After a century of relative stasis, Irish politics is realigning and the chief accelerant is housing.
The State’s longstanding Fine Gael-Fianna Fáil duopoly received a combined vote of just 43 per cent at the last general election, a record low. Both were outpolled by Sinn Féin who appealed to voters seemingly left behind by a booming economy and aggravated by soaring rents.
Once the combined vote of the two main parties in a two-party system falls below a certain threshold, the system ruptures. The decision to bury the Civil War hatchet and enter government together will only hasten the process.
A decade of rising house prices and chronic undersupply has bored a hole in Irish politics, alienating mainstream parties from an increasingly vociferous younger demographic who feel permanently locked out of the market.
Despite successive pledges to build more houses and make them more affordable, successive Irish governments have succeeded in doing the opposite: inflating prices and rents, building only a trickle of new homes, and widening the affordability gap.
Expensive housing, long commutes and stretched public services are making Ireland a less attractive place to live. That’s the view of Ibec, the State’s business main lobby.
And it’s not just younger people who feel aggrieved. People on relatively good incomes, who might have traditionally bought into the status quo, are now priced out and are calling for more radical solutions.
Property has become one of the most polarising issues in western democracies, particularly Anglo-Saxon ones like the UK, where adherence to free-market policies is traditionally stronger.
Surveys show people under the age of 40 in Britain are less likely to vote for the ruling Conservative Party than ever before, and those in this age cohort who are renting are even more antagonistic to the party.
The “forgotten middle” was how property economist Ronan Lyons referred to them at a conference hosted by the Dublin Economics Workshop (DEW) on Monday. He was talking about that growing segment of Irish society that is too well-off for social housing or rent supports but too poor to afford a basic housing unit on the open market.
On the rental side, they are competing with housing assistant payment tenants, and therefore with the State itself, in a process that upholds and locks in higher rents.
On the other side, they are competing with a richer cohort of buyers supported by their parents or high-paying multinational jobs.
Left-wing parties want the Government to step and build en masse, something it has been reluctant to do even in this era of low borrowing costs and with a suspension of the EU’s spending rules.
Industry wants high construction costs to be reverse-engineered to deliver viability on the development side and more help-to-buy schemes in the interim.
There is no agreement on a solution and no likelihood of one being pursued. Instead we have tinkering and a growing voter dissatisfaction.
Rising house prices were once an electoral asset for the likes of
Fine Gael and Fianna Fáil
How did we get to this point of gridlock? In the 1980s and 1990s, governments here and elsewhere stopped building social housing and switched to subsidising rents, an ideological shift from bricks to benefits. The financialisation of housing and more relaxed lending rules managed to cover up this process.
In other words the reduction in social housing was met by an expanded mortgage market with providers seeking smaller and smaller deposits and lending to people on lower and lower incomes, people who would normally be served by social housing.
This all came to a shuddering halt in a 2008 when the global economy crashed.
Since then, the State’s absence from the social housing sector, combined with a more curtailed mortgage market, has resulted in a housing crisis of unparalleled proportions: a shortage of emergency housing on one side and an affordability gap on the other.
The Government’s response has been to ramp up emergency rent supports.
Between 2016 and 2019, spending on housing assistant payment, the State’s main rent support scheme, increased by 563 per cent and is expected to be about €500 million this year alone. The average monthly rent subsidy in 2019 was €1,872. This is a colossal rent for a non-housing assistant payment recipient to compete against.
At Monday’s conference, Lyons said social housing needed to be responsive to the housing need, a separate concept from that of housing demand, and counter-cyclical rather than pro-cyclical.
The Part V requirement on developers to hand over a percentage of their housing units for social homes works but only when the construction industry is building. Who will take care of that need when it isn’t?
In previous eras, the State used to pick up the shortfall when private sector construction softened, acting as a sort of counter-cycle stimulus, smoothing out the cycle rather than exaggerating it.
When construction stopped after 2008, no one, including the State, built and within a few years we had a chronic housing shortage.
Rising house prices were once an electoral asset for the likes of Fine Gael and Fianna Fáil. They made homeowners feel richer and more likely to reward the administration that presided over them.
Not anymore. Rising house prices are a big negative for many, particularly young voters, who will grow up having never voted for either of the establishment parties, but who will blame them for being materially worse off than their parents.