February 2014        

No recovery for working people

Has the time arrived for unrestrained rejoicing? Have those mighty men and women of the coalition rescued us from economic and social calamity? Can we trust indicators that are supposedly pointing to recovery?
      The Taoiseach gravely tells us we have exited the bail-out; hip hip hooray! Michael Noonan welcomes a report that the Republic’s government is no longer suffering under the lash of the Moody Blues, as our bond status has been upgraded from junk to investment level by the influential credit rating agency; more hip hooraying.
      Nor do the celebrations end there. Frank Daly, chairperson of NAMA, has boasted that the Irish property crash has ended; so hats in the air as well as hip hip hooraying.
      However, before we decide to put gilded images of Enda and Eamon on top of the Dublin Spire, let us enter a few words of caution. Eye-catching headlines about recovery are often misleading. A slight decline in the total rate of unemployment is heralded as proof of upturn but overlooks the reduction in the real value of incomes. The finding of the Irish League of Credit Unions that monthly disposable income increased by €50 in December 2013 masks its other discovery, that 1.6 million people had €100 or less left at the end of the month once all bills were paid, while half a million have nothing at all left after meeting their commitments.
      Even those who have regular employment are finding it increasingly difficult to make ends meet. Wages are not keeping pace with the cost of living. This situation has been exacerbated by the imposition of a universal social charge—a poll tax on homes—and this will soon get worse with an impending levy on water.
      Compounding these uncomfortable realities, there is a real threat that along with our many other woes, difficulties in the housing market will almost certainly get much worse. There is a looming crisis caused by converging factors, involving large numbers of mortgage-holders in financial difficulty while simultaneously pressure is growing on lenders to realise their assets.
      In spite of NAMA’s up-beat message, the reality is that an estimated fifth of all mortgages in the Republic are in arrears. In view of the floundering real economy experienced by working people, as distinct from the one enjoyed by the privileged class, it is likely that few of those in mortgage difficulties will find sufficient well-paid employment to service these debts. On the contrary, it is even possible that an unexpected economic tremor could lead to still more families experiencing problems with repayment.
      While many mortgages are in trouble, banks and building societies are sitting on a large stockpile of repossessed domestic properties, reported to be more than 1,500 houses and apartments. The indications too are that the financial institutions’ “grippers” will continue working in the days to come, adding to these already significant portfolios. All the while, NAMA, being the biggest property-holder in the Republic, holds an even larger portfolio than the banks.
      The question, therefore, is what NAMA and the financial institutions plan to do with their growing stock of houses and apartments. In spite of a professed reluctance by government TDs to speak of repossessions or forced sales, the Troika is pressing relentlessly for an accelerated programme of home-loan recovery. The Republic may have nominally left the bail-out, but the state remains locked into the Troika’s recommended course of action. Failure to do so risks “disturbing financial markets’ confidence”—a precarious concept on which the coalition has staked the people’s future and prosperity.
      With house prices again rising in Dublin, pressure will undoubtedly grow from the Troika to increase the rate of seizures (or forced sales) and thereafter additional pressure on banks and NAMA to sell these properties. Frank Daly insisted that NAMA would adopt a responsible approach when disposing of its holdings, though he did add ominously that he would adopt “an entrepreneurial approach.” The banks won’t even bother to dissemble.
      The question of where might NAMA and the financial institutions find buyers is, of course, an important one. In spite of high emigration levels, youth unemployment remains high, at more than 25 per cent among 15 to 24-year-olds, so there is little prospect of a significant uptake from that age cohort that is most frequently in search of a family home. Many within the 25 to 45-year-old category are already suffering mortgage hardship and are unlikely to provide a lucrative market for spare housing capacity. Nor is there any real prospect that the over-50s will be persuaded to invest their strained remaining resources (if they have any) in speculative house-buying.
      Put bluntly: if NAMA and other financial institutions are to monetise their domestic housing assets, they will be forced to find buyers abroad. This will most probably come in the form of cash-rich venture capitalists and private equity buccaneers who specialise in buying up distressed assets. We are seeing this already within Dublin’s commercial property sector, and there is no reason to believe that, under pressure from the Troika, it will not also happen to the domestic housing market.
      No-one can say with certainty what speculators would do with their acquisitions, but in the absence of local buyers the likelihood is that they will seek to rent property back to distressed (and by this stage dispossessed) occupants. Ireland would then be witness to a significant proportion of its population finding themselves tenants of absentee landlords.
      When this is taken in conjunction with the expanding private rented sector, we can begin to see the extent of a developing problem. Commercially driven landlordism, whether native or foreign, has no interest beyond maximising profit, with the inevitable consequence of no or minimal upkeep and of rent being continuously squeezed as high as possible. The result is that those citizens living under the most precarious of circumstances will find themselves dependent on the altruism of landlords.
      The answer is not to aim at restoring and expanding home ownership, as that lay at the heart of the crisis in the first place. Firstly, we have to win the argument that a home is not a privilege but must be a constitutionally guaranteed right. What is then required is to break the Thatcher-inspired dependence on private home ownership and create an unanswerable demand for an adequate supply of good-quality public housing.
      A necessary step must be to reject the notion that we, the people, owe those who created the crisis anything other than a short, sharp note to say we are repudiating as sovereign the debt they created, and that means all the debts they created.

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