By Padraic Kenna. Housing in Ireland raises ethical issues, though for historical reasons we tend to see them almost exclusively as practical (or ‘economic’) ones. There is no other broad area of Irish society where public trust in institutions has been more corroded. Housing has been central to the collapse in Ireland’s State and personal finances and in respect for the public interest (such as it ever existed). Its supply, distribution financing and profits are at the heart of fairness in this country. Of course, most people in Ireland have no clear views on ethics or the absence of ethics in our housing system. Indeed our housing policies have generally been more about extending property ownership, boosting the construction industry, increasing public spending (in counter and pro-cyclical styles), facilitating lending and rewarding or providing for particular groups in society. In 1965, an American academic, based at the Institute of Public Administration, studied the Irish housing system and concluded that it was the most heavily subsidised in the world. If he returned today and made similar investigations in relation to the housing tax reliefs over the past 20 years, absence of tax on betterment and development, rent and mortgage supports, and the colossal State bailout of loans on development land, he would probably be shocked. Calculating how much of the Irish State €64 billion bailout bill is related to residential development land would give us some idea of the extent of these market subsidies. Clearly, nobody is doing that kind of economic research these days. However, these market subsidies to lenders, developers and landowners are politically acceptable, although rarely discussed. When house prices reach a level at which significant numbers of new households are unable to afford homeownership or even home rental, governments are faced with a dilemma, described by Pfretzschner in 1965: “Either [a government] can take the steps to raise the level of wages, pensions and benefits sufficiently so that each family can afford to pay an economic rent, or it can take steps to provide the shelter, or to assure its provision, and absorb the loss itself, meaning that the burden of the loss is passed along in the form of higher taxation and/or rates to the rest of society”. Of course, today, states have developed many effective instruments to direct the housing system, through planning, taxes, regulation etc, although in Ireland many of them are only marginally acceptable even in the wake of the Irish housing market fiasco. As long ago as 1879, Henry George pointed out that as the productive output of countries increased, such as in Ireland during the past 20 years, much of the increased wages and salaries can get swallowed up in housing costs. The huge increase in productive power does not result in increased real standards of living, but rather in an increase in the value of land. Indeed, the increase in land and housing costs prevents increasingly productive citizens from enjoying ethical increases in living standards and developing their full potential. In Ireland, the long commute (so as to afford a decent-sized home)and the absence of quality family time, as a result of expensive urban housing, is well established as a legend of our Celtic Tiger housing bubble. What is remarkable is that building costs have not increased that much at all, yet access to a decent home costs more and more in terms of multiples of annual earnings. Here, the hidden price of land and the profits of the developer are concealed. Henry George in ‘Progress and Poverty’ (1879) states that “all the advantages gained by the march of progress go to the owners of land”. A house and the land on which it stands are treated as property by the law, – “yet in nature they differ widely”. The “one is produced by human labour” and the other is part of nature. Lawyers look on the private ownership of land as the foundation of society. Yet, most people believe that it is unethical that owners of land should benefit from publicly funded and organised improvements in its location, connection to services, planning and zoning. People’s homes and front gardens cannot be regarded as the same as development land. Indeed, the Kenny Report in the 1970s suggested that local authorities be given the power to designate land required for development and the right to acquire this land at a price 25 per cent above its value in its existing use. The All-Party Oireachtas Committee on the Constitution Ninth Report on Private Property (2004) called for a “new mindset” in how we look at development land in Ireland. It suggested that the community should benefit from the “betterment” of land created by zoning, planning, infrastructure connections etc. A planning-gain levy was mooted in the 1990s. This has now been enacted, with surprisingly little public awareness, in the NAMA Act 2009, which introduced a “windfall tax” on disposals of development land, to the extent to which they are attributable to rezoning. Capital Gains Tax is exacted at a special rate of 80%. The danger in Ireland is that this will be insidiously removed sometime soon on grounds that it might raise prices. This particular issue should be an ethical not a practical one. A recurrent property tax on all land zoned for development where the land was not being developed was proposed by the Commission on Taxation in 2009. The idea of a site value tax (SVT) on land (including where homes have already been built) is to capture the underlying value of developed land. In general, the value of a site derives from its location and accessibility to publicly funded or subsidised services, facilities and utilities”. No SVT has been introduced in Ireland, though it was promised in the programme for government. Whereas a value-based property tax like the one the coalition in the end pursued has the ethical purpose of spreading wealth, a site value tax serves the practical end of promoting economic land use. Indeed the economic imperative is so
