Cian O'Callaghan (Dublin Bay North, Social Democrats) | Oireachtas source

I want to address a point the Minister for Finance made in his remarks. I do not think I need to explain this to him. I am sure he understands how social housing is costed in budget 2022, which he introduced in the House, in Housing for All and, in fact, in all the budgets he has introduced. I would say he knows full well that the total capital cost of each social housing unit is not provided for in the budget and that the way the Government counts social housing costs is partially through capital payments and partially through low-cost loans. Given that this is how the cost is provided for, it is a bit unfair and disingenuous to attack people on the Opposition benches for using the exact same costings he introduced in this House on several occasions. He either does not understand the costings he introduced or this is a cheap political attack. It is one or the other.

There are three factors that applied in Ireland until recently but are no longer the case. Until recently, it was cheaper to rent than pay a mortgage. That is no longer the case. Until recently, it was cheaper to buy a new-build apartment than a new-build house. That is no longer true. It is not long since Ireland had above the average rate of home ownership in the European Union. Now we are below that average. In fact, it is not terribly long since home ownership rates were at 80% in Ireland, but they have decreased steadily over the past number of years, especially since Fine Gael came to office. This is because of the policies that party is pursuing.

The growth in investment funds that has been facilitated and encouraged by the Government has gone hand in hand with rent increases of some 10% in the past year, according to the daft.iereport, increases in house prices in the past year of 14% and the financialisation of housing, which has seen the turning of homes into assets. It has gone hand in hand with the creation of generation rent - an entire generation made up of people who cannot afford to buy their own homes even though they want to and who are being forced into renting. It has gone hand in hand with the decline in home ownership I referenced. This is particularly serious in an Irish context because our welfare state is very much based on home ownership. It is where many of the supports went into over the years. Our pension provision is based on the idea that the majority of people will own their own homes when they retire. We are already seeing increasing numbers of pensioners at risk of homelessness and becoming homeless because they can no longer afford rents. That will become a greater problem in the coming years.

I was particularly struck at the launching of Housing for All that the party leaders all talked about increasing home ownership. However, looking at the targets in the plan and what the Government is doing in terms of attracting investment funds to buy up housing for rent tells a different story. If Housing for All meets its targets, the only impact on home ownership will be a continued push to take ownership levels further down. The plan is predicated on approximately one third of new homes going to owner-occupiers, with everything else going to support differing forms of rental provision, including a large number of institutional landlords. The truth is that the current trajectory of Government policy is to continue to decrease home ownership. Part of the drive behind investment by institutional landlords is that it goes hand in hand with build to rent provision.

Look at what has happened to apartment standards and sizes in recent years. In the past three years in Dublin alone, apartment sizes of new-build apartments have decreased by almost 20%. Apartment sizes have gone from 89 sq. m in the second quarter of 2018 to just 62 sq. m in the second quarter of 2021. That is the legacy of current policy. Look at the housing needs assessment of Dublin City Council and the analysis carried out by KPMG on behalf of Dublin City Council. They predict that of new households formed between 2023 and 2028 in Dublin city, and in the Minister's constituency, only 18% will be able to afford to rent. Only 15% of those new households will be able to afford to buy a home. Everybody else will require either social housing or subsidised rents and supports. Therefore, almost 70% of new households will not be able to afford to meet their own housing needs. Look at their year-on-year analysis of the numbers of people who will be able to afford their own rent without subsidies. The numbers able to buy their own home will decrease year on year while, the report predicts, rents will go up and up.

The key feature in this is the uneven playing field we have. Since the Celtic tiger collapsed, we rightly have had mortgage lending rules that are difficult and restrictive for people but there also is an advantage to them, in that they combat house price inflation. On the other hand, while individuals and families have those restrictive rules, there is no such regulation or rules around investment funds. That is an uneven playing field. That is what creates this unfairness. Clearly, we need a fair regulatory regime on this. We need rules to be written that are fair and that are actually to the advantage of individuals and families, not to the advantage of investment funds. That is what is missing here.

It is worth looking at the yields on apartments, which are largely owned by investment funds. The recent daft.iereport talks about yields on one-bedroom apartments in Dublin 1, in the Minister’s constituency, at 8%; in Dublin 10 at 10.3%; and in my constituency of Dublin 17 at 11.4%. These are staggeringly high annual yields. That is the kind of environment that has been created for institutional investment funds by the attractive tax treatment that has been put forward by the Government. There is clearly no need for such levels of tax incentives and tax treatment, given such high yields. With yields that high, individuals cannot compete. Only one thing will happen as a result of yields that high, which is that the price of new-build homes will continue to go up and up.

An excellent report was recently published by Professor Daniela Gabor and Professor Sebastian Kohl. It was produced for the European Greens group in the European Parliament. It is called “My Home is an Asset Class: Housing Financialization in Europe". While I am not used to quoting from Government parties in the Dáil, or from their European groupings, this is an excellent report that is well worth quoting. It states "Europe’s residential real estate has become an attractive asset class for investors worldwide, supported by a range of government policies that are ostensibly aimed at homeowners [but in fact push] up house prices and reduces affordability for citizens". The report goes on to state "Institutional ownership threatens to accelerate the trends unleashed by the financialization of housing: deeper financial markets have not substantively increased either aggregate home ownership or housing supply, but instead have inflated house prices". All this sounds familiar in terms of Ireland.

The authors also cite studies on both US and European cities, which “identify negative consequences for housing affordability”. The report notes that a report from the EU Commission on financialisation of housing in seven European cities had a similar conclusion in terms of housing affordability. It goes on to say that: “institutional investors hold back the supply of urban land, thus increasing housing shortages and driving up prices, as documented in relation to Ireland”, of course. Importantly, they make the point in relation to the regulatory side of what happened after the financial collapse that “substantive efforts to regulate global banking after the collapse of Lehman Brothers have not been matched by similar policies to regulate systemic institutional investors”. That is the key problem here. There have rightly been tight controls over bank lending, which affect smaller builders and individual families who are trying to buy. However, that tight regulation has not been matched for investment funds. In fact, there has been no tight regulation at all. It is that imbalance that needs to be corrected urgently.

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