Plant Closures

I was not totally surprised to hear that Pfizer have been unable to find a buyer for one of their two plants in Cork, and are quite possibly likely to be unable one for their other plant. Other pharma, chemical and medcal devices manufacturers are facing similar difficulties, not least from the astronomical wage bills and rent gouging that they will face on these sites.

Just last month a little note appeared on the window of the Spar shop in the Airport Business Park in Cork saying that it was no longer a viable concern. Now this was a shop that appeared on the face to be doing a good deal of business. Yet, there was no sign of a dramatic drop in business. The sign didn't indicate what the owners meant by viable: had there been a huge rent hike? Or was the franchisee looking for extortionate profits way out of kilter with realistic earnings in a more real world economy? We will never know.

One problem I do know from working on various industrial and business sites around Cork is that rents are disproportionately high for anybody not making a direct profit, and at best, difficult even for those who are. The property industry has a huge amount to answer for not only in the new climate of an uncompetitive Ireland, but also in totally unjustified rent levels which are now even more unjustified.

For example I pay 630 euros per month for a small 1 bedroomed converted Victorian flat in north Cork city. Not only is an equivalent flat in central Belfast more than 100 euros per month cheaper, I could get a nice modern apartment for less than I pay now for a conversion. In fact this represent about 300 euros per months savings on the current market rents for such apartments which at present in Cork range from 800 euros per month to an eye-watering 1200 euros per month (guess who wants their entire mortgage paid?)

When you consider that your typical tenants for this kind of apartment would be an average wage earner on 34k per year, with a net monthly income of about 2400 per month, 1200 is more than 50% of their after tax income, even the more common bottom of the apartment market rent of 800, is almost 1/3 of their monthly take home pay. And thats before bills, cost of car, loan repayments. Most single people simply cannot afford to pay 800 per month at this wage level.

Even take the example of the single earner on 40k. They take home 2700, but 800 euros a month is still a very high proportion of their income.

Lets consider a couple earning a combined income of 50k. They bring home 3400 per month so now 800 is ok. However 1200 is still distinctly implausible. Bump their incomes up to 60k and now they've 4000 a month between them. Now suddenly 1200 is a possibility but wait a minute, they are now in a realistic position to save for their own place so why should they give away 400-600 of their hard earned cash when they can live next door for probably the same mortgage level?

Lets look at potential sales for this group. A typical 1 bedroom on the Lee Rd goes for around 300k, which with a good desposit should place the borrower around 1400. Why pay 1200 when you can have it for just a little more? In fact, since the gouger of a landlord is going to have you paying that, and probably double that, in 10 years time, where is there even a question?

In fact quite some years ago the ERSI asked the question Is the Private Rented Sector the real problem? One item that I haven't raised and that isn't pointed out is the impact of publicly subsidised social welfare recipients being dumped wholesale into the private rented sector. The net result of this has been that the highest level of rent subsidy has created an artifical "floor" for rents through which rents never appear to fall, even in areas of extremely low demand such as rural country towns. This has artificially raised rents for the poorest quality accomodation, thus artificially pushing up market rents throughout the country. Since tenants are not assessed to be "in need of housing" at more than a any level (which in reality for even a single person means that you are over 25 and on welfare payments) it effectively has become a very reliable income subsidy for low earners, in many cases enabling them to afford a size of accomodation that would be unavailable to earners on an average wage (this is particularly the case in remote regions of low demand, and I would argue, the reason why welfare dependency increased dramatically over the years from 2001 onwards, long before the current job loss haemorrage).

We really do need these things to happen:
  • Proper incentives for commercial landlords to make empty building available at a competitive rate for both existing businesses seeking to move and to new businesses
  • Fair tax allowances for residential tenants who are currently heavily discriminated against by the current taxation system which massive favours owners
  • A more aggressive policy against substandard accomodation - I would suggest that Threshold back a test case against a local authority on behalf of a tenant to force local authorities to properly enforce the law on substandard rentals
  • Removal of "maximum" rents for subsidised tenants, preventing baseline market rents from becoming based on them
  • Assessment of potential tenants to ensure that they have no other options with regard to accomodation, to stop welfare recipients from automatically getting subsidised accomodation without a real need


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