| Immigration policy to account for housing demand of 12,500 per year |
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| The government’s plan to liberalise immigration for skilled workers will likely attract people who need family housing, and double the ESRI’s projection of housing demand from immigration alone. The accommodation of asylum seekers will also provide a new stimulus to housing demand over the next six years, writes Annette Hughes. |
A recent article in a Sunday paper led the journalist writing it to conclude that ‘immigration is set to become a fact of Irish life’. Following a sustained period of net emigration since records began, with the exception of the intercensal periods 1971-79 (+13,600) and 1991-1996 (+637), the transition to being a net importer of people brings a new set of challenges for politicians, policy makers and employers. This transition commenced in 1996. Total net migration between April 1996 and April 1999 was 64,500.
Perhaps one of the key challenges at this point in our housing cycle is the provision of accommodation, and not just for immigrants who are in a position to finance their own accommodation but also for asylum-seekers, who at present are not allowed to work and are, therefore, being accommodated at a significant cost to the taxpayer in terms of welfare and housing support. There is also the displacement effect that has resulted in a slower rate of progress in eliminating the backlog on council housing lists than might have otherwise been the case.
Immigration projections
A recent report by an the Inter-Departmental Group (IDG) on Immigration Policy has calculated that a gross figure 200,000 new immigrant workers will be needed over the next 7 years to maintain the growth of the economy as envisaged under the National Development Plan. This equates to approximately 29,000 new immigrant workers per annum and compares with an average of 27,000 new immigrant workers per annum over the past six years. There will continue to be people leaving the State for all sorts of reasons. Around 19,000 workers on average left the State over the past six years. Thus some 133,000 should leave over the next seven years, based on recent trends, resulting in a net addition to the workforce of around 67,000 workers or 10,000 per annum. However, the IDG has suggested that emigration would be lower than previously, at around 112,000, resulting in a net addition of around 88,000 workers over seven years or around 12,500 per annum.
Whichever number materialises the boost to labour supply of between 10,000 and 12,500 per annum is modest when compared with an average increase in employment of 100,000 per annum since 1998.
Effect on housing demand
However the implications for housing demand are much more significant for two reasons. Firstly, the net inflow of 88,000 workers understates the total inflow as those returning to work are likely to bring dependants with them. Assuming an average labour force participation rate of 60%, total net immigration is estimated at 147,000 or 21,000 per annum over the next seven years, based on the number produced by the IDG. It is conceivable that housing demand could equate to one per worker, which is equivalent to a demand for 12,500 dwellings per annum from migrant workers and their dependants alone. Thus every net inflow of 10,000 persons is assumed to generate a housing demand of 6,000.
Secondly, the propensity to demand housing is likely to be higher for people returning to Ireland than for those who have left in the younger age groups. Over the period 1994 to 1999 the 15 to 24 age group recorded emigration of 113,700 or 19,000 per annum on average, and immigration of 69,500 or 11,600 per annum. It is conceivable that many of these young emigrants will have previously resided in the parental home. Their departure, therefore, will have had little or no stimulatory impact on housing supply.
Conversely, the 69,500 immigrants in the 15 to 24 age group are likely to have sought accommodation in the owner occupied or rented sectors. This is notwithstanding the fact that many in these younger age groups will have taken up temporary resident jobs in the hotel and catering sector.
There was a net inflow of 66,000 persons in the 25-64 age group over the same period or 11,000 per annum, the majority of whom will also have sought housing accommodation either in the owner occupied or rented sectors.
The total net inflow of 58,000 over the last six years represents less than 40% of the IDG’s projected net inflow of 147,000 over the next seven years. Using our assumptions for housing demand, the projected housing demand due to net migration is estimated at 87,500 over the next seven years compared with 35,000 over the last six years. Thus the impact on the demand for housing of a stimulatory immigration policy will be significantly higher than we have been used to in the past, if the government’s strategy to increase labour supply by immigration is successful.
However, if, as the IDG predicts, fewer people in the working age groups leave the State than hitherto because of the increased opportunities for employment, then the boost to housing supply will be lower than it would otherwise be, despite a higher net inflow.
The already prohibitive cost of housing is already causing people to turn down job offers. Should this trend gain momentum, the new labour market immigration policy designed to meet the skill requirements over the next seven years could fail to have the desired effect, thereby jeopardising the targets set in the National Development Plan. Thus labour shortages would give rise to wage inflation, which would dent our competitiveness, and cause output to be lower than it would otherwise be.
Accommodation for asylum seekers
The net immigration numbers alluded to above of around 21,000 per annum or 147,000 over the next seven years exclude those asylum seekers which have arrived in the State since the 26th. July 1999 and are awaiting processing of their applications. The delays in processing could result in many asylum seekers remaining in the State for months and even years before their applications are processed. In the meantime they will require housing accommodation.
There are more than 10,000 asylum seekers in Dublin and 1,500 elsewhere in the country. While these have already been accommodated, albeit at considerable expense to the taxpayer, the number of applications for asylum is currently running at around 1,000 per month or 12,000 per annum. Even taking into account the fact that the government proposes to house as many as 6,000 asylum seekers in temporary accommodation, including imported prefabricated housing and mobile homes, for example, the accommodation of asylum seekers adversly impacts on council housing lists by diverting housing resources away from the social housing needs of the indigenous population to the needs of asylum seekers.
Demand projections
There may well be a strong case for maintaining significant immigration inflows over the next seven years but there is no doubt but that the whole issue of immigration will compound the difficulties the government has to face not just in relation to our housing problem, but also in relation to other pressures evident in terms of transport, education and health. The message here is simply that allowing asylum seekers to work would result in a lower level of immigration, which would in turn reduce the pressure on the housing market.
The housing problem has arisen following an unprecedented demand for housing over the last six years which has lead to an increase in supply of almost 220,000 units or an average of 36,500 per annum. Notwithstanding this exceptional rate of housebuilding activity average new house prices have increased by 14% per annum and demand continues to escalate. There now exists a large section within the potential household forming age groups which have chosen to postpone house purchase due to a lack of affordability.
The ESRI Medium Term Review projections for housing need forecast a housing demand of 6,000 dwellings per annum over the period 2001 to 2006 due to net migration alone, out of a total annual average demand of 45,000 per annum.
Based on the IDG immigration report, the housing demand due to net migration alone could be as high as 12,500 per annum, which would imply a total housing demand of 51,500 per annum over the period 2001 to 2006, assuming all of the other components of demand remain unchanged. Such a stimulus to housing demand at this juncture will keep house prices higher for longer than they would otherwise be in the absence of a corresponding increase in supply. |
Annette Hughes is an economist at DKM Economic Consultants
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| Article appeared in the May 2000 issue.
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