The headline of this piece, though I wrote it myself, is a little unfair, which is not the same thing as being untrue. It is unfair for this reason: Any plan to spend €39billion (thirty nine thousand million euros) in order to deliver 300,000 new homes will de facto have many problems. It would be the most expensive infrastructure policy in Irish history, and this is not a state with a recent record of successful expensive infrastructure projects.
Sinn Fein are to be credited with doing something serious: Putting an expensive building programme before the electorate, and allowing people like me to poke holes in it, which is an easier thing to do, it must be admitted, than developing a housing plan of your own. Sinn Fein supporters will say that what follows amounts to hurling on the ditch, and they will be right.
But then I’m not seeking election, and Sinn Fein is, and it plans to spend thirty-nine billion euros on just one area of policy – so the many problems in its document do need pointing out.
We’ll start with the easiest and obvious point that political parties have a preference for simple messaging and hoping that you might ignore the problems involved by simply getting you to remember big numbers: 39 billion for 300,000 homes. Not 317,000 homes, or 293,000 homes, but a lovely, if slightly suspiciously, roundy number.
Of these homes, Sinn Fein will only actually spend public money on 125,000 homes. That’s what the 39 billion gets you – 125,000 homes at a cost of just over €300,000 apiece. The remaining 175,000 homes, a clear majority, are to be provided by the private sector who will be encouraged, we are to believe, into building on a scale that they simply are not building right now.
How is this to happen? The Sinn Fein policy is detailed, to be fair, and the section on private sector building alone can be found here.
The attractive and good part of the policy on private sector building revolves around proposed reform of the planning process. Sinn Fein says it will massively expand the number of staff in planning departments to guarantee a much improved timeline for planning decisions, so that the final final decision on even the largest developments would be issued within a maximum of 50 weeks of a planning application, even accounting for appeal and judicial review. Of course, it is easier to say that you will hire a lot more planning staff than it is to do so in practice, but assuming this can be done and those timelines adhered to, then it would be good policy.
The party would also reform planning permission to a “use it or lose it” model, which would incentivise developers to build quickly, once permission was granted. Again though, this is one of those things that’s easier to say than it is to do: What does “use it” count as? If a developer slow walks a development – say puts in foundations and then delays doing anything else for six months or a year – does the state simply ban him from doing anything further and impose a crippling (and likely fatal) economic loss on a business? What if the delays are beyond a developer’s control? We’ll come back to that below.
There are other questionable initiatives, like the plan to offer low-cost state-backed loans to developers, which (as the party fairly notes) may well run into EU rules against state aid to the private sector.
Then there are the explicitly terrible ideas, like Sinn Fein’s plan to freeze rents for three years – a policy which has never worked to improve the housing market or lower rents in any country that it has been tried. For one thing, Sinn Fein states that it wishes to move away from a rental model towards a home-ownership model, but rent controls accomplish the opposite: Since renters who are benefitting from artificially lower rent have very little economic incentive to move out or move on, all that rent controls tend to achieve is lower turnover in the property market, and fewer entrants to the rental market. Also, landlords learning of Sinn Fein’s rent control policy will simply move to increase rents long before the new law is passed, meaning that the threat of the policy alone will actually drive inflation in the market. There are dozens of examples of this happening everywhere in the world, from New York to Berlin, but Sinn Fein clearly feels the political benefits of “we’ll freeze rents” outweigh the number of people who will investigate whether the policy might work.
By far the biggest problem with “A home of your own”, however, is what it doesn’t say: Who is going to build all these homes? By that I don’t mean “the Government” or “private developers” – I mean who is actually going to go to the building sites and lay the bricks and fit the electric fittings and tile the roofs?
Ireland, readers will be well aware, does not have a large number of plumbers and carpenters and electricians who are unemployed – indeed it has the reverse. We have a massive labour shortage in the construction industry even at current home-building levels. “A home of your own” amounts to an enormous public works programme, and at the same time as it says it will empower the private sector to build 175,000 homes, it also pledges a dereliction scheme to restore existing derelict homes, and a public building company to build another 125,000 homes. What the policy document doesn’t answer – even once – is where all the actual builders will come from, and what those builders are doing right now instead of building homes. Read through it yourself – you won’t find an answer to that question.
It’s an important question for a simple reason: Sinn Fein is pledging to pour tens of billions of euro into this problem, most of which will end up going into the pockets of the aforementioned builders and plumbers and electricians. The state will be bidding against the private sector for their services. Under the normal rules of supply and demand, this will drive up costs for both sides. Imagine two developments in the same town – one of 100 homes being built by Sinn Fein’s housing company, and another of 100 homes being built by a private developer who has been told that he will lose planning permission if he doesn’t finish his development quickly.
Is there any locale in Ireland – even one – that currently has enough qualified tradesmen to simultaneously knock up two separate developments? Those workers will be able to name their price.
This is the fatal flaw with the policy, and indeed it is the fatal flaw with most Government housing policy enacted by the current administration. At the moment, the Government bids against itself and the private sector on three fronts: New home building, green renovations and insulation programmes, and dereliction. Not to mention the MICA rebuilds in Donegal. Costs are as high as they are because of labour shortages. Sinn Fein’s policy will fail (not might fail) because of this problem.
Ironically, the biggest problem with the policy is also the problem that the Government can’t attack: FF and FG themselves are equally committed to the idea that magic wands can be waved to conjure homes out of the ether. Neither of them are going to say “but we don’t have enough skilled workers to accomplish this” because the riposte would clearly be “why not? where did they all go? And on whose watch?”
That problem can be solved in the long term, of course, but not quickly enough for any politician. We might ask ourselves, as a starting point, whether free third level education and the points race is making the situation worse, or better. The irony here is that we have a housing crisis because so many arts and philosophy graduates can’t afford their rent.
Perhaps it might be better if the state had funded them to study something else. Like bricklaying.