Peter Fitzpatrick (Louth, Independent) | Oireachtas source

This Government promised in the programme for Government to make home ownership affordable and accessible again to an entire generation who are locked out of home ownership. Home ownership rates among young working adults in Ireland have collapsed in the face of rising house prices and, unfortunately, the myriad of issues impeding home purchase look unlikely to be resolved in the short to medium term.

Ireland has the ninth lowest home ownership rate in the EU according to a National Economic and Social Council report. The Economic and Social Research Institute found that the share of 25 to 34-year-olds who own their own home has more than halved, falling from 60% in 2004 to just 27% in 2019. The average age for somebody leaving the parental home in Ireland is now 28 years of age. It used to be 23 or 24 years of age. At least 350,000 adults in their 20s, 30s and 40s are living at home in their childhood bedrooms. We have to turn that around. The collapse in home ownership rates will cause great social harm to an entire generation who are locked out of home ownership and forced to live in the parental home or, alternatively, who will never become homeowners and will pay extraordinary rental rates.

Is it any wonder this is still an issue when 9,166 homes were built for rent last year compared with 8,590 being built for sale? The proportion of the population residing in the private rental sector more than doubled between 1991 and 2016, rising from 8% to 18.2%. While rents are increasing by the hour, people are unable to save to purchase their own home. Millennials in Ireland are facing financial ruin when they retire because they have been locked out of home ownership and will still be renting in retirement.

While mortgage rules imposed by the Central Bank in 2015 were necessary, they have led to many aspiring buyers being squeezed out due to their overly strict nature. The rules were introduced at a time when house prices were much lower and interest rates were on a downward trend.

I acknowledge that thousands more prospective homeowners will be able to apply for financial assistance this year due to an increase in the thresholds for the State-backed mortgage scheme; the local authority home loan. However, with inflation still rampant, further European Central Bank, ECB, price hikes are widely expected meaning that banks will pass on the increases in interest to mortgage customers and it will see repayments go up considerably. We are at this tipping point with interest rates being driven by something that is totally out of our control, namely, higher energy prices because of the war in Ukraine and higher food prices because of climate change, but we are paying the price. Economists are saying that 3% will not be the peak level. There is a likely need to keep interest rates higher for longer, as loosening prematurely could risk a sharp resurgence in inflation once activity rebounds. However, if the ECB raises rates too aggressively, it could tip the eurozone into recession.

Home ownership is, therefore, increasingly becoming the preserve of those on higher incomes with a steep rise in houses being bought jointly over the past decade. According to the CSO, for sole purchasers, the median age rose from 34 to 41 from 2010 to 2021, while the median for joint purchasers increased from 35 to 38 in the same period. The rise in age and joint ownership levels for people buying homes starkly demonstrates the social change being forced upon society as a direct result of the housing crisis.

These kinds of societal changes will have continuing and serious negative effects across society in the years ahead unless they are addressed. First-time buyers are getting older with just two thirds of those currently aged 35 to 44 years likely to own their home by the time they retire. It is not uncommon to see people in their mid-30s entering large-value, 35-year mortgages. Unless they overpay during the term of their mortgage, many will not have cleared this debt until they are into their late 60s or early 70s. If you do not own your home by the time you retire, your living expenses are still going to be significant even if your income falls. This could cause many more older people to be at risk of poverty in the future. These are the hidden victims of the housing crisis. These are people, pensioners, who will have worked all their lives, contributed to society in innumerable ways and who are supposed to be able to enjoy retirement in peace and security. Instead older people are faced with the constant stress of housing insecurity, which we all know has a detrimental effect on health. Additionally, young people are under stress due to the uncertainty caused by a lack of housing options available to them, which will certainly affect how they plan their lives. Some are considering emigrating for better money to eventually be able to move home and afford a home while some are emigrating for good. Choices made by successive Governments have resulted in the aspirations and dreams of an entire generation being either diminished or destroyed.

Regardless of what happens in an uncertain world outside, the thinking goes that if you own your home, at least you have some security. You have your most basic human right. In this regard, one must have empathy with the younger generation of renters and would-be buyers in Ireland. Buying a house has never been an easy process but it has now become so difficult. It is no surprise when average rents in Ireland stand at a whopping €1,460 a month making the 10% deposit requirement to purchase a property a very difficult hurdle.

Current lending rules in Ireland are for banks to lend a peak 3.5 times a salary as a mortgage. Assuming that a first-time buyer manages to find a home valued at €375,000, has a €7,500 deposit saved and takes advantage of both the Government’s first home shared equity and the help to buy scheme, that requires a salary of €75,000 per annum to be able to buy. In repayment terms, that equates to a repayment rate of €1,044 per month on a 30-year mortgage. This is clearly much more attractive than the aforementioned current crippling rents.

However we all know the statistics. Ireland has a supply-demand imbalance and a widely accepted need for circa 45,000 to 50,000 houses to be built every year based upon demographic trends. Despite the Government recognising the clear need for housing, the number of houses built continue to be well below the demand levels.

The planning permission system in Ireland appears to be dysfunctional with many projects spending years in the planning process. Planning permissions in rural Ireland are being rejected left, right and centre. In my constituency of Louth and east Meath, when you compare the disparity in planning permissions granted in the previous two years, it is vast. Something is happening whereby the planning policies that are being put before councils today seem very anti-rural in nature. They are pushing people from rural communities into bigger towns and villages, which is very unfair. We should be helping and encouraging young people to build in this time of housing crisis.

Another issue is rising costs and supply chain issues. While the listed house builders in Ireland are talking about significant cost inflation rises of between 7% and 9% this year, the larger house builders actually benefit from economies of scale. This can lead to delays, with some products particularly impacted by gas supply such as bricks, sanitary ware and aluminium products. As a direct result of increased costs, house prices are now six to seven times the average salary, thereby making housing severely unaffordable for many workers.

Overall, high prices to build or buy relative to income are pushing potential buyers out of the market and into rental accommodation, social housing or emigration. The affordability gap is shocking and we need to step in now. Housing affordability has also deteriorated for renters. I note that rents are now 40% higher. We need to ensure public money is not invested in the delivery of private rental-only developments that are unaffordable to rent and unavailable to buy.

Our population is aging rapidly and with the chronic housing shortage, the many generations locked out of home ownership will need a more sophisticated pension system to cope with the rising cost of housing. This is the ticking time bomb of the housing crisis. Thousands of people in their 20s and 30s have already accepted they have no prospect of owning their own home.

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