Last month the Minister for Finance Paschal Donohoe was reported to have said that EU state aid rules could not be changed to allow states to invest in the delivery of social and affordable housing. Perhaps the Minister was quoted out of context. But there is nothing to stop a change in EU state aid rules to allow the member states of the EU to invest in the delivery of this essential need except the political will to do so.
Indeed, there is no state aid rule stopping the Government right away from investing in the delivery of social and affordable housing.
The delivery of social and affordable housing is, under state aid rules, a “service of general economic interest” which is exempt from state aid rules. Once the Government has formulated its scheme to deliver housing where there has been a manifest market failure, as there most definitely is in Ireland, there is no EU impediment.
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But there is more our Minister for Finance could do to assist in our housing crisis, especially as he is the chair of the Eurogroup. During the Covid pandemic fiscal rules were suspended to enable member states to deal with the emergency for the public good. These rules are now being reformulated.
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As the crisis in housing effects more and more cities in the European Union, new rules must be formulated to make it easier for governments to put finance for both social and affordable housing off balance sheet. The Eurogroup is also working on the future of Banking Union and on the Capital Markets Union. These frameworks are relevant also to how the EU will deal with finance for housing.
The European Central Bank, in addition, has a role to play. Through its policy of quantitative easing and low or negative interest rates international money flowed into housing in the European Union to make a return.
Where there is a clash of values with rules: the rules must be changed
But the movement of capital was not interested in building homes for families. It was looking for the investment that would extract the biggest profits. The most lucrative return was found in high rise, high density, low standard build-to-rent developments of one bedroom, two bedroom and studio apartments. This policy has not delivered homes to buy or rent at the scale or at the level of affordability required.
In ensuring the stability of financial markets the European Central Bank has unwittingly enabled our housing crisis to develop. It should look at its rules and institute credit guidance policies that discourage bank lending for real estate speculation. It could co-ordinate with fiscal authorities to foster real economic activity, not speculation. It could also encourage member states to tackle the financialisation of housing by eliminating subsidies for international real estate funds.
The European Commission too has a role to play by setting affordable housing as an essential policy goal. Already the Commission has highlighted the importance of affordable housing in the European Semester. It should do everything that is required to remove any possible excuse that member states cannot recite state aid rules as a reason to block the delivery of social and affordable housing.
The debate on housing in Ireland largely focuses on the micro such as delays in planning permissions, HAP payments or cost rental delivery. These are important issues. But, as homelessness increases, rents rise and housing comes under unprecedented pressure from the arrival of many Ukrainian refugees, we also need to focus on the macro framework of financing the delivery of housing.
Some time ago the European Parliament produced an important report on “access to decent and affordable housing for all”. The report draws on the Charter of Fundamental Rights, the UN Universal Declaration of Human Rights, the Sustainable Development Goals as well as the European Union’s foundation treaties to address the many faceted nature of the housing crisis and what needs to be done.
The underlying message in this report is that rules can be changed but our values are what make these rules. Our values are set out in the Treaties and other fundamental texts. Where there is a clash of values with rules: the rules must be changed.
The European Parliament report was adopted last year with the unanimous support of all 13 Irish MEPs. So, now that we have a national agenda in Housing for All we also have the makings of a European wide agenda. But to deliver we need political will. Do we have it?
Anne Barrington is chair of O Cualann Cohousing Alliance