Focus On the Root-Cause



I woke up early this morning and scanned a few articles on LinkedIn. The first on the government’s attempts on addressing the rental crisis and the second on lack of units for sale in Ireland. The ideas presented for dealing with the rental crisis and comments relating to the lack of houses for sale frustrated me.

At my first job after college, I attended many training and development courses, from negotiations, project management, leadership, however, the course that stands out to me today is problem-solving. While I firmly believe common sense is the best tool to solve a problem. The course focused on first finding the root-cause of the problem.

It seems like the government is focusing on proposals that pander to some voters rather than trying to fix the root-cause. It would also appear that the public still thinks profit and developers are bad words and this is why the government is afraid to address the root-cause. We all know that the issue of the rental crisis, increased values and little housing stock are the lack of newly constructed units. However, rather than trying to increase supply, the government is proposing further rules on landlords. Such as restricting rental deposits and removing loopholes which allow landlords increase rent after they have carried out refurbishments. God forbid a landlord expecting to make a return on their investment. Calling this entitlement a loophole is plain wrong, while a small number of owners may use such a rule for their advantage the majority do not. The government is focusing on a limited number of stories that hit the headlines to drive their policy.

Changes that affect a landlords ability to manage their investment correctly will just result is more owners turning to short term lettings or getting out of the game altogether, which will compound the problem.

The government’s refusal to tackle the supply issue and to refuse to introduce VAT reductions on newly constructed homes even for a short term. Screams to me that the government are still afraid to be seen to helping out developers, regardless if it is the right thing to do. Reducing VAT will make more developments feasible without increasing the price paid by the buyer. A mere fact the government refuse to see.

Judging by comments on articles and social media the government is right to be fearful as many seem to blame developers and estate agents for the current situation still. As somehow in Ireland, an estate agent trying to maximise the value of their client’s property and a developer taking huge risks hoping to make a profit is wrong. People are entitled to their views, but the government are allowing this sentiment guide their policies on housing.

Nearly all the government’s recent policies or suggestions are restricting supply further and are not addressing the root-cause. Some examples:

Rental Caps= Reduces investors willingness to enter the market and provide rental accommodation. Increases the attractiveness of short term lettings for landlords. Promotes tenants to remain in one location regardless of their needs. While helping tenants manage rental growth, it does not address the root-cause and adds to the problem.

Vacant Land Tax = Increase developers costs and could delay construction as additional costs could reduce feasibility. Increases housing prices in the long run as costs will be passed to the end user. If a development is currently not feasible adding a vacant land tax to the costs will not promote development. Again this is not a policy that promotes supply or addresses the root-cause.

The government needs to focus on increasing supply, and all policies should support supply not add to the uncertainty. The government should not be focusing on small issues like deposits or landlords carrying out repairs. Let’s hope the government’s plans due to be announced in the coming weeks are focused on supply.

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