Wednesday 20 November 2019

Home truths: Towering land sale profits kill city ownership

The Tower, St George Wharf in Vauxhall, London. Unlived in, causing inflation for locals and owned largely by foreign based investors
The Tower, St George Wharf in Vauxhall, London. Unlived in, causing inflation for locals and owned largely by foreign based investors
Mark Keenan

Mark Keenan

What does London's 50-storey 'Tower of Greed' - in which apartments have sold for up to STG£50m - have in common with a tract of tillage and grassland land in Cork that sold for €5.6m this week?

Before I answer that one, let me introduce you to The Tower at St George Wharf - part of an upmarket residential development at Vauxhall on London's South Bank. 'The Tower of Greed', as the British press christened it, was completed in 2012 and has 214 apartments on 50 floors, which were sold from its launch two years ago for prices ranging between STG£700,000 and STG£50m.

An investigation by The Guardian newspaper showed that almost two thirds of the tower's 214 apartments are owned by foreigners who seldom live in them. It has been argued that because of this, the apartments cannot really be considered 'homes' but rather raw investment opportunities for the global super-rich, towering over a city which (like Dublin, Cork and Galway), suffers from a shortage of affordable housing for average citizens. Owners at The Tower include a Middle Eastern buyer who acquired an entire floor to make one giant home, a Russian billionaire whose business partner is an ally of Vladimir Putin, the former chairman of a now defunct Nigerian bank and a Kyrgyz vodka tycoon. Only a tiny fraction of the owners qualify to vote in Britain.

Meantime, most young London-born buyers on average wages are forced to make new lives entirely outside the city with two hour commutes each way, as much of their city becomes little more than an investment vehicle. It must sound at least a little familiar to young Dubliners, Galwegians and Corkonians who are priced out and facing surging rents? The Tower of London is a perfect (albeit extreme) example to illustrate what happens in an unfettered and runaway land-to-development system of the sort which has evolved here and in many western cities like London.

The ingredients you need for housing exclusion by commoditisation are as follows: You need a housing crisis involving an increasing population which elevates land prices to a higher level that, in turn, translates into unaffordable homes. In turn again it eliminates all but the wealthier elite operations from the development of housing and all but the elite from the purchase of the resulting new homes. You will need a 'hands off' right- leaning Government which refuses to provide social or affordable housing in any worthwhile numbers and one which is generally supportive of housing as a business.

You need a planning system which tightly restricts the supply of land for development and therefore allows existing brownfield sites to surge in value; wages which are generally static or historically falling for younger adult age groups - the latter ensuring that most citizens fall off the affordability ladder in cities, first for purchasing, and then for renting. Finally house prices and rents increase to the degree that it draws in international investors. Housing becomes a commodity.

This is the result of unfettered land-to-housing feed system of a type which economists in other affected countries are beginning to address.

Global thinking is changing on how cities should solve such a housing crisis as many nations now discover that their city housing problems are no longer temporary spells but ongoing, sustained and worsening.

It starts with land purchase. This week a site of 101 acres of tillage and grassland at Monees outside Douglas in Cork changed hands for €5.6m or €58,000 per acre. This is because Cork City is desperately in need of development land amidst its own fast growing housing crisis. New plans and boundaries for development spreads outside the city are about to be drawn. The site in question is not directly outside of the population centre of Douglas, but separated from it by other lands. Therefore the record price reported earlier this week in this newspaper's Farming Independent pages has been driven by medium to long-term housing potential. It's the beginning of that chain - more expensive land equals housing that is not necessarily affordable for the average Cork buyer.

But cities in some European countries do not suffer from this rapid commoditisation of housing and crisis of affordability. Germany, Belgium and the Netherlands can still provide city citizens with reasonably affordable homes.

They do this by tightly managing the provision and the usage of land for housing before it goes under the hammer. It means development land is provided on the outskirts of cities as it is needed and with no requirement to wait around years for a new development plan. It means local government determines and polices exactly what type of housing can be provided where. This keeps development land prices down and therefore the end price of housing remains affordable. There are no farmers walking away with bumper jackpots and no big foreign investment firms pumping money into blocks of tiny apartments to rent back to priced-out citizens at crazy prices.

Last month NESC published a report warning that Ireland needs to stop selling private and State- owned lands at inflation-causing and socially-excluding prices and to manage land use more actively. Today the Irish State sells public land for profit only - to the highest bidder. There is no stipulation of what level of affordability should be present in the homes provided. Last year the State sold nine acres of RTÉ land for €107.5m for luxury homes and countless Nama disposals were also engineered for profit only. It's a towering shame.

Indo Property

Editors Choice

Also in Life