Ibec’s pre-budget submission runs to 55 pages and covers a wide variety of issues – from proposed changes to personal taxation rates to the business case for a national infrastructure fund.
The theme of the document is quite clever, and in many ways, sums up the paradox that is the Irish economy at present: “Harnessing Abundance”.
Essentially, as the Exchequer numbers show, the state has plenty of money coming in. The issue, however, is that it is increasingly clear that there is a capacity deficit in how to spend that money in the most appropriate way.
We have the funds. But we lack the capacity to deploy that money in a way that is effective and appropriate.
“We have failed to invest in absorptive capacity (eg, skills, housing, productivity, or infrastructure) for record private investment levels. This has led to systemic congestion in both access to physical assets like housing and to the ability of households to access services which reflect the dignity which should be afforded in a rich society,” according to Ibec.
It is hard to disagree. And the examples are everywhere – Francesca’s report on the legal battles over the potential price of the new national children’s hospital last week is a case study in Ireland’s longstanding inability to bring in capital projects on time and on budget.
However, if you really want to understand this infrastructural deficit, just look at Ireland’s housing malfunction.
It is an issue I have dwelled upon on a number of occasions in this column. But sadly, it remains the most significant issue in the country today.
It impacts where people can live, what sort of job they can aspire to, and much more besides. It impacts everything.
We all know there is a crisis. The government knows there is a crisis also. That much is easy to diagnose. But diagnosing the problem is entirely different from implementing a series of policy measures that could potentially solve it.
In the past week, I have spoken privately to two government ministers about it. Both are well aware that it is the issue that will move them from government to the opposition benches. And they have known this for a number of years.
Yet, even now, there is no clear plan for resolving the issue. Take the proposal, outlined by Minister for Housing Darragh O’Brien, of tax breaks for landlords.
On a superficial level, it makes sense. Small, almost accidental, landlords are fleeing the market. So, the government is proposing a series of incentives to make it financially attractive to remain in the market. However, O’Brien is not asking some basic questions.
For a start, is the withdrawal of one-off landlords impacting rental supply? Plus, are landlords leaving the market because of a lack of profit or for other reasons? For example, many sell up to acquire a larger family home.
This was something Stephen looked at in-depth in his column last week, where he effectively dismantled the case for tax breaks for landlords.
“There is little to no economic logic for giving tax breaks to landlords, and the people who need help – those providing new supply and those in rental accommodation – can be helped in other, more targeted ways,” Stephen argued.
Stephen looked at the arguments for tax breaks and took them apart – one by one. On the flight of the landlords, he pointed out that the total number of occupied rental properties in the 2022 census was 513,704, up from 469,671 in 2016, while the rents themselves have, of course, risen very rapidly. He maintained that we do need more rental supply, but it is not the case that the stock of rental properties is falling markedly.
“Subventing the profits of a class of people who have never, ever, done better does not seem like a good use of the taxpayer’s cash,” he wrote.
Tax breaks are popular, understandably so. But in this case, does it make sense to offer them in the hope of keeping people in the rental market? Either way, someone will be living in the property – either the tenant or the new buyer.
Instead, we need to build more homes. And this is where we are falling down.
As Ronan outlined last week, the scale of the problem here is only getting worse.
It is not often that I am shocked by a tweet, but Ronan’s summation of his column last week left me speechless.
“In today’s piece, I review the latest EU data on younger adults’ living arrangements and how it helps us identify Ireland’s housing deficit. As you can see, Ireland’s change in the last decade is extraordinary (esp for 25-29yos). It points to >250,000 missing homes,” he wrote.
Ronan has spent his life studying the data on housing. Based on his analysis, and I have not seen anyone contradict his theory, we are missing 250,000 homes.
As Ronan put it: “The housing deficit is not in three-beds on greenfield sites far from urban centres. The housing deficit is homes for one to two persons, typically apartments, in the heart of our cities and towns.”
Yet, it is these types of units that we are struggling to build. And the issue is only going to get worse.
Some of it is down to poor planning regulations. In other cases, it is down to economic viability.
We are simply not building enough homes. Tax breaks for landlords might generate a few votes. But it will not create additional capacity in the market.
Elsewhere last week, Stuart Fitzgerlad wrote about the collapse of his restaurant chain LEON. It was a piece that will resonate with lots of people, because it was so raw and honest. “A lot goes into the make-up of our business pioneers. It’s often about being in the right place at the right time, but old-fashioned luck is also in the mix. And as I discovered with LEON, when luck runs out, you have a problem,” he wrote.
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