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Why the housing crisis is going to continue for decades, not years.

This article first appeared on RTÉ BRAINSTORM @RTÉBrainstrom at this link

Thomas Friedman published a book called ‘The World is Flat’ in 2005. It has become one of the most quoted books of the 21st century. However, the idea that the world is flat is really only in certain economic areas such as where goods are standardised. The world is also simultaneously becoming spikey in areas where the knowledge to produce creative ideas and innovations is becoming more complex and detailed. In fact, even with advances in transport technologies and the internet, economists argue that the world is steeper and spikier, than it is flat. Standards of Living, firm productivity, patent activity and quality of life measures are very different between and within countries.

What has this got to do with housing you may ask? Well, the spikes in these measures are happening in urban areas. Cities of higher, more densely confined populations are driving prosperity. Even with better technologies in transport and computers, people require face to face interaction and this overwhelming fact is shaping how we live and where we want to live. The past century has seen a large migration of the human race from rural to urban areas. By 2050, Eurostat predicts about 80 per cent of the European population will be living in Urban areas. Despite this fact, Irish planning policies tend to fight against the move towards urbanism. The ESRI in a report in 2016 on ‘Housing Supply Issues’ noted that although housing completions have increased since 2013, 60 percent of new units completed since then have been in areas outside the major urban centres. The report further identified that in Dublin, an average of 600 new units per quarter, or less than 2500 per year have been completed. This is significantly less than the quantity required with an estimated 25, 000 extra units needed each year in Ireland, in the short to medium term, to meet demographic change. A comparison of the current levels of completions indicates constraints to supply in city areas, which may include a lack of development sites and higher development costs.

In Cork, our councillors are actively constraining advancement of the city with an ongoing city boundary dispute between the city and the county council. Protection of county interests appear to be driving the resistance to change. From 1971 to 2016, over 100,000 houses were completed in County Cork and less than 30,000 were completed in Cork city. For 50 years, largely, we have been building houses where people do not want or need them. And, in locations that are further from people’s places of work. We have constrained the supply of development land around our cities in favour of development towards more unsustainable locations in more rural commuting towns. And, further by constraining the supply of land, we have transferred the wealth created from younger families to landowners. Before the financial crisis, house prices rose to three times what they were in 1995, in real terms. This was the largest increase in the OECD. We transferred a high proportion of our increases in wealth into pieces of land. Collectively, it is sheer madness. We are turning land into gold. From this, you would think land is scarce. In the 2011 census, urban areas only represented 2.4% of the total land area in Ireland. We are not covering the countryside in concrete. In fact, most urban areas are made up of green spaces we enjoy such as gardens and parks.