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Why In Irish housing, only fools work hard

Most of us are broadly familiar with the basic outlines of the relationship between the citizen and the state in a modern democracy: The citizen works, and earns money. Some of that money is handed over to the state in taxes, and those collective funds pay for things that none of us can provide by ourselves – roads; schools; hospitals; the Gardai. Because it is ultimately your money being spent, you are given a vote and we get to elect what is essentially a national committee to manage our collective funds. All Government is, in theory, is a larger extension of the committee running your local sports club or community centre.

There is, though, one important difference: If your local sports club or local community centre starts acting well outside its original remit, you are free to stop paying your fees and leave. With the Government, if you stop paying your taxes you go to jail.

All of which means that if you are a young person living in Limerick, paying your taxes, and hoping to buy a home, there’s absolutely nothing you can do about this:

Potential homebuyers will not be in a position to privately buy or rent new homes in a number of developments in Castletroy.

Figures seen by Live 95 news show that 63 apartments under construction in Newtown Meadows, close to Castletroy College have been acquired by Cluid Housing, an approved body.

In another location close-by a development of 222 homes have been bulk purchased in advance for use as social and affordable housing.

Credit to Live95fm in Limerick, by the way, for the original reporting.

In any case, what we have here is straightforwardly a case of the state bidding against its own people for a scarce resource – in this case housing – and driving the prices up. The basic laws of economics remain unchanged, and unchangeable: For the state to have successfully bulk purchased these homes, it would have had to have offered a price greater than what the developer would have expected to receive from private buyers buying the homes individually. In other words, even without knowing the precise figures involved, we can be as close to certain as it gets that the state paid more for these houses than the average working couple could have afforded to pay.

Consider then, the next element of the equation: These homes are going to become “social and affordable housing”. That is to say, they will be provided by the state to the “needy” – people who cannot afford to buy their own homes, either through joblessness or disability or, in some cases, general unwillingness to make the effort. There is moral hazard, here.

The moral hazard is this: The net effect of the state’s intervention in the market will be to give homes to those who don’t work, having priced them out of the range of people who do work.

In other words, if you do things the right way, the state will swoop in and undermine your chances of getting a home. If you don’t do anything and just wait on a list, the state will outbid the poor eejits who work, and give you the house instead.

This is not how a state is supposed to work. You shouldn’t be making fools out of the people who do things the right way, and making relative winners out of those who are dependent on the Government.

Speaking to Live 95, of course, sources were more circumspect than me, but they, too, can see the problem:

A source speaking to Live 95 news said leadership in Foreign Direct Investment companies in Limerick are now concerned that their employees will continue to struggle to find houses to rent or buy.

“What we are realising now is that these homes are not going to come to the markets because they have been bulk bought by AHBs. There is now a worry that if this cycle continues we will see an even bigger housing problem down the line”, the source said. 

There are good reasons, by the way, why people don’t really want to live in areas with high amounts of “social housing” – those who own their own homes and have a stake in them, tend to improve them, and keep them cleaner, and take a greater interest in the local community. Those with no stake in their own home are much less active. That is why, for example, almost every antisocial behaviour “black spot” in the country overlays with a map of social housing. You can like that, or lump it, but it’s true.

A government that is block buying homes out from under its own working citizens in order to give those homes to non-working citizens is sending a message. And that message is that in Ireland, only an absolute fool tries to do things the right way.

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