Sunday 18 February 2018

When council is the real elephant in your room

The condemned Priory Hall apartment complex
The condemned Priory Hall apartment complex
Mark Keenan

Mark Keenan

WHAT if cars were taxed like new city homes? How would a motorist feel if she went out to buy a new car only to learn that on top of VAT and the usual taxes, she must now also pay 20pc as a new tax to provide cars for those who can't afford them?

What if she was then asked to pay yet another flat charge of between 5pc and 20pc of the value of the car as a one off "levy" in order to compensate for the road services her new vehicle will demand?

And what if the man in the showroom then told the lady driver that she can only purchase a hatchback runabout and not the "people carrier" she wanted for her four teenage children – another new council stipulation for road use efficiency purposes?

We can go further still – what if our lady driver later discovered that some, or most, of the money she paid towards providing those cars for deprived people actually went towards paying for the local authority's bloated salary and admin costs?

And what if, to add insult to injury, the wheels fell off that new car soon after purchase because it's badly made – because nobody inspects finished vehicles nor enforces the car-building regulations?

And what if the responsibility for both rested with the local authority?

In the boom years, many local authorities earned more than 60pc or more of their total annual incomes from development levies – a per unit charge on new homes levied on the developer but ultimately paid for by the buyer.

They received cash for social housing but didn't always spend it on providing homes, as evidenced by housing waiting lists.

They received even more cash from "supplementary levies" sought for nearby visible infrastructure.

Based on this easy boom years cash, they inflated their staff numbers and their salaries and when the crash came, they failed to cut their cloth.

The fat salaries, overstaffing and spending excess continued – as evidenced by a 2012 government commissioned report.

This pinpointed the unusually high numbers of high-salary positions in local authorities.

That report is now gathering dust.

The levies, which in some cases go as high as €60,000 per house, the Par V stipulation for affordable housing (which seeks 20pc of land values from developers), the additional levies towards special projects like the Luas and, finally, the restrictions to high-density development are among the main reasons why Dublin has not been getting the housing it needs and why the housing it has is becoming so expensive.

Throw in the so-called "windfall" tax, which is preventing development land coming to market, and you have the perfect cocktail for a housing crisis.

It costs €200,000 to build a house today aside from land, levy and Par V charges.

With these added on top, that cost rises to about €250,000 per family house before the developers can break even.

This is why home completions are at record low levels. And then there's VAT of 13.5pc.

Finally, councils have failed in their responsibility to enforce quality of construction from the same developments from which they have reaped so much cash – as evidenced by Priory Hall.

So we can expect homebuyers and developers to have been uplifted by this week's news that the Government is to take concerted action to reduce levies, to reduce the Par V requirement (perhaps to 10pc) and persuade local authorities to consider family-sized homes for planning. There will also be a tax on developers who sit on land but don't use it.

But if such changes are coming via "recommendations" to local authorities then the same problems are likely to continue.

The reality is that in the absence of enforced compliance via nationwide legislation, the local authorities are likely to thumb their noses at Government recommendations – as they have done ceaseless times before.

Last year, when the minister recommended they cut the value of their levies, only some did so, and those that did cut them by such minor amounts that it didn't make a difference.

There is a big-picture issue going on with Ireland's local authorities.

As monstrously bloated organisations which are top heavy with high-salaried executives, we could ask whether they really are that much different from those recently exposed charities who have been shown to consume almost all their earnings simply keeping themselves afloat?

But when it comes to the cost and shortage of family housing in cities, be it Dublin, Cork and Galway, they really are the big fat bloated elephants in the room.

Indo Property

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