I woke up yesterday to sadness and frustration to see reports in the Business Post article of my ex colleagues in the Department of Finance admiting that the Department of Housing got their targets wrong in Housing for All. Everyone can make mistakes but this expensive one could have been avoided easily. I am others pleaded with the Minister at the time to use higher targets. But we were not listened to. That has been at huge costs to ordinary people and given windfall profits to investors and sellers.
But it is not too late to get better results as I explain here.
It has just resulted in a shocking waste of resources and missed time to really get on top of the crisis so the mistake has still been an expensive one.
When you announce to the world that you intend to build too few houses across the state, you tell the market prices will keep going up. They agreed. Property company share prices did not fall when Housing for All was announced.
It was simply market economics. Everyone knew there were not enough homes to meet demand and so prices would naturally rise. But it was worse (as this is the property market not just any other).
Those owning homes who were going to sell then pulled back making supply even less driving prices up even more.
Those who might have slowed down their purchase panic against rising prices and demand goes up even more.
Investors know rents are also going up so pay a premium today to have the apartment they can rent at a shocking overvalue.
And icing on the cake, the government who is also a buyer, renter and/or supporting people to buy or rent is also overpaying and pouring good money down a drain (or more accurately into sellers and investors pockets).
No one could make it up in their worst dreams.
People can make honest mistakes or there could be a bubble oblivious to the mistake as happened somewhat for the last crisis.
But, that was not the case this time.
I read and wrote numerous papers after the last crisis about the importance of listening to minority contrary viewpoints.
I tried to shout. Others did too. But the Department of Housing was deaf to those pleas.
I did it privately to the Department and the Minister in May 2021 before the Housing for All strategy was finalised. In a letter which the Department has refused to release under freedom of information, I made the point that:
"I worry if we displace necessary action on the demands of the medium term by focussing mainly on short term delivery giving the impression of action. Without proper scale, action alone will not solve the problem."
I tried to raise a red flag again publicly in interviews after I saw the contents of Housing for All, including the interview below hoping the message would get through in time for a change of mind before it was too late.
I might still suspect that they were trying to pitch targets at the very low edge of the range so that annually they could celebrate beating the targets. Perhaps they believed that was the way to restore confidence but it was not. I had seen something similar in another all too low target in the Action Plan for Jobs back during the troika period.
Had they listened, they could have put out the real target, admitted it could not be done immediately but introduced and explained a credible plan to meet the surge in delivery needed. After all in the early 2000's we were building over 50,000 homes a year.
It was something like that which I advised the Cabinet to do over two nights to do in 2011 for the PCAR bank recapitalisation to restore confidence in Ireland. They agreed albeit knowing how hard it would be. But as soon as three months later, as our actions built confidence in our ability to deliver our plan, Irish government interest rates started to come down.
Had they so done, a lot of pressure for more delivery from local authorities and the LDA would have occurred.
More land would have been zoned in the recent development plans.
The sellers above would have sold out quickly afraid prices might fall - thereby increasing supply temporarily while biulding was catching up.
The buyers who could would have waited for prices to level off or fall - thereby reducing demand.
The investors would have known the day of super rents was coming to an end and would immediately have reduced the premium to value they were willing to pay.
The rental market would still have been rough until supply caught up but at 50,000 units not 30,000, the end was in sight much more quickly.
Prices would have fallen.
And lo and behold, the government would have been buying and supporting purchases too at a lower cost.
It is not too late to correct the mistake.
But it has been costly and avoidable and there needs to be accountability and an understanding who exactly made the decision to ignore the contrarian views and evidence back in 2021.
Anyone interested in a further explanation from 2021, might like to listen to this interview:-