Fixing the housing crisis without massively increasing tax or borrowing

golfwallah

We all know about the conventional and expensive ways to fix the housing crisis that are aimed mainly at private market and will take a long time to implement. These include the NAMA development plan, massive water infrastructure, savings through public service re-structuring, new funding models that depend on private sector investment, etc.

For more public sector spending, there is the possibility of EU funding, but this usually has to be matched by more government spending on new build, which is expensive. Small scale schemes for pre-fabricated housing and housing co-operatives help show the way but will make only a little difference.

A much simpler and novel way to make a significant immediate difference in public sector supply has been put forward in today’s Sunday Independent, by Master of the High Court, Edmund Honohan SC (brother of Patrick Honohan) – “nationalise repossessed homes”:

The Master of the High Court has called on the Government to "nationalise" repossessed homes and buy-to-lets that banks have sold to speculators and investment trusts and use them as social housing.

Sounds like a good, workable solution to me – he has put out this challenge to political parties in advance of the general election – will tell us something about political will in this country of ours as to whether our politicians will rise to the challenge – or even come up with more workable initiatives.

worded

Yeah, free gaffs for everyone

golfwallah

worded wrote: »

Yeah, free gaffs for everyone

As things stand, many repossessed homes are being sold off below the cost of building, often to what Edmund Honohan reportedly likened to "Maple 10 Golden Circles", thereby enriching a chosen few.

Mr Honohan's proposal is merely about making cheap housing available for public sector renting - not "free" as you suggest.

Nowhere in this article is there mention of "free gaffs for everyone".

It's easy to be cynical and bang out a response without much thought. Have you another suggestion to free up money being spent on housing people in hotel accommodation, as is currently happening, and spend it instead on a better long term solution?

Godge

golfwallah wrote: »

We all know about the conventional and expensive ways to fix the housing crisis that are aimed mainly at private market and will take a long time to implement. These include the NAMA development plan, massive water infrastructure, savings through public service re-structuring, new funding models that depend on private sector investment, etc.

For more public sector spending, there is the possibility of EU funding, but this usually has to be matched by more government spending on new build, which is expensive. Small scale schemes for pre-fabricated housing and housing co-operatives help show the way but will make only a little difference.

A much simpler and novel way to make a significant immediate difference in public sector supply has been put forward in today’s Sunday Independent, by Master of the High Court, Edmund Honohan SC (brother of Patrick Honohan) – “nationalise repossessed homes”:


Sounds like a good, workable solution to me – he has put out this challenge to political parties in advance of the general election – will tell us something about political will in this country of ours as to whether our politicians will rise to the challenge – or even come up with more workable initiatives.

How does that not cost money? The government would have to compensate the bank who owned the property.

Victor

golfwallah wrote: »

A much simpler and novel way to make a significant immediate difference in public sector supply has been put forward in today’s Sunday Independent, by Master of the High Court, Edmund Honohan SC (brother of Patrick Honohan) – “nationalise repossessed homes”:

The state already owns most of the banks. Repossessions are already nationalising the repossessed homes.

Importantly, any such 'Rob Peter to pay Paul' arrangement wouldn't deliver any extra homes.

golfwallah

Godge wrote: »

How does that not cost money? The government would have to compensate the bank who owned the property.

Nobody is saying that it won’t cost money. The point is it will make social housing available at a lot lower cost and a lot quicker than new builds and take homeless families out of B&B hotel arrangements. The capital costs associated with providing the additional infrastructure required to make available building sites viable will run into many hundreds of millions if not billions, as opposed to the relatively small cost of this suggestion.

If you read the article you will see that, according to Edmund Honohan who is witnessing what is happening in the courts on a regular basis, profits from the present spate of house repossessions is going into private 3rd party funds, at a loss to both the previous owners and the banks (some of whom are currently state owned):

the State could address the housing crisis by passing new laws to allow it to compulsorily acquire properties that "the banks dump into the market for speculators".
The outspoken senior official of the High Court and brother of former Central Bank governor Patrick Horohan said "the State simply steps in and takes them [the properties] back. The entities paid a small amount of money for them and they get that amount of money back. They are eliminated from the equation".
Mr Honohan issued a written judgment last week that touched on Danske Bank's bulk sale of more than 400 repossessed homes and properties to a trust fund last year. He likened the transaction to "a Maple 10 golden circle" - a reference to the investors who were offered loans by the former Anglo Irish Bank to buy shares in the bank.
Speaking on foot of his judgement, Mr Honohan said: "You can say, all right, let's go out and build houses. But if you can go out and pick them up for less than the cost of building, then that's what you should do.
"It is open to the legislature in the Oireachtas to pass emergency legislation this side of the new year to incorporate a new body which would compulsorily acquire the property overnight at the stroke of a pen."
Mr Honohan said "there is a well-worn mechanism for compulsory acquisition" and it is a "cut and paste job to produce legislation".
His proposal is that the State would buy the repossessed properties from the investment funds that bought them from banks rather than from the banks directly - as it could be difficult to establish their market value.

Still sounds like a workable solution to me!

mickdw

So take the house from struggling working family and make it available to welfare family with full rent supplement.
Great plan.
I agree that the way nama properties are being sold off is a disgrace. They are bundling properties in a manner that only mega funds can buy them.
A suitable portion of homes should be released to the home buyer market and another portion released to social housing.

golfwallah

Victor wrote: »

the state already owns most of the banks. Repossessions are already nationalising the repossessed homes.

Importantly, any such 'Rob Peter to pay Paul' arrangement wouldn't deliver any extra homes.

True the state owns AIB, BOI and the former Anglo-Irish – but not all banks, e.g. Danske, Bank of Scotland, etc., that were trading here during the boom. And repossessions to the state owned banks may put such houses into state ownership temporarily but all are ultimately being disposed of at discount prices in the private market, bringing in huge profits to bulk-buying, unaccountable entities.

The Sunday Independent reports:

In his written judgment, Mr Honohan said: "Given that we now have a public housing shortage, it is sobering to realise that the State could have - probably should have - bought up this distressed housing stock at the time, at knock-down prices, instead of losing them to the unregulated and sometimes unaccountable private investment funds.

Nobody is claiming, either, that the proposed scheme would deliver more houses but it would provide a greater pool of social housing. It would also bring an end to the only “rob Peter to pay Paul” arrangement in place right now by preventing profiteering at the expense of former owners and banks (in many cases, state owned).

golfwallah

mickdw wrote: »

So take the house from struggling working family and make it available to welfare family with full rent supplement.
Great plan.
I agree that the way nama properties are being sold off is a disgrace. They are bundling properties in a manner that only mega funds can buy them.
A suitable portion of homes should be released to the home buyer market and another portion released to social housing.

You need to consider that the struggling working family, in whose plight I would greatly sympathise, might very well themselves become the welfare family to whom you refer.

The differences would be that:

the pool of social housing available to house them after getting out from under an un-repayable mortgage would now be greater.

a private vulture fund would no longer profit from their misfortune as is happening now.

hmmm

How is this going to fix the housing crisis? It does nothing about supply, just moves the ownership from one group to another.

We need less of a focus on giving out free houses to people who couldn't be bothered paying for one, and more attention paid to those people who pay their way in society and want to buy their own house. The only solution is supply - that means more zoned land, less NIMBYism and far fewer levies taxed on the developers of new houses.

Silverbling

There is a middle group of people, the working homeless.

Due to circumstance I am on the list for social housing but will never get one and do not need one. As a single parent I can not afford the very high rents so am paying privately to live in 1 room with my kids.

Due to my divorce and age I have had no choice but to rent as I can't get a mortgage but rents in some cases are higher than a mortgage.

There are thousands and thousands of single parents in this situation, having no home of their own but not on the streets so do not count in the homeless figures.

The sad reality is becoming homeless can happen to anyone in the blink of an eye when landlords can move a family member in with 112 days notice.

Instead of saying the repossed properties should all be for social housing they should reverse the figures, 20% of them should be given to families at a capped affordable rent because if things get too difficult to manage then the easy option is to stop working and go fully into the system to put a roof over their kids heads, which no one who has worked for years wants to do but the priority is our children not the government that we have paid taxes to for many years

Silverbling

A quick solution would be to bring the rent a room scheme to rented houses, any landlord can earn €12,000 a year completely tax free.

Over that amount it is all taxable, it will not benefit all landlords with larger mortgages but would make more housing available from landlords with smaller mortgages.

That limit should be applied to every property and not to the landlord personally

Victor

hmmm wrote: »

The only solution is supply - that means more zoned land, less NIMBYism and far fewer levies taxed on the developers of new houses.

I don't think there is a shortage of zoned land. Development costs councils money and the developers should pay for that.

There is a shortage of banks willing to lend for residential property.

Silverbling wrote: »

A quick solution would be to bring the rent a room scheme to rented houses, any landlord can earn €12,000 a year completely tax free.

And who will pay for that? Assuming 25% of the population rents, that's about 360,000 properties or a cost of €4,320,000,000 per year - that would build 20,000-30,000 units per year.

The advantage of the rent a room scheme is that it better utilises otherwise under-used properties. Applying it to all rental properties would be a poorly focused use and not value for money.

golfwallah

hmmm wrote: »

How is this going to fix the housing crisis? It does nothing about supply, just moves the ownership from one group to another.

We need less of a focus on giving out free houses to people who couldn't be bothered paying for one, and more attention paid to those people who pay their way in society and want to buy their own house. The only solution is supply - that means more zoned land, less NIMBYism and far fewer levies taxed on the developers of new houses.

Nobody is suggesting this proposal will fix the housing crisis in its entirely or that it will fix the supply problem.

But it will help by taking a lot of ineffectiveness and profiteering out of the current practice of bundling repossessed houses for sale to vulture funds, which only serves to enrich a privileged few. Surely, you’re not proposing ignoring this issue by doing nothing about it?

I’m a house owner myself and my kids have had to work hard to buy for themselves, unlike a very small number of their relatives and friends, who have benefited from social housing. So I have no vested interest in social housing (although I was a director of a voluntary housing agency for a couple of years). I am a great believer in self reliance and, thankfully, most of the people I associate with are of the same bent.

That being said, and without trying to fix all the world’s problems, we have to live in the world as it is, rather than as we would like it to be. And in our world, in this country at least, there is a general acceptance that some people will never own their own home, leaving us with a dependence on social housing.

I agree that the biggest part of the housing problem concerns supply. But also, putting back on my realist hat, this problem is taking and will continue to take lots of time and truckloads of money to solve. Zoned land is not the problem – there’s loads of that. What is in short supply is zoned land that is serviced with public utilities (for water, waste water, etc.) and the funds to correct the current infrastructure deficit in waste water treatment, etc.

I also agree with your point on NIMBYism, that is, if you are referring to “spoiling” peoples’ views with the higher rise developments that have been used in other countries to solve housing supply problems. And I agree with the need to make it less expensive to bring developed sites on stream by easing up on development levies, etc. But there are prices to pay, through higher density, higher rise, etc.

In the final analysis it’s about choice and strength of political will to solve very human problems, which is impossible without upsetting some or other of the population!

Victor

golfwallah wrote: »

But it will help by taking a lot of ineffectiveness and profiteering out of the current practice of bundling repossessed houses for sale to vulture funds, which only serves to enrich a privileged few.

I think you're fundamentally misunderstanding what is happening. those funds are ultimately owned by investment and pension funds, in which many people have invested. So it isn't just the privileged few.

Imagine Tom lost his job in the recession and has fallen behind in his mortgage. With no repayments for several years and no immediate prospect of things improving, the bank repossesses the property. The bank then sells the individual property. Typically, it will be bought by a family or a landlord willing to rent it out.

Meanwhile Dick, a former developer, has 10 sites and a number of semi-complete estates in Laois that are selling slowly, due to their poor location. He profoundly overpaid for the sites, is having difficulty repaying his debt. The bank bundles Dick's debt with other similar debt and sells it off. It is then up to the buyer of the debt to manage the debt.

Finally Harry, another former developer, has 10 sites and a number of semi-complete estates in Leitrim that are effectively unsellable. He profoundly overpaid for the sites, can't repay his debt and is failing to maintain the part-occupied housing estates. The bank repossesses the property. The bank bundles Dick's former properties with other similar properties and sells it off. It is then up to the buyer of the develop or not the properties.

Silverbling

Victor wrote: »

I don't think there is a shortage of zoned land. Development costs councils money and the developers should pay for that.

There is a shortage of banks willing to lend for residential property.

And who will pay for that? Assuming 25% of the population rents, that's about 360,000 properties or a cost of €4,320,000,000 per year - that would build 20,000-30,000 units per year.

The advantage of the rent a room scheme is that it better utilises otherwise under-used properties. Applying it to all rental properties would be a poorly focused use and not value for money.

It may not be a long term solution but it would help with the immediate crisis and has to be a cheaper option than paying rent allowance or paying for emergency homeless accommodation

Something needs to be done and fast, I am in South Dublin so only see the problems here, if the govenment do not do something soon it will become so big a problem it might not be able to be fixed for years.

Value for money is not a factor, all long term warnings were ignored, it is having a massive knock on effect, the Dubs move down the country which pushes up the rents which makes more people unable to pay their rent which puts them at risk of being homeless, I looked into moving, there are no school places available so you have to homeschool

This situation is about more than economics, we are coming out of the recession slowly, I can see it in my sales but the focus should be on the next tax paying generation, home schooled homeless kids are not the way of the future

golfwallah

Victor wrote: »

I think you're fundamentally misunderstanding what is happening. those funds are ultimately owned by investment and pension funds, in which many people have invested. So it isn't just the privileged few.

Imagine Tom lost his job in the recession and has fallen behind in his mortgage. With no repayments for several years and no immediate prospect of things improving, the bank repossesses the property. The bank then sells the individual property. Typically, it will be bought by a family or a landlord willing to rent it out.

Meanwhile Dick, a former developer, has 10 sites and a number of semi-complete estates in Laois that are selling slowly, due to their poor location. He profoundly overpaid for the sites, is having difficulty repaying his debt. The bank bundles Dick's debt with other similar debt and sells it off. It is then up to the buyer of the debt to manage the debt.

Finally Harry, another former developer, has 10 sites and a number of semi-complete estates in Leitrim that are effectively unsellable. He profoundly overpaid for the sites, can't repay his debt and is failing to maintain the part-occupied housing estates. The bank repossesses the property. The bank bundles Dick's former properties with other similar properties and sells it off. It is then up to the buyer of the develop or not the properties.

This report in today's Sunday Independent article doesn't sound like a sale to a pension fund to me:

a bulk sale to Finsbury Circle Nominee Ltd, a fund set up by Davy Stockbrokers on behalf of a client.

All Edmund Honohan is saying, based on his considerable experience as Master of the High Court, is that there are ways of disposing of such re-possessed houses that would better serve the public good - and I still think he is on the right track. He has displayed considerable courage by speaking out - pity there aren't a few more like him in high positions!

hmmm

golfwallah wrote: »

But it will help by taking a lot of ineffectiveness and profiteering out of the current practice of bundling repossessed houses for sale to vulture funds, which only serves to enrich a privileged few. Surely, you’re not proposing ignoring this issue by doing nothing about it?

You could have saved us a lot of time at the start by saying this was a left-wing soapbox about capitalism and nothing at all to do with "fixing the housing crisis".

Personally I'd much rather have large professional landlords renting hundreds of houses, rather than putting up with every gob****e Tom Dick & Fintan and their bloody "buy to let pension". But whether it's them or a company renting properties makes no difference to the stock available.

Villa05

golfwallah wrote: »

A much simpler and novel way to make a significant immediate difference in public sector supply has been put forward in today’s Sunday Independent, by Master of the High Court, Edmund Honohan SC (brother of Patrick Honohan) – “nationalise repossessed homes”:


Sounds like a good, workable solution to me – he has put out this challenge to political parties in advance of the general election – will tell us something about political will in this country of ours as to whether our politicians will rise to the challenge – or even come up with more workable initiatives.

Something similar suggested here back in April

There is a complete lack of supply of council housing. If the government are to pay the mortgage. Let the state be the owner of these properties
Solve the council housing issue and keeping people in there homes (within reason of course, no mansions)

Plus these mortgages are highly distressed, they should be purchased at way below mortgage value. 40 cents on the Euro. Something similar to NAMA.
State gets housing at a fraction of there build cost and spread all over the country not in one big estate which caused issues before.

http://www.boards.ie/vbulletin/showpost.php?p=95091035&postcount=464

BoJack Horseman

If I had the choice of paying my mortgage vs surrendering it to the government and paying them rent at social housing rates I would chose the latter.... as would a great many people I imagine, it would work out a helluva lot cheaper for us.

And doing this will not increase the amount of available properties at all.

Villa05

BoJack Horseman wrote:

If I had the choice of paying my mortgage vs surrendering it to the government and paying them rent at social housing rates I would chose the latter.... as would a great many people I imagine, it would work out a helluva lot cheaper for us.

Social housing rates are income dependent plus the state becomes the owner of the property.

Villa05

BoJack Horseman wrote:

And doing this will not increase the amount of available properties at all.

Outside of Dublin, do we have a shortage of property?

Is it rather the supply of affordable property rather than property full stop?

BoJack Horseman

Villa05 wrote: »

Outside of Dublin, do we have a shortage of property

In some places, yes..
Where I am there certainly is, especially in the rental sector.

Godge

golfwallah wrote: »

Nobody is saying that it won’t cost money.

You said in the thread title that it wouldn't increase tax or borrowing, yet I do not see how it cannnot.

It looks to me like an overly simplistic solution that costs a lot more than the proponents say it will.

BoJack Horseman

Villa05 wrote: »

Social housing rates are income dependent plus the state becomes the owner of the property.

Yup.... I know that... And it will certainly save us a lot of money.
I've no issue with the government taking the house.
Its in about 200% negative equity... they would be welcome to it.

The mentioned policy would just need to clarify how long it would take us to no longer pay our mortgage & we'd be set.

Zubeneschamali

golfwallah wrote: »

All Edmund Honohan is saying, based on his considerable experience as Master of the High Court, is that there are ways of disposing of such re-possessed houses that would better serve the public good

Edward Honohan is Master of the High Court. He is not a judge. He deals with procedural matters before cases get to a real judge. There is no reason to suppose he is an expert on what would best serve the Irish people.

He has also been slapped down by the actual judges for acting irrationally.

emmet02

Is the title of this thread not massively misleading or am I just totally missing something?

How does the suggestion voiced by Honohan 'fix' the housing crisis?

golfwallah

hmmm wrote: »

You could have saved us a lot of time at the start by saying this was a left-wing soapbox about capitalism and nothing at all to do with "fixing the housing crisis".

Personally I'd much rather have large professional landlords renting hundreds of houses, rather than putting up with every gob****e Tom Dick & Fintan and their bloody "buy to let pension". But whether it's them or a company renting properties makes no difference to the stock available.

Godge wrote: »

You said in the thread title that it wouldn't increase tax or borrowing, yet I do not see how it cannnot.

It looks to me like an overly simplistic solution that costs a lot more than the proponents say it will.

Which is better:
– to deal with problems by putting left or right wing labels on them or face up and to try to solve them?
– To give up before even trying .... because of fear of the risks involved?

Sure, the one liner put down might make you feel good but it does nothing to deal with the real problem faced by a growing number of unfortunate families, who find themselves in a homeless situation.

My instinct is to look for solutions that are considered and measured – not reckless or driven by political ideology. There are enough smart people in this country to solve problems like homelessness. Certainly, there will be difficulties, but, at least, let us try to improve the current situation! There must be more options around than the current limited approach of below market housing allowance combined with putting families up in temporary B&B hotels.

Maybe we should look at this apparently “unfixable” homelessness problem from a number of different angles. The legal / legislative angle was put forward by Edmund Honohan SC in yesterday’s Sunday Independent and merits serious consideration, in my view. You can also look at the problem from a cost / benefit angle.

For example, cost of emergency B&B accommodation in Dublin in 2015 is running at about €9m / year http://www.echo.ie/news/item/emergency-housing-in-hotels-costs-4-5m-in-first-six-months-of-year. How much could be raised in government bonds to arrive at a break-even point and how many houses could be acquired for this cost? Simple arithmetic gives an answer of €180m @5% = 600 houses at average of €300K or €300m @3% = 1,000 houses at average of €300K.

OK, it does mean additional government borrowing but will save the €9m a year spent on B&B and produce rental income before accounting for the future hidden societal cost of temporary B&B.

I’ve no problem with large professional landlords gradually taking over more of the market (through buying repossessed houses), which may be happening right now. But what’s wrong with councils taking up a portion of such transactions on a purely cost / benefit basis.

Godge

golfwallah wrote: »

Which is better:
– to deal with problems by putting left or right wing labels on them or face up and to try to solve them?
– To give up before even trying .... because of fear of the risks involved?

Sure, the one liner put down might make you feel good but it does nothing to deal with the real problem faced by a growing number of unfortunate families, who find themselves in a homeless situation.

My instinct is to look for solutions that are considered and measured – not reckless or driven by political ideology. There are enough smart people in this country to solve problems like homelessness. Certainly, there will be difficulties, but, at least, let us try to improve the current situation! There must be more options around than the current limited approach of below market housing allowance combined with putting families up in temporary B&B hotels.

Maybe we should look at this apparently “unfixable” homelessness problem from a number of different angles. The legal / legislative angle was put forward by Edmund Honohan SC in yesterday’s Sunday Independent and merits serious consideration, in my view. You can also look at the problem from a cost / benefit angle.

For example, cost of emergency B&B accommodation in Dublin in 2015 is running at about €9m / year http://www.echo.ie/news/item/emergency-housing-in-hotels-costs-4-5m-in-first-six-months-of-year. How much could be raised in government bonds to arrive at a break-even point and how many houses could be acquired for this cost? Simple arithmetic gives an answer of €180m @5% = 600 houses at average of €300K or €300m @3% = 1,000 houses at average of €300K.

OK, it does mean additional government borrowing but will save the €9m a year spent on B&B and produce rental income before accounting for the future hidden societal cost of temporary B&B.

I’ve no problem with large professional landlords gradually taking over more of the market (through buying repossessed houses), which may be happening right now. But what’s wrong with councils taking up a portion of such transactions on a purely cost / benefit basis.

The EU rules on fiscal surpluses don't allow for such measures.

golfwallah

Godge wrote: »

The EU rules on fiscal surpluses don't allow for such measures.

There are always problems and negatives.

How about getting into solution rather than problem mode?

It's usually a process of recognising step by step possibilities and then joining the dots (or looking for ideas as to how they can be joined)!

Godge

golfwallah wrote: »

There are always problems and negatives.

How about getting into solution rather than problem mode?

It's usually a process of recognising step by step possibilities and then joining the dots (or looking for ideas as to how they can be joined)!

Solution is to grow the economy to create the fiscal space for housing measures.