The Taoiseach Leo Varadkar has said that he believes the government have now turned the corner on housing. In turning this corner, the government have turned their backs on the housing needs of the citizens of Ireland.
A blatant example of this is the latest government scheme which puts Ireland up for sale. Investment funds are buying up the bulk of second-hand homes coming onto the market because of this scheme. Investment funds who “invest” (buy) homes in Ireland can lease them back to local authorities for a fixed period ranging from 10 to 25 years for a guaranteed rent set at 20% below the market rates for the full period. These properties are then used as local authority housing and rented to citizens as public housing.
On the face of it, this may appear to be a way of providing much needed additional public housing for people. In actual fact this policy makes it impossible for ordinary working people to compete with finance capital who continuously outbid them when attempting to buy a home.
Average rents in Dublin for a three-bed house are €2500 a month. With this scheme, the investment fund will get a guaranteed €2000 a month in rent from the council, the property will be maintained by the council for the duration and handed back in showroom condition to the investors after 25 years.
This is how investment funds view the housing market in Ireland now. Investment funds look for a yield of 4% per annum on their investment. Using this as their baseline calculation, a €2000 per month income on the investment allows them to pay up to €600,000 for a home or, and this is key, an average of €600,000 each for a group of properties. This allows them to bid way above the asking price as they buy up multiple homes across the state. They will buy up second hand homes en masse once they average out a €600,000 or below.
With the average house price in Ireland now at €359,000, investment funds are squeezing out the vast majority of ordinary working people who are attempting to buy a home. Estate agents do the dirty work by offering €20,000 over market prices if people will sell to investment funds. Many homes don’t even go up for sale now as they are sold in this way, with people taking the opportunity of getting extra money when selling their home.
As a result of this government policy, investment funds are able to snap up the vast majority of homes that come up for sale and rent them back to local authorities. They can afford to pay well above the market rate for houses and outbid any young couple who have managed to scrape together the deposit and mortgage approval to buy a home.
With less houses available for sale on the open market to the ordinary citizen, they are left with no other alternative but to rent. This in turn increases demand for rented accommodation which in turn leads to rent inflation on the never-ending merry-go-round of profits for corporations and misery for the working class.
Of course financial institutions want to maximise their profits and still attempt to keep market value and sale prices to a minimum. If they can buy a €350,000 home for €400,000 their return will be 6% p.a. under this scheme.
Of course, capitalist greed and competition will eventually lead to multiple investment funds getting involved in this practice and prices rising to match returns. This could potentially lead to a time when all homes or the vast majority of homes in Ireland are owned by investment funds. This is already the case with much of the commercial properties from office blocks to hotels. The class issue is always ownership: this is where the power lies. These investment funds will hold incredible power over the state and our people as they will be able to turn on and off the supply of housing at a whim and set the rents. This is the Ireland of the Fine Gael/Fianna Fáil regime, where everything is up for sale to the highest bidder.
The commodification and the privatisation of the supply of homes in Ireland has been completed. We had already reached the stage where most citizens are unable to buy a home due to low wages but now the few remaining who could are outbid by finance capital. This is what Varadkar means when he says “we have turned the corner on housing”. He means it’s “job done” in the sell-off of Ireland to the corporate elite. Mission accomplished.
At one time the government owned up to 50% of housing in Ireland; now the investment funds own the government. The system isn’t broken, it is designed this way. It’s called Capitalism.