How to fix the Irish housing crisis

The Irish economy has been tackling a housing crisis for more than a decade, with prices rising 14.4% in 2021 alone.

The average house price in Dublin City is sitting at €512,000, and the average house price in Cork City is at €305,000. Monthly rental prices are above €2,000/month and €1,600/month respectively. There is a lot of talk in Ireland, both from government and the public, about the need for government to invest more money into building more social and affordable housing all around the country. The government is never as efficient as the market when it comes to getting something done properly and at the cheapest price, which is why it would not make sense financially to let the government build the new supply that is desperately needed. They have been talking for years about building enough housing to cool the market, yet take a look at where that has brought us – housing prices were up 14.4% in 2021 alone. If we break down what is actually going on in the housing market, it boils down to a simple issue of a lack of supply that can be relieved through cheaper means than the often proposed government built housing.

As of today, there are 3,245 properties for sale in Dublin City and 507 for sale in Cork City on daft.ie. That is one property for every 387 people and 433 people respectively. It’s even worse when you look at rentals: there is 1 rental for every 3,888 people in Dublin City, and 1 rental for every 11,000 people in Cork City.

Here is a look at that same ratio for other cities around Europe:

Barcelona: 1 property per 89 people, 1 rental per 301 people

Amsterdam: 1 property per 227 people, 1 rental per 588 people

Lisbon: 1 property per 36 people, 1 rental per 611 people.

Rome: 1 property per 83 people, 1 rental per 340 people.

Prices aren’t solely determined by the supply of housing – average salaries, quality of life, and other things factor into housing prices also – although it does have a very large effect on prices. There are two way to increase the supply of housing on the market: build new homes or renovate derelict properties. We are going to focus only on derelict properties today as both deserve their own separate article.

If you take a walk around one of the major cities in Ireland, be it Dublin or Cork, you will notice that above almost every shop there is at least two or three floors of empty or derelict space rotting away. Not only have all the derelict properties drained the supply of properties and in turn driven up prices, but they also make Ireland look like a country in serious economic decline. People are constantly voting against new buildings in Cork and Dublin because they will apparently ruin the city skylines (which are non-existent in the first place), but those same people say nothing about abandoned buildings all over the city centres. As Michael D. Higgins recently said, this is not a housing crisis, this is a housing disaster. How on earth can you leave these derelict buildings stay unoccupied, off the market, ruining the look of our cities in the middle of the worst housing disaster in Irish history.  It ruins the look of our great cities and gives off an impression of Ireland’s cities deteriorating year after year with nothing being done about it. Imagine what tourists from around the world think of when they think of Ireland. Greenery, nice restaurants and pubs, and overall a nice homey and welcome feeling. Instead what they are greeted with is three, four, five story buildings with the ground floor open as a shop or bar whilst the remaining 75% of the building is above rotting away looking like nobody has stepped foot inside since 1964.

The government don’t even know how many vacant houses there are, but it’s estimated to be above 200,000. Being able to bring just 10% of that inventory alone would flood the market with housing and push prices way down. Of course these houses need serious work done to them to become liveable and as others have pointed out, the costs of renovating these derelict properties are not worth it for landlords (which is why they remain derelict for so long). So now the situation becomes how can we get these derelict buildings renovated and turned into liveable homes when the costs of doing so are not worth it for those that own them.

The government needs to create both disincentives for holding onto derelict and vacant properties that haven’t been occupied in years, as well as incentives for owners of these properties to either sell them to people willing to renovate them or renovate and rent them out themselves.

First, we need to get rid of any taxes on doing up derelict houses. On top of inflated building prices, people are paying 13.5% VAT to do up a vacant property. A lot of the time it isn’t worth the hassle to renovate a property, and if the owner doesn’t have an actual need for it they will just leave it be derelict and see the value of the property rise year after year. We need to get rid of any taxes extra costs that may be discouraging derelict property owners from doing them up. Simply getting rid of the VAT will make it 13.5% cheaper to fix up a property.

We can also look at how other places have tackled similar problems of dereliction. Mussomeli in Sicily have been selling houses for €1 in an attempt to revitalise their city. The condition upon purchase is that you must spend a minimum of €17,000 on renovations, which should be finished within three years, and it must be in living condition. To be clear, we are not at all calling for properties to be sold for €1. We give the example of Mussomeli as it is a very creative way to revitalise properties that have been unused for years. The Irish government need to take a leaf out of Mussomeli’s book and launch creative ways of enticing derelict property renovations. We propose offering grants to people who own derelict properties and wish to renovate them in order to either sell them on or rent them out after they are in a liveable condition. The grants need to be easily accessible, unlike the current pathetic vacant property and upper floor refurbishment supports that have only been used by a handful of people across the country because of the amount of paperwork, red tape, and waiting involved. We need a clear and quick way of obtaining grants from government to do up these properties.

Houses in Sicily selling for €1.

If we bring in strong incentives to bring life back into dilapidated properties, we also need to disincentivise those that choose to not take advantage. In regular economic conditions we would not propose a tax on derelict properties, but the current situation in Ireland is a disaster, and has been a disaster for over a decade, therefore it calls for emergency measures.

We need to completely revamp the terrible vacant and derelict properties levies that are currently in existence. The government brought in the derelict sites levy and vacant sites levy in 2016, which was a complete and utter failure. Out of the €21 million owed from the derelict sites levy, just €210,000 was collected. There are too many loopholes and exceptions. Out of the €5.5 million owed from the vacant site levy, just €378,000 was collected. The levies are dealt with at local authority levels, we need to bring it in as a national tax so that the revenue deal with it and actually collect that money. These joke levies are nowhere near enough to bring properties onto the market. How does that rugby saying go again? “Use it or lose it”?

Look at Vancouver’s vacant property tax which brought thousands of empty properties back onto the market. They brought in a vacant property tax, which is 3% of the assessed taxable value of the property. We need to bring in something similar, and not some half-hearted attempt just to make it appear that the government is doing something. We need to push derelict property owners into making something out of their property or selling it off to somebody that will. A derelict tax needs to be brought in and needs to hit derelict property owners hard. Of course there should be exemptions to the tax, we are not advocating for somebody to pay a tax on their own property that they when the have future plans for it. This tax needs to target the hundreds of thousands of vacant and derelict properties that have been unused for years, which their owners have no plans to do anything with them.

In Ireland we have sadly grown accustomed to derelict buildings littering our city centres. But imagine going through Cork City or Dublin City and seeing life in every floor of every building. Outside of the fact it would hugely increase the supply of housing, it would make Ireland’s cities much more pleasant places to live and spend time in. It’s time the government stop talking about doing things to fix the housing disaster and actually go out and do it.

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