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Affordable housing and the Irish Times… a new and unusual view… August 5, 2008

Posted by WorldbyStorm in Housing.
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Briefly, from a piece in Friday’s Irish Times…

RECENT DEVELOPMENTS in the property market raise some interesting questions about the Affordable Housing Scheme, which provides discounted homes to lower-income buyers.

Okay.

For example, is the Affordable Homes Partnership’s (AHP) latest strategy of snapping up hundreds of houses and apartments on the open market simply bailing out builders desperate to offload a glut of unsold stock?

Fair point. No reason for the state to subsidise, yet further, the builders after their golden decade or two. But wait…

However, over the last few months the AHP, which co-ordinates and promotes the delivery of affordable homes, has entered into agreements with developers who are prepared to provide discounted houses or apartments for sale to eligible affordable home purchasers. So far the purchase of several hundred properties has been negotiated in locations such as Leixlip, Celbridge and Santry, and the target for the year is in the region of 600 properties.

Okay.

AHP chief executive John O’Connor is quick to reject the suggestion that builders are jumping on this as an opportunity to shift substandard or undesirable properties. “We look to purchase in a development where there is some level of sales happening,” he says. “We wouldn’t want to be in a development where the only sales happening are affordable housing sales.” He adds that a thorough vetting process is carried out. Each property is inspected by an architect, and the AHP assesses its quality and location.

And it continues:

But with house prices on a downward spiral, O’Connor accepts that the gap between discounted affordable housing and open market prices is narrowing in some cases. So is the concept of affordable housing still relevant?

After all, you may pay more for a property on the open market, but you have none of the restrictions that come with affordable housing. Buyers of an affordable home must live in the property and if they sell within 20 years a clawback must be paid to the local authority, based on the percentage discount received when buying the home. Therefore some people may be better off avoiding the affordable housing route altogether.

Yes. Indeed. The key issue of affordability, so central to “affordable housing” appears to have escaped the correspondent. And a – no doubt at this stage of his interview – puzzled John O’Connor accepted that:

“If someone can afford to purchase on the open market, I’d advise them to take that route,”

But he also noted the blindingly obvious.

…he insists that the need for affordable housing remains: “Even with the [ property] price reduction, a lot of people still can’t afford to buy on the open market.”

A lot he says. Or perhaps somewhere between ‘many’ and ‘most’.
And curiously the article itself supports his contention as when it notes:

However, the most common gripes about affordable housing are the oversubscribed waiting lists. “When I came on to Cork City Council initially in 2004, the affordable housing list at that time was in three figures,” says Lynch. “It’s now gone into four figures.”

And that:

The situation is even more extreme in the capital. Between the four Dublin districts, there are about 13,000 applicants on waiting lists (although some applicants put their name down with several authorities).

Not only, but also:

Last year, 3,500 affordable homes were sold, and the AHP wants to increase this to 5,000 a year. O’Connor says that the waiting time is high if you’re holding out for a prime property in a highly desirable area, but those who are flexible and keep their options open can expect a waiting period of a 18 months to two years.

Two years says the head of the AHP. Perhaps, after all, for a vast number of people, say taking the Dublin area alone 13,000 (and let’s be serious, a lot of people don’t sign up to it despite wanting to because a waiting period of ’18 months to two years’ is actually a rather optimistic reading of the situation) the ‘the concept of affordable housing still relevant’.

The curiosity of this is that if someone, say a journalist writing about the issue of housing and affordability, had looked at the Irish Times from the previous day they would have read that:

THE AVERAGE cost of a new house was just over 3 per cent lower in the first three months of this year than in the same period last year, according to new figures from the Department of the Environment.

And that:

Prices of second-hand houses suffered a sharper fall of 5.4 per cent, but the greatest decline was in the price of second-hand houses in Dublin which were 10.4 per cent lower in the first quarter of the year than in the same period of 2007.

Now, I’m no genius when it comes to maths. But I don’t really think that either a 3% or 10.4% drop in house prices in Dublin (and we can presume that in other parts of the country the falls are reasonably proportionate) is suddenly going to ease up affordability of these dwellings (great word) for people who would see the affordable housing schemes as the way forward. Indeed if we look at the figures in the article we see that:

Shammy Khan, head of mortgages at EBS, says that the typical price discount that their affordable homes customers receive from their local authority is about 32 per cent. For example, a property worth €400,000 on the open market might be made available to an affordable home buyer at a purchase price of just €272,000.

So, how long is it going to take even if 10% drops in the price of houses on the ‘open’ market continue unabated for the price to equalise with those properties available on the affordable schemes. Don’t hold your breath is my advice.

Or as a Labour spokesman suggested in the same article:

Although property prices have fallen in the last 12 months, in Dublin and Cork they are still “way, way off” what would be considered reasonably affordable. As long as house prices remain higher than four or five times the average industrial wage, there will be a role for affordable housing, he says.

And let’s not even get into the issue of how the affordable housing schemes are merely the tip of an iceberg that represents many tens of thousands of people who can’t access them at all due to significantly lower wages again. Or that such schemes are, and this has been dealt with previously, far from immune to criticism. A society where housing is, through the media, reified but one where the state takes an essentially hands-off approach is one where the term hypocrisy seems applicable. The idea that such limited measures as are available are somehow not ‘relevant’, when they in themselves barely scratch the surface of the problem, is simply willfully counterintuitive.

You’ve got to wonder about the IT. You really do.

Comments»

1. Joe Holt - August 5, 2008

Did I read some time ago where Kingspan (I think) won a contract to supply affordable homes in the UK for £60k. I don’t know anything about the standard of house or whether they were ever built but £60k (or €90k) seems reasonably affordable

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2. Forrestreid - August 5, 2008

My understanding is that you will not even be ALLOWED to join the affordable housing list in Dublin City Council (when the list re-opens this Autumn after several months being closed to new applicants) unless you have a minimum income of at least close to the average industrial wage.

Talking about how big the waiting lists are in those circumstances is pretty meaningless when for so many simply getting on the waiting list is an impossible dream!

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3. WorldbyStorm - August 5, 2008

I think I heard about something like that as well Joe…

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4. WorldbyStorm - August 5, 2008

Very true Forrestreid, and it makes a mockery of the IT article.

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