There is a lot of debate about the impact of the shortage of social housing at the moment, so I thought that this UCD Geary Institute for Public Policy working paper on the funding of this sector might be of interest:
In it my colleague Mick Byrne and I argue that the causes of our current difficulties in funding and delivering social housing are older and more complex than is commonly understood. Rather than policy decisions made during our most recent economic crisis, they are the result of reforms to social housing financing methods initiated during our last major economic crisis in the mid 1980s.
For most of the 20th Century social housing was funded by local government borrowing which were repaid using rents (which reflected the cost of providing housing), rates (local government property taxes) and central government subsidies. This financing method made social housing delivery affordable for government by spreading out the cost over an extended period and drawing on several sources of funding. This enabled government to build large numbers of social rented dwellings even during periods when the economy was weak such as the 1950s and to use social house building as a counter cyclical economic intervention.
The replacement of this funding method with central government capital grants as part of Ray MacSharry’s package of budgetary reforms in 1987 changed social housing into a pro cyclical intervention. From then on central government has paid all the cost of building/buying social housing in an up-front lump sum and to paraphrase another finance minister this meant that ‘when we have it we spend it’ and vice versa. In relative terms social housing output was well below historic norms in the 1990s; although it rose again during the property boom, the value for money achieved in return for housing investment at this time is open to question and of course output collapsed in tandem with the economic collapse from 2007. Inadequate social housing output also necessitated increased reliance on rent supplements and other housing allowances for benefit dependent private renting tenants which help to inflate rents and enabled the radical expansion in buy-to-let lending which was a key driver of the house price boom.
Merry Christmas and happy new year everyone. I hope 2017 will finally see homes provided for those who are without them this Christmas.