Immigrants need market-rate housing. By MATTHEW YGLESIAS

Whether in Ireland or the USA, social housing alone can't meet the need for mobility

JAN 23, 2024. 

The New York Times ran a feature last week on the housing crisis in Ireland.

The story has a clear thesis, though being a feature rather than an op-ed, it doesn’t make a clear statement. The basic point of the article, though, is that housing costs are fueling an anti-immigrant political backlash when the true cause of rising prices is a lack of public spending on public housing. A researcher named Rory Hearne is quoted to this effect, and no serious alternative hypotheses are contemplated. The article also outlines the perspective of the xenophobes, so readers are left with the impression that for good cosmopolitan liberals, the only options are siding with the immigrant-hating bigots or going in for social housing.

The recent xenophobic riots in Dublin capitalized on the grievances of people struggling to cover their housing costs and exposed to the world the deep fractures that the crisis has created. But the issue is decades in the making, experts say, and has become the driving force in Irish politics.

“Policy created this crisis,” said Rory Hearne, an associate professor in social policy at Maynooth University, west of Dublin. “It’s not immigrants, it’s not asylum seekers,” he added, naming groups the far right accuses of pushing up housing demand. “The housing policy created this housing crisis, and that complete refusal to develop public housing and to build affordable housing.”

As you might expect, my suspicion upon reading this was that despite talk in the article of Ireland moving toward “a reliance on the market,” there are likely very sharp restrictions on the use of market mechanisms to match supply to demand in the Irish system. And this is, in fact, the case.

But even though the broad story here is pretty clear (and unfortunately common), I do think that Ireland is an interesting case study.

For starters, it illustrates how insufficient housing growth can undermine basically any economic success. Because Ireland really is, on the whole, an incredible economic success story. When your economy grows, incomes rise, and people want to buy more stuff. When that stuff is traded on global markets, everyone just ends up with more stuff and living standards rise. When that stuff is locally-provided labor intensive services (nannies, housekeepers, haircuts), wages rise and relative prices shift, but living standards still, on average, go up. When you run up against a housing constraint, though, all that happens is prices rise, and the people who happen to already own the houses earlier get a windfall.

Housing is just too large a share of the consumption bundle to work around it. If your economy grows, then either you need more construction or else land rents are going to eat all your prosperity.

And as you see with the anti-immigrant backlash, other efforts to curb home prices end up undermining growth. But the posited tradeoff between xenophobia and social housing as potential solutions to the Irish housing crisis is particularly interesting because social housing is a uniquely terrible solution for immigrants.

The housing situation in Ireland

It will come as no surprise to Slow Boring readers that the underlying cause of the housing crunch in Ireland is not any change in immigration but a change in housing production. Ireland — in particular the Greater Dublin Area — used to be a place where the supply of housing rose to meet demand, which prevented prices from soaring.

Then housebuilding cratered during the economic crisis of 2007-2008 and never really recovered.

My broad understanding of the Irish situation is that it features British-style planning institutions and essentially nothing can be built “by right” anywhere. Instead, all projects are subject to various forms of discretionary review. And once a project does gain approval, there are nearly inevitable appeals to a national entity, An Bord Pleanála, which can reverse local approvals or demand more changes.

These are the kinds of institutions that lead to a systematic undersupply of housing in the places that adopt them. The interesting thing about Ireland is that until 15 years ago, they didn’t really have the undersupply problem, despite a lack of by-right building, seemingly thanks to corruption. In the US context, David Schleicher has similarly argued that oft-maligned corrupt urban political machines tended to generate more housing supply through similar dynamics.

Obviously this is not to endorse corruption per se as a solution to housing problems.

The point is that allowing localism and discretionary review to trump free markets creates a structural problem. Under this kind of system, it’s rational for each locality to underproduce housing relative to what’s optimal for the entire country. And the result is that each locality underproduces housing, and every locality ends up worse off than it would be if everyone produced more. Precisely because this dynamic generates a lot of deadweight loss, it is possible to unlock win-win trades via corruption. But an even better way to unlock those gains is with freer markets, clearer rules, and more by-right construction.

A painful irony of the Irish situation is that Ireland is a rare country that has fewer people than it had in the 1840s. The whole country has significantly lower population density than Ohio, and though Dublin is a very nice city, it’s hardly a gargantuan metropolis. There is plenty of space on which homes could be built. Clearly, though, modern Irish people expect a level of housing quality (and per person space) that’s far above what the pre-Famine population enjoyed. And the geographic pattern of housing demand is totally different now, with a much larger share of the population wanting to live in Greater Dublin. A big issue for Ireland seems to be that the national planning authorities somewhat stubbornly feel it would be more convenient for everyone if demand were more balanced — they are under-providing housing in Dublin in hopes that people will just live somewhere else instead.

This doesn’t really work. People want to live and work in or near Dublin.

And here’s the problem. There are two ways to accommodate Dublin-area housing demand — suburban sprawl or infill — but as actual Irish person and author of The Currency Sean Keyes writes, Irish policy essentially rejects both of these options:

We’ve decided, commendably, to limit the building of giant housing estates on the edge of towns. Big estates are an easy way to put roofs over people’s heads — but at the cost of increased traffic, long commutes, high CO2 emissions, and place-less neighbourhoods. Ireland’s population is forecast to reach between six and seven million in the coming decades. Everyone can’t live on a housing estate.

Building less on green fields means building more within towns and cities. But building within Irish cities doesn’t tend to go down well with locals. The planning system (itself a product of local politics) doesn’t allow for high density. A new paper by economist Paul Kilgariff shows that Dublin is much less dense than peer cities like Copenhagen, Helsinki and Vienna.

From a purely aesthetic standpoint, I’ve really enjoyed this outcome when visiting the city. Dublin has an attractive look with a lot of old buildings, and it’s surrounded by picturesque farmland rather than tacky suburban sprawl. There are American cities whose anti-growth political economy I find genuinely incomprehensible, but that’s not really the case with Dublin. It really does look very nice in my opinion, and I can see why people might not want it to change. But the fact is that the existing built environment is the built environment of a much smaller country, ravaged by famine and poverty. If everyone’s feeling about the status quo were that the status quo is fine, that would be one thing. But the actual situation is that the country is in a state of social and political crisis driven by the housing market, and the only way to change that is for the city to look different.

Room to grow

Notably, the city will need to look different if the outcomes are going to be different, whether that means you’re building market-rate or social housing. If the plan is to generate a large quantity of social housing, then the social housing will have to go somewhere.

And in my American opinion, I do think the anti-sprawl tendencies in Dublin are beyond what’s reasonable. This area that’s just north of Dublin, just south and east of beach communities, and just west of the airport is not some kind of unspoiled wilderness — it’s under-built farmland. It’s kind of nice, sure, but Ireland is not short on kind of nice farmland, it’s short on housing.

And there’s also the question of infill. These short row houses right by a transit stop are pleasant, but these are not priceless marvels of architectural history. It’s not like every old short building in town needs to be knocked down and replaced by taller structures; that’s not how growth or markets work. But allowing these lots to be redeveloped as higher density structures would set off a short-term building boom that would ultimately alleviate a lot of price pressure.

Keyes’ own proposal (I think it’s also a very good one) is that Ireland should embrace more transit-oriented development in the Greater Dublin Area, which has plenty of passenger rail capacity that’s even more underused than what’s in the picture above. In most metropolitan areas in the western world, dense patterns of residential development grew up around train stations in an era when automobile technology didn’t exist. In the United States, we have a lot of western and Sunbelt cities that were small during the Age of Rail and only became big during the Automobile Age. European cities generally aren’t like that because they’re older.

Ireland, though, has a unique demographic history, and its population was consistently shrinking between the Great Famine and World War II. As a result, there wasn’t nearly as much development around its rail lines as you’d expect, and as Keyes writes, there’s a lot of spare capacity:

Ireland happens to have rail lines lying around, half-used, in all our towns and cities. On the west side of Dublin alone, there are four currently underused rail lines, running through green fields, 20 minutes from the centre of the city. They could be carting up to 50,000 commuters per hour each, in each direction. 

When you start thinking about the capacity of these rail lines, the next thought is how many homes and jobs these lines could potentially serve. 

As an illustration, this is about 12 miles from central Dublin. There is already a train station and an expressway, but it’s just empty fields and an under-utilized parking lot.

As Keyes emphasizes, transit-oriented development (TOD) has a lot of advantages over car-oriented sprawl, so this is probably a more attractive answer than a total “let her rip” attitude toward building new suburban subdivisions. That said, I do think you need to be realistic. Even building dense developments near train stations is going to generate more than zero automobile traffic. Given the baseline situation, any development at all does mean a lot more people driving cars than the current use as empty land. There’s a lot more that can, and should, be said about upgrading Dublin’s rail infrastructure to maximize TOD potential, and I really recommend Keyes’ whole series on this if you’re interested — I’m just breezing lightly over the main points.

The point from an American perspective is just to understand what’s being left out of the New York Times’ account, which is that Ireland has not shifted housing policy to “a reliance on the market.” They have adopted a set of regulatory institutions that are hostile to infill development and also hostile to greenfield development near Dublin. The housing that is being built is financed by private capital and allocated via market mechanisms. But whenever housing is scarce, someone ends up in trouble. To expand the supply of social housing would require more or less the exact same thing as an expansion of market housing — it has to be built somewhere.

Immigrants can’t rely on welfare

This brings us back to the relationship between market-rate housing and immigration.

I believe that immigration, when properly managed, is incredibly valuable to the world. But imagine a situation in which a huge share of new housing is built by the government and then allocated via some kind of bureaucratic process. There are two ways I could imagine this allocation intersecting with the immigration system:

Citizens could be given strict priority over non-citizens, leaving immigrants out in the cold and unable to find places to live.

Non-citizens could be eligible for social housing, in which case people who find themselves behind foreigners on the allocation list for units would have a rational basis for wanting to cut immigration levels.

I’ve even started to see complaints from the UK about the number of naturalized citizens living in social housing units. That’s something a country could only avoid by either sharply decreasing immigration levels, making it extremely difficult for immigrants to become citizens, or violating core democratic concepts of equal citizenship. Note that New York City has been facing litigation over policies that try to reserve social housing units for longtime residents of specific neighborhoods.

Of course, “just build even more social housing” is a possible answer here.

But the basic issue with any social housing expansion program is that it costs money, and in order to get that money, you need to raise taxes. That’s always a difficult political lift, but there are also always competing possible uses for the money. You’re scrapping not only against the low-tax lobby, but also against investments in things like education, health care, and transportation infrastructure. Under the circumstances, “pay more in taxes so that we can build apartments that we give away to immigrants” is not going to be a politically compelling proposition. You have to overcome NIMBYism and then several other additional political barriers.

By contrast “let people build housing and lease it at market prices” only has to overcome NIMBYism. That’s hard. But if you do it, it becomes a source of economic growth that creates fiscal resources that can be used for health care or education or infrastructure or tax cuts or to directly subsidize the poor. And in that political economy, the fact that immigrants raise housing demand becomes a benefit — a source of further jobs and tax revenue — rather than a cost.