This week saw protests on the streets of Dublin about the housing shortage. It was prompted by the eviction of protesters occupying an empty building on North Frederick Street. Later in the same week, the Government launched the Land Development Agency. The agency’s remit is to facilitate the development of 150,000 homes on at least 40 sites in Dublin and Cork, the vast bulk State-owned land.
While very different, both are responses to the persistent and growing shortage of housing in this country – in particular in our cities and affecting those on lower incomes most. It is perhaps tempting to think of this shortage of housing as a recent phenomenon, dating back three or maybe five years. But in truth, this is a problem that has been building for a generation. In that sense, the bubble-crash episode of 1995-2012 is a distraction. If a straight line were to join those two years, it would be easier to spot that the true time-span of this problem is closer to 30 years.
Three decades ago, there was effectively no difference between average property prices in Dublin and those elsewhere in the country. Certainly, the Dublin property would have been smaller – both in dwelling size and site size – but, to the couple on an average income, the city was affordable. Since then, Dublin properties have inched up and up in price – either sale price or rental price. This mirrors what has happened in many other high-income cities. Supply has simply not been able to keep pace with demand.
The protesters in the streets this week – and the Government talking about tens of thousands of homes on State-owned lands – are responding to a problem that is three decades in the making, not three years. By political inclination, or perhaps cynicism born of weariness, many of the protestors on the streets of Dublin this week are likely to view the Government’s new land agency with scepticism. One early response was why the private sector was needed at all. As someone on Twitter asked, why couldn’t the Government build all the homes and make them all affordable?
My fellow academic-columnist, Eoin O’Malley of DCU, had a related argument: why can’t the state just keep the land, like is done in Singapore and Hong Kong?
I interpret the Singaporean and Hong Kong models somewhat differently. Both states effectively as ground landlords and they can direct what happens on the ground they own without ever having to take on that risk.
There’s a lesson here for the Irish government. By adopting a land tax, they effectively nationalise the entire stock of land in one go, without ever having to own any of it. With a land tax, the State (or municipality) levies a charge each year on land based on what its best use is. That value of that best use comes from the market, certainly, but is determined entirely by State regulations on what would be allowed on that land.
If a strategic land bank is required for defence purposes, then zoning that reflects this will mean its value is very low and the Army will not have to sell up. However, if you are the Army and you own half of Rathmines – or Portobello South, as the marketeers will no doubt be calling it – then if that land were better used for residential and mixed-use purposes, all the Government needs to do is zone it as such and, in a land value tax system, the market does the rest.
Land value tax is popular with left-wingers, who like the power it gives government, but also right-wingers, who like that the government sets out it stall and then lets the market do its thing. It is also popular with (real) farmers, as it typically gets ‘hobby farmers’ off valuable land, and with environmentalists. In fact, it is popular with almost every political group apart from the centre. It is, therefore, something of a test for those who call themselves Ireland’s left wing. Are they interested in government ownership for its own sake? Or are they interested in results, even if it means governments direct, rather than own?
PS. I still remain somewhat concerned that, this long into our housing shortage, senior Government figures are talking about long-run demand of 30,000 homes a year. If this figure refers only to market supply, then perhaps – if we can get a sense of what the Government believes social adds on top – this can be compared to aggregate estimates. But I’m not sure that this is the case. As ever, I remain happy to meet up with policymakers and outline the true level of housing demand and construction activity needed in the country over coming decades.
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