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Belief that building more homes will bring down prices ‘a red herring’

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Belief that building more homes will bring down prices ‘a red herring’

Belief that building more homes will bring down prices ‘a red herring’
September 24
14:57 2021

Housing conference hears many young people slaves to rent because of mortgage rules

A belief that increasing housing supply – the key target of the Government’s multi-billion euro housing strategy – will result in more affordable homes is a “red herring”, the chief executive of the Túath approved housing body has said.

Speaking at a conference on Wednesday entitled Delivering Housing for All, Seán O’Connor said there was a danger that newly built homes would remain expensive and that young people would continue to face issues meeting prices.

Responding to a pre-recorded address from Minister for Housing Darragh O’Brien, who spoke about the Government’s multi-annual Housing for All policy, Mr O’Connor said he welcomed “the upping of the ante in recognition of the seriousness of the problem”.

However, he displayed a slide depicting a fish, which he said was a red herring, facing maths equations relating to the elasticity of demand. He said the evidence suggested that increasing housing supply in an attempt to reduce prices had in the relatively recent past “proven to be a complete red herring”, something that misleads or distracts from an important question.

‘Not enough’

Mr O’Connor told the online conference of approved housing bodies there was a widespread belief that increasing supply would reduce prices in relation to many activities or products, but that it “doesn’t apparently apply to housing” as “increasing supply on its own is not enough”.

“Affordability has to be improved,” Mr O’Connor said, adding that there was a “very substantial gap between the growth of house prices and earnings”.

While the Government plan was “right to focus on increasing supply”, he added that “for me its true measure of success will be whether it also delivers on affordability”.

He warned that the Government’s strategy was itself leading to inflation in house prices. While competition was generally good, he said competition for materials could lead to increases in prices.

Cruel mortgage rules

He said “it is almost cruel in a certain way” that Central Bank rules restricted the level of mortgages available to young people.

“For many people today, particularly young people, it is not possible to secure a mortgage despite it being cheaper (than renting) due to Central Bank rules on loan to value and income,” he said. “Is it really for their own good to become a rent salve and not to be able to break out of that?”

Mr O’Connor said he hoped the current review by the Central Bank would result in changes.

In his address, Mr O’Brien said “one of the most significant aspects “of the Housing for All strategy was “the implementation of a new cost-rental sector”.

Cost rental is a long-term arrangement where the rent covers the cost of construction, management and maintenance of homes for those who qualify.

He said the approved housing body sector would be “key” throughout the delivery of the Housing for All plan.

Aideen Hayden, chair of housing charity Threshold, said that in 2006 around 90,000 homes were built but that affordability remained out of reach for many.

She said increasing supply “is only useful if it leads to affordability”.

Source: The Irish Times

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