In part one last month[1] the government’s latest scheme — more like “scam” — to solve the housing crisis was highlighted. Local authorities are renting homes from investment funds for periods of between 10 and 25 years for an average of €2000 a month in Dublin. These houses are then used as public housing for qualifying citizens.
Let’s look at this from a financial perspective to see who benefits. With the investment fund getting a guaranteed rent of €2,000 a month, that is a total of €24,000 per year or €600,000 over a 25-year period, for a property bought by them for circa €400,000. That is a 150% guaranteed return on the investment over 25 years or 6% per annum. The ownership of the home remains with the investment fund, while coupled with this, the council maintains the property and returns it to the investment fund in show-house condition after the 25-year period. The investment fund can then sell the property for another profit. As house prices in Ireland have increased by an average of 300% over the last 25 years, this would make the value of the property at circa €1,200,000. The Investment fund’s total profit for the 25-year period would be circa €1,400,000 on their original investment of €400,000.
The council on the other hand pays €600,000 to the investment fund and receives the average council rent of €300 per month totalling €90,000 for the duration, making a net cost of €510,000. If the council was to buy the property then it would have to pay a potential €1.2 million to buy the home, three times the original asking price of €400,000 when added to the other costs: a total of €1,710,000.
It does not make economic sense for the state to rent properties back from investment funds in this manner. There are numerous much more financially rational alternatives available.
The state could buy these second-hand properties instead of investment funds for €400,000 (net cost €310,000 minus rent). It would cost less, and the property would be added to the State’s public housing stock as a perpetual asset for the citizens.
The state could build public housing using a state construction company. This also would cost less, approximately €300,000, and the property would be owned in perpetuity by the state. It would also be cheaper net cost of €210,000 over 25 years.
The state could initiate a scheme whereby when citizens reach retirement age the state would buy their homes off them for, say, 50% of market value, €200,000, and allow the citizen to live there until their passing rent free. This property would then be added to the public housing stock and would have cost half the market price, although it could take 20 years or more before it entered the public housing stock. The retired person would have the benefit of a substantial lump sum payment on retirement and a rent-free home until their passing. The lump sum would go back into the local economy and relieve pension poverty for thousands of elderly people in Ireland, at a net cost of €110,000.
The state could seize some or all of the 166,000 vacant properties that exist today and rent them to people on the public housing list. With grants of up to €50,000 already available towards the cost of refurbishment this would be near to cost-neutral for the state.
Government housing policy is nothing short of reckless and is the economic sabotage of public monies.
The suggested four alternatives above make much more economic sense, if the citizens’ needs are the priority of the state. This is not the aim of our government’s housing strategy. It is designed to benefit the interests of the capitalist class. The supply of homes for the citizens of Ireland has been transferred into the full control of finance capital, for their benefit alone.
On top of this scandal, the state has spent €220 million buying back council houses in Dublin that they originally sold to tenants for a fraction of their worth, back when the government started the process of the commodification of homes. This is the reality of the government’s housing policy.
As we go to print, senior officials and ministers are holding confidential talks with the construction industry that will provide subsidies of up to €150,000 to builders per home built to “make construction more affordable”. They could set up a state-owned construction company to reduce the cost of building homes but that is not the purpose of their housing policy.
The government’s housing policy is a vehicle to transfer the social income of the state back into private hands. It is economic treason, a.k.a. Capitalism.
[1] Varadkar Turns the Corner, part 1. Socialist Voice, April 2023 Issue. (https://socialistvoice.ie/2023/04/varadkar-turns-the-corner-part-one/)
