In 1824, Nathan Rothschild, a man of considerable wealth, single-handedly rescued the Bank of England from financial difficulty. At his passing at 56 in 1836, then the richest man on earth, he succumbed to an abscess, a medical condition easily curable today with common antibiotics. It’s a salient example of the transformative power of modernity, highlighting how what was once unattainable for even the richest individuals, is now within the average person’s reach. Consider the marvels of our present day – flat-screen televisions, iPhones, air fryers, cosmetic dentistry, online shopping, and even frequent, affordable flights across Europe – these were once unthinkable indulgences, reserved for the most affluent. Travel, in particular, shifted from being a luxury for the elite to an accessible enjoyment for all. Dublin Airport is a standout testament to this social evolution.
We attribute this societal change to economic growth, leading to increased accessibility of more goods for more individuals at more agreeable prices. This has great implications for how we invest our income. In 1922, an average family would spend 57% of their income on food and non-alcoholic beverages alone. Presently, this statistic stands at a mere 8.3%. In the past, food, clothing, rent, fuel and light consumed almost 90% of a family’s income, but today it’s less than one third. We are witnessing a shift where items and experiences once exclusive to the wealthy are now enjoyed by those of lesser means.
However, housing is the glaring omission in this narrative of broadened dispersal of wealth.
In the current Irish landscape, it is an oddity to see wealthy individuals residing in properties that were originally constructed for those in less fortunate circumstances, spanning the last hundred years. This perplexing phenomenon is not confined to Ireland, as a recent piece by Rory Sutherland in The Spectator confirmed it’s also prevalent in England. Perhaps more peculiar in Ireland is the trend of the rich engaging in bidding wars for former council accommodation and traditional workers’ cottages originally intended for the less affluent. The question is, how have we arrived at this situation where the wealthy are spending large proportions of their income living in properties that were once affordable for those less fortunate?
Housing’s dual character of being both an onerous monthly expense for some and an appreciating asset for others is the confounding variable in Ireland’s economic equation.
[ The dimension of housing is notably absent in the discussion on immigration ]
In the year 1866, the Artisans and Labourers Dwellings Act came into being as an answer to the massive accommodation problem Dublin was facing. Under this act, a new company was formed to construct residential spaces for the impoverished. These houses were connected to the city centre via tram services. The Dublin Corporation, in an attempt to keep costs manageable, provided the company with their own land at cost price and reduced the ground rent. The houses were constructed, however, the primary issue was the cost. In 1906, the Irish Independent highlighted the expensive rent of the Harold’s Cross cottages, debating how a man earning 18 shillings a week, with a family to support, could afford a weekly rent of 6 or 8 shillings.
Even the rich are investing in previous council houses and artisan cottages scattered throughout the city, often forking out large portions of their earnings over three decades for their properties – once intended for those in lower income brackets.
Back in the day, the idea of a working-class individual, earning close to the bare minimum, having to part with over 30% of his wage for rent, was absurd. Today, a minimum wage worker would likely be in a far worse situation.
Given the rent for Harold’s Cross cottages is €1,558 per month, leaving just a small leftover from a monthly wage of €1,700, it has become nearly impossible for minimum wage earners to afford. These houses, which were once designed to provide shelter for the less fortunate, are now only accessible to the moneyed classes, and in some cases, the super-rich.
Imagine a prosperous pair recently returned from a sojourn in London. They’re both in their early thirties, with successful careers; he as a staff software engineer at a prominent tech firm set up at the harbour, and she as a business attorney. Together, they bring in a substantial annual income of roughly €200,000, placing them within the top five percent of all income earners. There’s no lack of wealthy young individuals in Ireland, with the past couple of years seeing a significant 112 percent rise in the count of “tax units” (singles and jointly-assessed couples) with earnings exceeding €200,000.
However, even our affluent tech-attorney couple can borrow no more than four times their gross income, capping their potential mortgage at €800,000. Compounded by LTV (loan to value) laws, they need to have saved up a deposit of at least 10 percent of the property value, in this case, €80,000.
Inspecting their choice of both location and type of property, we see they’re targeting previous working-class homes in areas such as Portobello. These individuals, amongst the wealthiest of young earners, are purchasing residences initially constructed for “average” workers.
Shifting our attention to the top 15 percent, those with salaries above €100,000 may be considered affluent, but still, their property preferences lean towards former council homes and craftsman cottages sprinkled across the city, this exemplifies wealthier individuals opting for what were historically homes of the less fortunate and repaying large sums of their income over three decades.
Moreover, the societal impact of displacing less financially secure residents from their long-time neighbourhoods is concerning. Additionally, the repercussions of directing considerable finance into property via mortgages have led to an overhaul of our economy’s innovative structure.
The lack of alternatives in the property market and forty years of mortgages being channelled into the real estate sector has led to an escalation in house prices. Although the average standard of living has improved and granted the less affluent classes access to luxuries once exclusive to the higher echelons, the housing industry has experienced quite the contrary. The cottages in Harold’s Cross, for example, have seen a dramatic rise in prices over time. Concurrently, life expectancy has surged from approximately 50-51 years in 1875 to 80-83 by 2016, offering an extra 30 years of living. Moreover, infant mortality rates have decreased from 81.3 in 1916 to 3.7 deaths per 1,000 births in present times. Literacy rates too have improved significantly, with 99% of Ireland’s population being literate now, a stark contrast to 150 years ago.
The social impact of this economic model includes the displacement of low-income individuals from their hometowns. The financial dynamics promote property owners who hoard wealth, while workers who earn through active employment are penalised. The property owners, or rentiers, accumulate tremendous wealth and show no care for individuals who, predominantly the younger workforce, opt to migrate. This entire affair adversely affects the aggregate economy’s expenditure since wealth is concentrated amongst the wealthy who hold onto their capital, whereas the younger working class who would otherwise spend, are stripped of their earnings.
The remedy, as suggested by Henry George around the inception period of Harold’s Cross cottages, involves taxing property wealth, penalising unused or hoarded land, implementing a site-value tax, and curating living conditions suitable for all, not just a select few. Any political party that puts forth this proposition will indubitably secure my vote, alongside countless others.