The central objective of housing policy is to ensure that every household can obtain a house of good standard in an acceptable environment at a price or rent they can afford.
In practice the means of achieving this objective has been and is the encouragement of home ownership and the provision of local authority housing for those who cannot afford to provide adequate accommodation from their own resources. The results of this policy are seen in the ownership composition of the housing stock, which is approximately as follows:
(Based on Provisional Results, Census 1981 and other subsequent estimates).
In recent years the level of housebuilding has varied between 25,000 and 29,000 units per annum, the bulk of which is provided by the private sector for owner occupation.
Q.B.H.S. Quarterly Bulletin of Housing Statistics (Dept. of Environment)
Indeed it could be also argued that Local Authority housing, which is officially provided as rented accommodation, is to a large extent for owner occupation as generous tenant purchase schemes exist which have resulted in sales of 180,000 Local Authority dwellings to date with sales running at between 3,500 and 5,000 units per annum during the 1980’s.
2. The Future Market for Housing
The level of housing requirement is determined in the long term by changes in the size and structure of the population, including migration.
The NESC and An Foras Forbartha have estimated the housing requirement for the 1980’s as:
The total number of completions for 1981-84 was 106,798. Given that there has been a further decline in construction in 1985 it is probable that completions for 1981-85 will be slightly in excess of the NESC minimum forecast.
A significant factor influencing demand at present is recession with its adverse effects on consumer confidence. Although mortgage finance is available, disposable income is restricted.
A further factor is emigration. When preparing its estimates for housing requirement the NESC assumed a net emigration of between zero and 5,000 per annum. However subsequent forecasts imply a net emigration of between 7,500 and 15,000 a year until 1991.
The NESC projections are now being revised, but this is likely to be downwards in the light of higher than assumed emigration.
However in the medium to long term economic and social changes, including increases in the adult population, should lead to a requirement for more housing. However this additional housing requirement may be met by more but smaller average dwellings.
3. Houshold Formation
The housing stock per 1,000 of population is low by international standards. Statistics from the U.N. Economic Commission for Europe show that Ireland has 268 dwellings per 1,000 of population compared with an ECE average of 347 dwellings. The low Irish figures of 268 dwellings per 1,000 of population must be related to the relatively large size of families in this country.
However the pattern of household formation in this country is changing rapidly with a tendency towards smaller households (minimum size - one person). In 1981 the average size per household was 3.66 persons compared with 3.93 persons in 1971. However the rate of reduction in household size should accelerate due to:
(i) Falling Birthrate
In the 1970’s the crude birth rate here varied between 21 and 22 per 1,000 and this rate persisted until 1981. In 1983 the rate was 19 and last year it was 18. The CSO forecasts for 1986 to 1991 are effectively predicting a birth rate of between 14 and 16 per 1,000. The two child family is rapidly becoming the norm.
(ii) Social Changes Affecting Marriage
The Irish marriage rate, long the lowest in the world, increased from 5.5 per thousand in the 1950’s to over 7 per 1,000 in the 1970’s but has fallen to 5.5 again. While the reasons for this fall may be partly economic there are implications for permanent family formation.
While statistics on Marriage Breakdown are very incomplete it is clearly a growing trend and will, of itself, lead to a need for more but smaller units of accommodation.
Another factor is the growing number of single parents. A survey of the Dublin Corporation Housing List in November 1984 showed that the largest single category was the two person family and 45% of those were single mothers and their children.
(iii) Single People (not contemplating marriage)
Department of Environment statistics for 1984 show that 32% of purchasers of new houses in 1984 were single people. In Dublin the figure was 38%. While the existing incentives for first time buyers of new houses are an influence here, there is a clear underlying demand and willingness by unmarried people to purchase their own accommodation.
4. Accommodation Sectors
The principal accommodation sectors are (a) Owner Occupied Housing, (b) Private Rented Accommodation and (c) Local Authority Accommodation.
(a) Owner Occupied
As has already been stated continuous Government policy has been one of encouraging private home ownership. Over 70% of homes are privately owned and the factors that encourage home ownership and other features of the sector are:
(i)Incentives and State Loans
There is a considerable range of incentives to encourage home ownership:
A grant of £5,000 was introduced this year to encourage local authority tenants to purchase new or secondhand private accommodation.
In 1985 the State will make £84m. available through Local Authorities to finance 5,800 house purchase loans and the Housing Finance Agency will provide £86m. to finance 4,185 loans.
Some 70% of new private houses in recent years or 50% of all new houses have been financed by way of mortgage. The major proportion of mortgages has been supplied by Building Societies and mortgage advances have tended to equal 60% of new house values.
Building Societies also have particular tax advantages. While the standard rate of corporation tax is 50%, Building Societies are charged at a special rate of 35% on their income. In addition interest on deposits under £25,000 is subject to a composite rate at 80% of the standard income tax rate of 35% i.e. a composite rate of 28%.
The proportion of new private houses financed other than by mortgages has grown from 20% in 1976 to about 30% now. However there is very little information on the composition of this finance.
One-off houses now constitute one half of new private housebuilding and tend to be located outside the main urban centres.
The remaining half are estate houses.
A feature of recent years has been the trend towards apartments particularly in Dublin. Some 1,300 apartments were built in 1983, mainly in Dublin, compared with 200 in 1974. In 1983 new apartments accounted by 17% of all housing completions (public and private) in Dublin.
(iv)Accommodation and Private Asset Formation
In the 1970’s trading up was a significant feature of the housing market as high inflation, expectations of continuing high salary increases, and relatively high tax relief on mortgage interest encouraged people to take on larger mortgages. The service or utility of accommodation became mingled with the view that house acquisition was a form of personal saving and capital formation. This motive was reflected to some extent in the demand for expensive high quality estate houses, fuelled by the view that property values alone could outpace inflation.
Recession and the fall in inflation have changed this perception. The decline in personal living standards has led to a decline in new private estate house size with the terraced house now predominating. The average floor space per new estate house declined from 114m2 in 1979 to 98m2 in 1982. In 1979 the proportion of newly completed houses with 4 bedrooms was 52% and for 1982 it was 33%.
A period of sustained low inflation, probably combined with real interest rates exceeding the inflation rate, may divert personal capital from the house purchase market into other areas of investment.
This factor, combined with social changes leading to smaller average household sizes, may lead to accommodation being viewed as a service, rather than as an asset and may eventually bring about some preference for private rented accommodation.
(b) Private Rented Accommodation
Only 10% of total accommodation here is privately rented which is low compared with other European countries.
The whole thrust of public policy has been to encourage home ownership, particularly of newly constructed dwellings, through a generous range of incentives.
Private rented accommodation on the other hand is usually charged at its full unsubsidised value, although since 1981 there have been some tax incentives to encourage the provision of additional rented accommodation.
Section 23 of the 1981 Finance Act allowed 100% in respect of expenditure incurred on the construction of moderate cost rented accommodation. Until 31 March 1984 it was possible to offset the construction cost against rental income from the relevant property and from other properties as well. However in respect of accommodation supplied since 31 March 1984 the offset may be applied only to rent from the property in question. In 1985 this relief was extended to cover refurbishment expenditure on a building with two or more residential units and expenditure on the conversion of a non-residential premises into a single residential unit.
While home ownership will almost certainly continue as the main form of accommodation, based on the motive of security rather than investment, an era of low inflation may encourage an increase in demand for private rented accommodation. Younger single people, who may be more mobile may come to see the following advantages in rented accommodation:-
(i)it does not tie up personal capital,
(ii)it offers more flexibility in the sense that it facilitates movement from one location to another in the case of a change of job, without the expenses associated with house sale and house purchase. It may therefore be seen as a form of accommodation suited to the more mobile type of person,
(c) Local Authority Accommodation
Completion of Local Authority houses has been of the order of 6,000 per annum. The capital allocation for construction of local authority houses in 1984 was £208m. compared with £108m. in 1980.
However, not only will the interest on this capital not be repaid by the rents but annual rent income does not even cover Local Authority maintenance costs and management charges:
The average Exchequer subsidy on each new Local Authority house is £84 per week. The average rent from a first letting is £10 per week.
It has been Local Authority policy to sell houses to tenants where possible and of approximately 290,000 Local Authority dwellings constructed to date 110,000 are rented and 180,000 have been sold to tenants, usually at below replacement cost.
The Government has now brought in a scheme whereby tenants with more than three years standing may obtain a grant of £5,000 to vacate their existing residence and purchase privately elsewhere.
A tenant eligible for a £5,000 grant would also qualify for the first time buyer incentives if he were a first time buyer. There have been over 4,000 grant applications so far. The original provision for 1985 as whole was £2m. or 400 grants.
The average cost of constructing a Local Authority house in the Dublin area is £34,000 at present, which exceeds the cost of second hand houses of similar quality on the open market.
The National Plan provides for making 9,000 local authority dwellings available each year - 6,000 additional new dwellings + 3,000 from existing stock. Some 2,000 houses from existing stocks become available each year due to deaths, repossessions, and people moving.
5. Other Forms of Housing
While the three main avenues of accommodation provision are private construction for home ownership, private rented accommodation, and Local Authority housing, there are other means of providing accommodation which are often more usual in other countries.
(i) Co-Operative Housing
The National Association of Building Co-Operatives Society Ltd., Liberty Hall, Dublin is the umbrella body for co-operative housing in Ireland and is recognised by the Department of Environment.
Since th early 70’s some 2,400 houses have been built by local co-operative housing associations, usually on developed sites allocated by Local Authorities.
(ii) Co-Ownership (Northern Ireland)
The Northern Ireland Co-Ownership Housing Association Ltd. was set up in 1978 on the initiative of the Department of the Environment for Northern Ireland to develop the concept of equity sharing in the private housing sector.
The scheme administered by the Association caters for people earning up to GB£7,500 per annum who aspire to home ownership but who cannot achieve it in the normal way because their incomes are not sufficient for them to obtain or service the necessary mortgage in the normal way.
The scheme caters for the first time buyer seeking family type accommodation. The equity sharing arrangement involves the purchase of dwellings by the Association on the open market and making them available to members on an equity/lease arrangement.
Applicants initially buy at least 50% equity in the dwelling by paying the Association at least half of the purchase price and paying rent in respect of the equity held by the Association.
Building Societies and Banks in Northern Ireland are willing to grant mortgages for the purchase of the applicant’s equity in a dwelling.
To date the Association has purchased and sub-leased in excess of 4,000 properties.
(iii) Tenant Ownership (Sweden)
Tenant ownership associations are non-profit making and they have special legal status. These associations provide dwellings, usually apartments, for their members. A member pays a capital sum to the association and then monthly payments to cover the cost of the association’s borrowings and other expenses on his dwelling.
Tenant ownership has no time limit. A member may transfer his dwelling to another member and is free to negotiate the price of the transfer.
Tenant ownership covers 15% of all dwellings in Sweden.
6. Housing Outlook
In the medium to long term the population pressures and structure here will require a high level of housing construction, well into the next Century.