Money Problems

 

The following is an accompaniment to part 1 of our chat with Mel Reynolds:

Money is not a problem. A simple sentence, repeated over and over by Housing Minister after Housing Minister. Five words designed to give the impression that the Government are throwing all the necessary resources at tackling the housing crisis. Money is not a problem.

Maybe money should be a problem. In fact, given Fine Gael’s self-styled nonsense about being the party of the fiscally responsible, money should be placed at the very centre of the housing crisis.

Minister for Finance, Paschal Donohoe nearly guffawed on RTE last week when he parodied Oliver Callan parodying himself. When told Miriam that “I’ve only got a certain amount of money” I grimaced. No one in the RTE studios thought to ask why the Minister(s) for Housing keeps saying “money is not a problem”, when the Minister for Finance clearly thinks very differently.

But this little insight into the lack of Fine Gael economic insight aside, the real issue is that money really isn’t a problem. It’s the squandering of it that is.

I’ve been lucky to sit down and chat with a host of experts on the housing crisis, all of whom agree on one thing. Fine Gael aren’t putting the resources into the right areas. The economic reality is that this government, the one so obsessed with the Debt to GDP ratio, are burning money.

Take the homeless hubs, or as Mary McAuliffe calls them poor warehouses. The average of cost of housing a family in €69,000. Dublin City Council currently have over 950 vacant units in need of a refurbishment. The cost of the refurbishment would be between €30-50k and the works could be completed in a few months.

For €47 million we could give 950 families a home, a permanent home. Instead, in November 2017 alone over 1,530 families were accessing emergency accommodation. The average time spent in the emergency accommodation system is 3 years. In “money is not a problem” world that’s a cost of about €316 million. €316m to warehouse a national disgrace, or €47m to make a serious effort to address it.

If Fine Gael want to be taken seriously as custodians of the economy, and they do, then they need to address their economic lunacy in tackling the housing crisis.

But wait, there’s more. The current crisis isn’t just a homelessness crisis, there’s also a drastic crisis in the availability of affordable housing. Affordable housing should be, by definition, housing that is affordable to the average worker. Taking the latest CSO stats on a double income household and current mortgage lending rules the cost of an Affordable Home should be in or around €240k.

Yet in “money is not a problem” world the state are buying homes and selling them to people at a 15% discount on the market value. Given that the average cost of a house in Dublin is now €365k this is not affordable housing, nor is it anywhere in reach of the average couple.

This wouldn’t be such a disgusting waste of money if it wasn’t for the fact that, as shown by the Ó Cualann Cooperative, family homes can be built for between €151-168K. That’s affordable housing. It can be done quickly, cheaply and to high building standards. I know, I’ve seen them.    

The State could do this on a wide scale, but they are married to private developers and the “free-rigged-market”. The money that is not a problem, is going to developers, at roughly 2.5 times the cost per unit when compared to the Ó Cualann Cooperative.

Finally, for today, there’s another black hole that is swallowing money that is not a problem. It’s called the Housing Assistance Payment (HAP) and it devours over half a billion euro a year. HAP as a temporary scheme is a good idea, as Mel Reynolds told me, “you need to keep the patient alive”. But as a long term strategy it is disastrous, socially and (are you listening Fine Gael) economically.

The average HAP payment is €825 per month. A mortgage of say €190k over 20yrs at 3.5% would have a monthly repayment of €800. Now, if the government wanted to they could borrow money at near 0% rates, build houses, or pay someone like Ó Cualann to build them and rent the homes on long term leases, SAVE the state a fortune in HAP and other rent assistance schemes and still own the underlying asset.

These things aren’t complex. What we are doing now is complex. Fine Gael are supposed to be the party that fixes the economy. But they are burning money by choosing the most costly solutions to the crisis.

We need a real plan, it’s no longer any good Eoghan Murphy sticking his finger in the dyke, unless there’s an affordable housing scheme getting built behind him. So listen out for the “money is not a problem” mantra and tell them straight, “no, but it should be, it is the economy, stupid”.

Image result for finger in the dyke

Tony Groves January 2017

 

About tonygroves

The ramblings of a malcontent, with a Utopian vision that I'm told is too Utopian. An optimist, who believes others can see beyond the end of their noses. Failed Banker & Reforming Human...

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