obvious that rent controls haven’t worked and in all probability are adding to rent increases. New rents nationally increased by 10.3% last year – nearly 500% more than that specified by RPZs! One of the main contributing factors to this has been the haemorrhage of thousands of small time landlords from the rental market in response to attempts by the government to control rents. It seems that good intentions will never be a match for the economic law of supply and demand especially in a free market economy.

Even though state interference in the housing market is demonstrably making things worse, the calls for even more interference by the state grow louder by the day. These days all mainstream political parties including, not surprisingly, the Trotskyist People Before Profit compete with each other in demanding even more state interference.

This is now part of a political culture which sees the lack of state interference as the main problem rather than it being the main problem. It’s a political philosophy that’s well reflected in the present Fine Gael/Fianna Fáil/Green government.

Why should the state confine itself to core activities and try to do them well when it can instead try to do lots of things badly but look good and virtuous in the process?

Consider the near impossible range of portfolios which ministers are now required to take on in order to present a PR facade of an effective political player. Minister Catherine Martin, for example, seemingly has the super human qualities that enable her to effortlessly run six different areas such as tourism, culture, the arts, the gaeltacht, sport and even the media thrown in for good measure. No one believes this is humanly possible but in Ireland’s supercharged political echo chamber, it has long since ceased being about effectiveness and become all about the press release and the carefully staged photo opportunity.

Likewise, Ireland is one of the few countries on the planet that doesn’t have a full-time Minister for Defence. It’s probably not all that surprising in a country that likes to see itself as so progressive and woke that something like an army is viewed as unnecessary anyway. Not surprisingly, our defence forces much like health, housing and a host of other core state services are in a shambles.

But our political elites are not idle, they are busy drafting press releases and staging photo opportunities for things for which they are not responsible for and for which they have little control over anyway. Simon Coveney, Minister for Foreign Affairs (and part-time Minister for Defence it seems), for example, is more likely to be expounding on the threat of the Taliban in far-away Afghanistan or the Russian invasion of Ukraine than he is to being doing something as mundane as ensuring that Ireland has an army that is fit for purpose.

And this is where it all comes back to the lonely plight of the ordinary house purchaser trying to buy a house in Ireland with their own hard-earned money. Of course, we have a duty to help and assist the people of Ukraine in their hour of need but just how realistic is the promise by our political class to accommodate and support up to 200,000 additional people in a country which itself already has a severe housing crisis? Anyone who believes that such political showboating does not affect the Irish housing market is utterly deluded.

As ever, outlandish promises by politicians who routinely over-promise and under-deliver are nothing new. But at its core is a political philosophy which maintains that the problem is that the state is not interfering enough. Perhaps it’s time to recognise the reality that more state interference does not always mean better outcomes. Busy body PR press releases and staged photo ops are ample evidence of that. It’s a reality that’s starting to dawn on many people in the Irish housing market and indeed in many other areas of Irish life.

 

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