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Money Times - July 25, 2017

Posted by Jill Kerby on July 25 2017 @ 09:00

The Housing Crisis is only going to get worse as the population ages

 

Remember bedsit-land?

Especially the great triangle of shabby Victorian and Edwardian row houses in Rathmines, Ranelagh and Terenure in Dublin’s southside and in the Dorset Street, Fairview and Phibsborough neighbourhoods on the northside?

I remember it well. Nearly every young person I knew who left home or moved to Dublin from rural Ireland back in the early 1980s lived, reluctantly, in grim firetraps for a few years, their only consolation, other than conveniently located neighbourhoods being their affordability. Just about. 

Bedsits, of course, have been banished under recent housing legislation with owners forced to add separate bathrooms and cooking facilities (as opposed to a portable electric hob and grill behind a cupboard door) and a laundry facility.

This are improvements, of course, but last week a well-known Rathmines letting agent advertised three ‘fabulous’ studio and one-bed “apartments” – tiny, souped-up bedsits that now boast a kitchen wall unit literally at the end of the double bed; a bathroom so tiny that the door doesn’t close if the bed is not shoved entirely against a wall and a sofa bumped up against the washing machine. (Whatever happened to dropping off your bag of laundry to the washeteria?)  

In exchange for all this upgrading, but no extra space, the tenant had to cough up €1,550 a month, or €18,600 per annum.

The abolishment of bedsits and the surge in rents for ‘refurbished’ ones is just part of the reason why greater Dublin but also Cork, Galway, Limerick and Waterford are also gripped by the worst housing crisis since the 1930s. Not only are students and single workers crammed into overcrowded flats and houses; there is also an unprecedented rate of working families who’ve become homeless.

The crisis isn’t just due to the aftermath of the 2008 economic collapse, but to  decades-long government mismanagement, especially on the tax relief and planning fronts.

For at least 50 years, developers, buyers and owners have all been incentivised, subsidised (by non-home owners) and protected by laws and regulations that have allowed tax-free land banks to accumulate, vacant properties to be left untaxed, owners to enjoy subsidised grants and allowances, nil or low property taxes and rates, and mortgage tax relief.

Meanwhile, without any capital gains tax on the sale of principal private properties, older property owners whose families have grown and departed enjoy tax-free asset inflation while occupying a disproportionate number of larger family homes.

They have no incentive to sell up or downsize: even the Fair Deal nursing home payment scheme incentivises them to hang onto their large property (the asset contribution to their nursing home care is capped at 23%) in order to leave its remaining value as an inheritance to their heirs.

Labyrinthine planning appeals, meanwhile, make it not only very difficult to introduce ‘density’ into residential city neighbourhoods but also to convert large, city homes into high-quality multi-dwelling ones that would attract other down-sizing home owners.

I mention all of this because last week the CSO announced that between 2011 and 2016 another 100,000 people in Ireland turned 65 and the Department of Social Protection, in its 2016 annual report, stated that in the past 20 years, state pension payments have increased by two thirds.

The ‘Ireland has an ageing population’ story you might have read about is no longer just a warning of things to come. It has arrived.

All the usual suspects in government, academia (including TCD’s excellent Tilda study centre on ageing), the pensions industry, the welfare industry, including the Citizen’s Assembly that met recently to declare that there should be no compulsory retirement the pensions industry – as if this is was an original idea – believe they have identified the issues and that action should be forthcoming.

They haven’t. And it isn’t.

While everyone knows how health resources are already being stretched by our rapidly ageing population, where is the analysis and planning relative to the housing imbalance?

According to a 2016 Tilda paper on the quality of housing that older people occupy, it found that while about half the c640,000 over 65s live in inadequate housing to some degree which impacts on their physical/mental health, nevertheless 92% of older Irish people live in owner-occupied houses, 83% owning their homes outright and only 8% renting.

In other words, the part that isn’t broke, doesn’t merit immediate attention.

But a problem does exist in cities where there is a chronic housing shortage amid growing employment. (Ironically, in Dublin, the size of households has suddenly shot up as children remain in their childhood home, or move back in.)

Housing mismatch, nevertheless, is quietly ticking time bomb.

Ignoring the need for high quality step-down and sheltered properties suitable for retired couples and widows  – the fastest growing population cohort in the state – represents a lack of foresight that we are going to regret in the next few years.

 

Please send your queries to Jill c/o this paper or by email: jill@jillkerby.ie

 (The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)  

 

 

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