Monday 17 June 2019

High living: the answer for city housing or just pie in the sky?

Government's reliance on the private sector to deliver homes has the potential to cost the State billions in the near future, writes Ailish O'Hora

An artist’s impression of a plan proposed by the Progressive Democrats in 2005 that would see Dublin Bay transformed into a Manhattan-style skyline
An artist’s impression of a plan proposed by the Progressive Democrats in 2005 that would see Dublin Bay transformed into a Manhattan-style skyline

Ailish O'Hora

Developer Johnny Ronan's plans to add to the capital's skyline hit a snag last week when Dublin City Council shot down his bid to increase the height of office blocks at Dublin's Docklands.

Had the planning permission been given the green light, an additional 1,000 Salesforce staff could have been accommodated at the site, Ronan had claimed.

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And it was a double blow for the developer, after Spencer Place Development Co Ltd - co-owned by the Ronan Group and Colony Capital - was also refused planning permission for a companion application to increase to 13 storeys a residential and aparthotel plan in the Docklands.

The double refusal came in spite of heavy lobbying of Government ministers and Dublin City Council by Ronan and Salesforce over recent months in a bid to ease height restrictions on buildings in the Docklands.

And while the concept of building up is increasingly cited as one of the solutions to our commercial and residential property woes, it is not without its detractors, with some commentators highlighting that it is adding to price inflation in an already dysfunctional property market.

"There's an implication that building high-rise means cheaper and faster development, or that homes would be more affordable, and that's not the case," said Orla Hegarty, assistant professor at UCD's School of Architecture, Planning and Environmental Policy.

"Neither of those assertions stand up to any scrutiny. And, unlike cities like London, we have a lot of development land available, much of which is already zoned and substantial amounts of which are in public control," she said.

Hegarty added that removing height limits in a particular part of the city immediately inflates land values because the value of a site is calculated by how much can be built on it.

"When that increases it doesn't mean there will be any more development or any development sooner. In fact, the landowner may just sell it on for a higher price, and if a site already has planning permission it will have to go back to square one for planning permission for a higher building. In many parts of the city residential buildings were already permitted up to nine floors under the current development plan, which also designated areas suitable for high-rise buildings."

A spokesman for Ronan said that high-rise was part of the solution to the housing crisis but was not a magic bullet.

"All housing that's delivered helps the housing crisis. High-rise buildings are more expensive, but so what? Nobody said high-rise and co-living is the solution, but they are part of it. The real question is does it help the housing stock - and the answer to that is yes.

"Increased density and height are necessary to stop urban sprawl. We're not talking about skyscrapers up and down the Liffey. It's just part of the answer, like co-living is. If you don't have higher density around transportation hubs you have urban sprawl. It's also important for sustainability and the environment. I think there's a lot of hysteria around height and destroying the Georgian core of Dublin which, of course, should be protected.

"But when it comes to the docks, it's a different proposal and there can be some high building, especially where the river widens. We're not talking about Manhattan, but there is the capacity to have some taller buildings. I don't think there's anything wrong with co-living either as part of a solution," he added.

The spokesman for the high-profile developer added that the housing crisis could only be solved by increasing the housing stock. "Of course the State should be building affordable housing. Even in the depths of economic times we were building houses. And it should not be competing with first-time buyers by buying from the private sector," he said.

But the debate around building up, and even co-living, is perhaps deflecting from the State's larger role in Ireland's housing problems.

Arguably, housing policy could be fuelling the problems through a number of initiatives including subvention and competition with ordinary buyers through the purchase of homes from the private sector as well as initiatives that may be skewing the rental sector.

According to numbers compiled by architect and housing policy expert Mel Reynolds, using figures from Nama and the local authorities, at the end of May last year, the State either owned or controlled enough zoned land to build 114,000 homes and many of these could be social housing.

In Dublin alone, there was enough zoned land in State control to build over 70,000 dwellings.

Figures from the Central Statistics Office show that there were 13,373 'scheme' homes and apartments, excluding single homes, out of a total number of 18,072 new-build completions in 2018. In the same period, local authorities and approved housing bodies purchased or built 4,594, including Part V units.

Of this figure, 64pc were purchases of new homes from the private sector while the average price paid for Local Authority 'turnkey' and new-build local authority dwelling was €235,411. Nama funded the construction of 2,500 new homes with 40pc of them sold for more than €400,000.

"The figures show that excluding purpose-built social housing, the State subvented more than half of all private dwellings built for sale last year," said Reynolds. "The State is competing with ordinary buyers in the affordable housing market while simultaneously using State funds to build severely unaffordable schemes. And through the cumulative effect of a number of uncoordinated initiatives and interventions, is actually exacerbating the current affordable housing crisis that we have in the country," he added.

Then there's the dysfunctional rental market and its potential impact on the wider economy in the near future.

Some sobering observations were made last year by the Irish Government Economic and Evaluation Service, a number-crunching division of the Department of Public Expenditure and Reform, which is designed to ensure that the State gets the best value for money spent and the competency of Government schemes.

"The analysis concluded that rent assistance was twice as expensive over a 30-year term than the State building in the same location. What Housing Assistance Payment (HAP) is achieving is one new rental tenancy for the price of two new builds. So even according to the Government's own advisers, the Rebuilding Ireland plan's heavy reliance on rent assistance makes no sense," Reynolds said.

He added that HAP is a useful measure of rental distress in the housing sector.

"The current rate of increase is 50 recipients per day and that same report estimated that the annual cost for rent supplement or assisted tenancies would increase to €1.7bn per annum by 2022 which is the equivalent of one new children's hospital being spent on rent assistance per year," he said.

And while rental-assistance schemes may have made sense when rents were lower, it's time to take a fresh look at our overall housing policy, according to Reynolds.

This is something echoed by Hegarty, who added that we could be on course to repeat the mistakes of the recent past if we continue with Nama plans to sell off the Poolbeg site in Dublin 4 to the highest bidder.

Poolbeg housed the old Glass Bottle Site and Nama controls 15 acres at Poolbeg West ­- the biggest of the capital's development areas.

"Selling off public land like the Poolbeg site is very short-sighted and may be very high risk because the development hinges on there being a market for 2,625 homes/private units at a high price. If house prices stabilise or drop the entire scheme may stall and the social and affordable component (875 homes) may not materialise," said Hegarty.

She added that a less risky alternative would be for the State to put in the infrastructure and to either license or sell plots to housebuilders in the SME sector.

"In this way, there is quicker progress, more competition between the builders, more affordable housing and control over the delivery of a mixture of private, cost-rental, co-operatives, social and affordable housing. It is also 'recession-proofing, because it would be built more quickly and it opens up opportunities for small builders to access land, where they are currently priced out.

"It gets these people back in the game allowing them to recapitalise, take on apprentices and grow skills. This system can deliver housing that is more affordable, that is not vulnerable to changes in the private housing market, and that can continue to deliver homes and jobs even when the downturn comes, as inevitably it will," Hegarty added.

According to Reynolds, it's not too late to have a policy shake-up with a co-op model as a key component. He cited the O'Cualann affordable housing scheme in Dublin's Ballymun as a starting point.

Last year, Housing Minister Eoghan Murphy handed over the first sets of keys to homeowners there with prices starting at €160,000 for a three-bed and €219,000 for a four-bed. The scheme is operated by the O'Cualann Cohousing Alliance and it is targeted at families with annual income thresholds of €36,000 to €80,000.

"One third of all housing in Germany is co-operative. In the middle of all of our housing chaos, we have O'Cualann and they are doing it in partnership with Dublin City Council. There's no reason this couldn't be rolled out across the country for ordinary households on moderate salaries to either rent or own," said Reynolds.

"The only reason it couldn't would be the lack of available State land - and we have it in spades. Broadening the view beyond local authorities, Coillte owns 440,000 hectares and that's 7pc of the land area of Ireland. That's not to mention the likes of IDA, Iarnród Éireann and other State and semi-State agencies.

"It also seems we're in the middle of a land-price bubble at the moment which is being funded by private equity and while there are beneficiaries to this it also challenges viability in many locations.

"The only remaining impediment to wide-scale affordable housing is housing policy itself."

High-rise restrictions is one issue dominating public debate over building developments at the moment.

But when it comes to housing, it seems some of the Government's other policies should perhaps come into greater focus.

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