Friday, October 12, 2012

Ireland is ahead of the U.S. in housing policy

by Ethan Handelman, National Housing Conference

The U.S. is used to leading the world: economically, militarily, in space exploration, you name it. Even in the special niche of housing policy, other countries look to the America as a place that has pioneered public-private partnerships, an affordable 30-year fixed rate mortgage, and a vibrant rental sector. But in the post-Great Recession, post-housing crash world, we’re not quite the model we once were. We need only look to Ireland as an example of a country struggling with a deeper real estate correction but able to muster stronger policy responses.

Two telling examples:

Some of the difference between the two sides of North Atlantic is the severity of the crisis: In Ireland, property values fell by 50%, on average, while the average in the U.S. was 30% (the U.S. also has a wider variety of housing markets that fared better or worse). I was able to observe the difference in Dublin first-hand, seeing the massive spike in home values and the concomitant struggle to create affordability, followed by the disastrous crash and the abandoned, half-finished properties called ‘ghost estates’. Ireland’s Housing Agency is in part an expansion of the Affordable Homes Partnership, which led housing affordability efforts before the crash.

Another part, however, is political will. Ireland has nationalized much of its banking sector, which means taxpayers are on the hook either way. That’s made it easier to recognize the economic reality that writing down debt now prevents the painful and destabilizing vacancies that result from widespread foreclosures. Perhaps Ireland’s experience in coming months will help to demonstrate to U.S. policymakers that principal reduction is viable.

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