As negotiations around the formation of a government rumble on, the housing and homelessness crisis is deepening. Everyone is talking about rent increases, social housing waiting lists and emergency accommodation. These issues all, one way or another, have their roots in the lack of social housing.
During the election campaign, many left and progressive candidates argued strongly for a massive increase in investment in social housing. From a housing-policy perspective, it is absolutely necessary to make the case for greater investment.
However, advocates for more investment in social housing all too often ignore a key aspect of Irish housing policy: tenant purchase schemes.
Tenant purchase is a long-standing aspect of Irish housing policy and dates back to 1936. It is a scheme that allows tenants in social housing to purchase their homes. They can also avail of a discount, to reflect the rent they’ve been paying.
This means that the household in question goes from being a social tenant to being a homeowner, and the house itself goes from being a part of the social housing stock to part of the private, owner-occupancy sector.
The figures around tenant purchase, though seldom quoted, are truly concerning.
During the boom years, between 1997 and 2006, 43,218 new local authority units were added to the stock. During the same period 17,197 units were sold to tenants. In other words, over 43 percent of new output was lost through tenant purchase.
If we look at the years since the crash, the picture is even more disturbing.
Between 2011 and 2014, local authorities added 2,364 units to their stock. Over the same years, they sold 2,233 units. Tenant purchase sales were equal to 94 percent of new units. And this was in the middle of a chronic housing crisis.
Tenant purchase means that when it comes to investment in social housing, we are always running to stand still.
A particular problem with tenant purchase is that it involves a steep discount for the tenant.
After living in a dwelling for 10 years, tenants can avail of the maximum discount. This is usually supposed to be 30 percent of market value, but a new tenant purchase scheme introduced by Labour’s Alan Kelly last year provides for discounts of up to 60 percent.
Some commentators believe, however, that in practice the discount is much greater, because of conservative estimates of market value. Either way, the unit is sold for far below market value and therefore below the cost of replacing the unit.
While the tenant has indeed paid rent, social rents are quite low in Ireland and often cover only maintenance costs. This means that public investment in social housing is continuously depleted as we sell off stock at a discount.
A large part of investment in social housing in this country is thus actually an investment in subsidised home ownership. Tenant purchase also plays a key role in considerations around how we finance social housing.
In countries where social housing is not sold to tenants, it eventually starts to produce a return and, moreover, can be used as equity to draw down private finance for investment in social housing. It is very hard to design a sustainable model of social-housing finance if the very thing we’re investing in is constantly sold off.
There are positives to tenant purchase.
It may well represent one of the most significant instances of transferring wealth to working-class people in Irish society. There are also arguments that tenant purchase helps to stabilize working-class communities by increasing tenure mix, in other words creating a mix of home owners and social tenants.
However, a large portion of those who acquire their homes through tenant purchase then sell them and move elsewhere. Between 1999 and 2015 (up to November), Dublin City Council had 10,254 applications to resell homes bought under tenant purchase, an average of 603 a year. It allowed the resale of 8,793 of them.
Tenant purchase is thus a great scheme for transferring wealth to working-class people in the form of home ownership. However, it is a terrible scheme from a social housing perspective and for the housing system as a whole.
Many in Irish society think that tenant purchase is fair and commendable. Indeed, many political parties campaigned to extend tenant purchase in future. For example, Fianna Fáil’s election manifesto promised a give-away bonanza with a new tenant purchase scheme for 150,000 tenants.
Meanwhile Labour’s Alan Kelly (the acting Minister for the Environment), announced plans last year, referred to above, for an extended tenant purchase scheme. (A plan that was subjected to a blistering critique in the Irish Times by Simon Brooke of Clúid Housing Association.)
The Workers’ Party was the only party I could find that takes a strong stance against tenant purchase. Sinn Féin’s housing policy notes that the scheme has “positive and negative aspects”, and commits to a stay on the scheme while the housing crisis continues, and to future reforms.
However, most left-wing political parties stay away from the issue, as tenant purchase is extremely popular among the scheme’s potential beneficiaries, who are also a key constituency for the left.
Abolishing tenant purchase is a bit like increasing taxation. It’s fairly obvious we need to do it to have decent public services, but there is no short-term political gain in advocating for it.
This why we need a strong civil society and social movements that can shape housing policy beyond the narrow confines of electoral politics.