I WILL SING OF THE WHITE BIRDS IN THE BLUE WATERS OF HEAVEN
May 25th, 2010 by Conor McCabe
In the June budget the Minister for Finance, Mr. Richie Ryan, announced that the two major Associated Banks [Bank of Ireland and Allied Irish Bank] had agreed to make £40 million available to house purchasers over the next two years. The two major banks were each to make £10 million available for house purchase loans in both 1975 and 1976. It was hoped that this additional financial stimulus would help to revivify the ailing building and construction sector.
That sector would receive a further boost when the two Northern Ireland banks [Northern Bank and Ulster Bank] also begin to extend finance for house purchase. These two banks could together increase the “home loan fund” by about £3 million annually. (Irish Times, 20 August 1975)
I’m old enough to remember when scratched records were more than just metaphors, but I cannot help but think of them as such when reading about the Irish construction and mortgage debacle of the 1970s.
The associated banks came late to the residential mortgage market - in terms of household lending, up until 1975 they concerned themselves mainly with ‘bridging loans’ or short-term money to house purchasers. The entry of these banks into what was till then the preserve of building societies, local authorities, and assurance companies had an immediate effect - prices shot up. Not only could more people apply for mortgages, with greater amounts of credit available the amount that speculative builders and estate agents could charge people for houses rose as well.
This was not how the entry of the associated banks was sold to the public. In the 12 months before the 1975 budget the estate agents, builders, and newspapers all claimed that the slump in the private housing market was caused not by a lack of affordability, but by a lack of available credit: people could afford mortgage repayments, no problem, they just couldn’t get a mortgage from the building societies. This was because of the societies themselves who insisted that applicants had to have a certain income, and had to have saved at least £1,000 in the previous six months with the society in question, in order to receive a maximum loan of 75 per cent of the house price.
The other main source of mortgages, local authorities, capped their loans at £4,500, which meant that prospective buyers had to have built up £2,500 in savings in order to make the £7,000 price tag for the average home.
The ‘dream’ of owning one’s home, however, was outside the realm of the majority of families. In the towns and cities, most people rented - either from private landlords or from local authorities. The task for speculative builders and estate agents was to convince the general worker that owning a home was a logical and natural process. The fact that this natural process needed unnatural amounts of credit to sustain it was never mentioned.
One of the arguments put forward was that Irish people owned the land they worked, and so it was natural to own one’s home. To rent was un-Irish, and went against the whole spirit of the nation’s history. Yet, there is a fundamental difference between owning a farm (however small) and owning a house. One is a livelihood, the other is shelter. The industrialization of the Irish economy that was taking place at this time separated people from the ownership of their livelihood: people worked for a wage and from that wage provided for themselves and their families. The land analogy so beloved of builders and estate agents was more between the farm and the factory, rather than the farm and the house. To work in a factory, rather than to own a factory, that is what is un-Irish according to the speculative house-builder’s logic.
And yet, rather like the smooth-talking Lyle Lanley and his monorail plans for Springfield, the Irish people eventually went along with it, to such an extent that even the most educated people, the soppy-stern in old-style hats and coats, will proclaim that home ownership in Ireland dates to the Famine.
I wrote something on the myths of Irish home ownership before, this little post just came out of reading I’m doing this week.
Final quote from the Irish Times, 1975, which illustrates that when it comes to pimping the property market the Irish Times has form.
Mr. McInerney [deputy chairman of McInerney Properties Ltd.] said that besides being a great social need, housing in Ireland was a leading industry and was like the motor industry in America. When building boomed, the nation boomed. He would, he said, appeal to the government to give earnest consideration to a suggestion that first-time buyers should be helped by measures similiar to those announced in Britain, which included a reduction in the rate of mortgage repayments for the first five years.”
As we know now, and as some knew then, if your economy is based on building houses, you don’t have an economy.
Anyway, more from the seventies during the week.
Until then.
Conor - finishing with one of the most famous bank heist filums going - are you trying to subliminally suggest some sort of course of action to us in our dealings with banks ??
Just a question - why were the big banks (let’s call them Bank of SickBoy and Sickboy Irish Banks…) absent from mortgage lending until 1975 ? Due to their own commercial policy or was there some sort of statutary reason ?
Good post too - while I’m at it.
There was no real market for it. Home ownership in Ireland outside of the 19th and early 20th Land acts was a middle class concern. I don’t have the figures handy, but something like 60% of Dublin rented up to the 1970s. There was very little speculative house building up to the late 1960s as well. What we see in the late 1960s and early 1970s is the creation of a mortgage market where there wasn’t one before. There’s a lot of credit in Ireland at this time, a lot of it going into property - commercial and residential - and in order to get payback there needed to be people to buy the houses. Yet, wages and work conditions wouldn’t allow the type of mortgage market necessary to service that amount of speculative building, and that’s where the government steps in, with tax breaks and encouraging the associated banks to start lending mortgages. It took a couple of decades but they got their way. Public housing as an option is all but shot to hell, leaving private landlords subsidised by the government, and private home-ownership as the only long-term option for young families.
But, it’s a disaster of a policy, as the credit needed to sustain such levels of private, speculative home construction isn’t based on realistic future earnings of the mortgage holders but on imported credit via the money markets. It’s a scam, the evidence of which is surrounds us today.
As regards the bank heist clip - wow! didn’t make the connection until you pointed it out. It was unintended but yeah, interesting. The mind works in mysterious ways.
Conor: this is another fine piece of analysis of the history of property relations in Ireland. After your last comment I went to the historical Census files (for example, http://www.cso.ie/census/Census_1971_Volume_6.htm) and noted that in 1970 about 70% of the private housing units in Dublin were owner occupied. Smaller percentages rented from both local authorities and privately. The figure is about 60% owner occupancy for the state as a whole.
I’m a nerd.
Cheers Eoin, and thanks for the figures. It shows the influence of the various land acts alright. In town areas in 1971 though the breakdown nationally was 49% owner-occupied, 51% rental (excluding tenant cottage purchase scheme. When that’s taken into account the owner/rental ratio in town areas is 55/45. For the town areas of Dublin (including Dun Laoghaire) the breakdown is 52% owner-occupied, 48% rental (with the tenant cottage purchase scheme that goes to 57/43 breakdown, which shows the effect of government moves to privatize housing, even in 1971). The land acts of the late 19th and early 20th century had an affect on home ownership simply because the farms were homesteads. Yet, when all and sundry were calling for the shutting down of uneconomic farms in the 1960s, and for Irish farming to modernize, they weren’t saying that the farmers should be made homeless, but that the land attached to the homestead should be sold on and merged with larger units. Yet, the myth of home ownership and land acts being one and the same persists, even though Irish government policy in the 1960s actively dis-encouraged small farming while subsidising the homestead itself.
One other thing. Have to say Eoin, I’m envious of your discipline. While historians and economists have been farting around with personalities and papers of treaties, it’s been geographers who have been fighting the good fight. The physical traces of capitalism are the most powerful arguments against it.
Conor: glad to see you did a more comprehensive job on the numbers than I was prepared to. I see a paper somewhere here…seriously.
As for your geographers vs economists and historians, I’m flattered but I’ve only recently come to it as a trained sociologist! That’s a whole other story. I’ll take the recognition though, if only to ingratiate myself with my warm new lovely fuzzy subject. Seriously though, while there are plenty of shopping-centres-go-here kinds of geographers who accept the conditions imposed by capital’s imperatives, it is the critical geographers of the discipline who have the most to contribute. Economics tends to evacuate place from their blue books, historians the influence of culture. I’m not writing so much about this but still learning about it.
That’s a good mix! As regards geography, I’m thinking of Harvey, but also Ireland after NAMA, which is great in its physicalities approach to the property boom and our so-called miracle.
A friend of mine defines geomorphology as “where’s the dirt and how’d it get there?”. We might replace ‘dirt’ with ‘cash’ and we’re almost there.
Conor, your point that there was no real market for mortgage lending until the 1970s is a good one. A point that backs it up further I think is this: In smaller towns (with large rural hinterlands) people tended to build their own houses but at a slow pace. They would finish another piece of the house when they had enough cash to do so. While I don’t have the figures to prove this, if you talk to people who built their own houses in the 1960s and early 70s you’ll find that many of them bought a piece of land with savings and lived in caravans on the land until the house was in any way habitable. It could have been ten years or more before the house was actually finished. I think this shows an aversion to the idea of mortgage lending even among those who wanted to own their own homes.
p.s. I’m speaking here about working class people, not middle class professionals etc.
Thanks Adrian. My point is not so much that there wasn’t a market for mortgages until the 1970s, rather that the credit wasn’t available for a mortgage market outside of professionals and the higher end of the skilled working class to sustain itself. It’s with the influx of huge amounts of credit into the Irish banking system - building societies, banks, assurance companies - mainly via American and German banks which set up in Ireland in the 1960s, that we see the artificial creation of owner-occupancy levels which are above the norm for most of Europe.
It was incredibly difficult for most working class people (and most farmers under 50 acres) to get credit from banks until the mid-1960s. I think the aversion to lending is also tied into the fact that they wouldn’t have gotten a loan anyway. The huge amount of lending which occurs in during the 1960s with regard to the calf subsidy scheme I think shows that there wasn’t anything particularly cultural about not having loans; the loans weren’t available in the first place. There’s a dynamic going on here, it’s not an either/or situation, but the outcome is being influenced by both sides. And the point about buying land and then building is well-made. I must try to find out how to track down figures for that.
On the broader subject of land ownership, the Labour Land Campaign in Britain who are holding a conference in Lincoln university on Monday 28 June.
“A day of talks and discussion about the policy of land taxation and what it can contribute to tackling the Budget deficit and the crisis in the housing market.”
http://www.labourland.org/downloads/Symposium_flyer.pdf
Haven’t read through their stuff yet but they look like an interesting bunch.