Sunday 26 May 2019

How to solve the housing crisis

Current planning policy must be abandoned if we want to end the crisis of rocketing property prices and rents

Outside Dublin, not a single county or city of the 29 had an average price above €250,000
Outside Dublin, not a single county or city of the 29 had an average price above €250,000
Colm McCarthy

Colm McCarthy

Despite the sharp increase in prices and rents these last few years, housing remains affordable in most parts of the country. Most Irish people with a steady job can afford to rent accommodation and can at least aspire to home ownership.

The exception is Dublin. The website Daft.ie published average prices for a range of dwelling types in its recent report for the first quarter of 2018. The report broke the figures down for 25 districts in the city and county of Dublin and for 29 areas outside Dublin, the 25 remaining counties plus the four largest provincial cities. The table shows how many areas fall into each price bracket across the country, distinguishing Dublin districts from the rest, for a three-bedroomed semi-detached dwelling.

Outside Dublin, not a single county or city of the 29 had an average price above €250,000. Every single Dublin district was above this threshold and the cheapest area in Dublin (the Dublin 22 postal district) had an average price above the dearest anywhere else (Co Wicklow). In 22 areas outside Dublin (out of 29) the average price was under €150,000. For the cost of a three-bed semi in the dearest Dublin districts you could buy eight such units in the north midlands.

For other dwelling types the pattern is the same. In Cork city, sometimes alleged to share Dublin's affordability problem, the top end of the market (five-bedroom detached properties) had an average price of €460,000, which would just about buy a two-bedroom terraced house in the more expensive parts of the capital. Comparing like-for-like dwelling types, prices in Dublin are more than twice the level outside the capital and more than three times the level in some rural counties.

Rents and prices follow one another over any timescale that matters. If you think that Dublin rents are too high, you must also think that prices are too high. There is a fatalism in official policy about housing costs, both prices and rents, in Dublin. People seem to think that it was ever thus - Dublin is a big city and big city prices reflect some kind of absolute shortage of land for residential building. But it used to be different. Dwelling costs in Dublin were no greater, like-for-like, than in the rest of the country until about 40 years ago. The gap began to open up in the mid-1970s and really got going over the last 30 years. It is not a coincidence that the pronounced sprawl of the Dublin suburbs into the north Leinster counties accelerated over the same period. The result is a crisis of housing affordability in the capital, a wasteful resort to long-distance commuting, unearned capital gains (on paper) for older city-dwellers and a perception of inequity among younger aspirants to home-ownership.

If Dublin really was a huge city burdened with an absolute shortage of land for residential development the fatalism of policymakers would be understandable. But it is a pretty small city in reality, with a population in the city and county combined of just over 1.3 million. There are close on 100 bigger cities in China alone, and more importantly, dozens around Europe of similar size which manage to deliver affordable housing for citizens.

It is undeniable that the population of the Dublin area has been rising in recent decades, but so has the population elsewhere in the country. To turn a spurt of population growth in a city surrounded by rolling prairies of undeveloped land into a housing affordability crisis needs a policy intervention, and it arrived in the form of the 1963 Planning Act. An unholy coalition of local and national politicians, residents' associations and professional planners has arisen in the years since to impose a highly effective divorce between supply and demand in the Dublin housing market.

People are commuting from midland towns like Portlaoise and Mullingar, 80km from central Dublin. For the first 70km of their journey they could be in the plains of North Dakota. There are lands zoned for agriculture inside the M50 ring-road, believe it or not.

The provision of extra residential units requires three critical ingredients. These are zoned land, publicly-provided services such as water and roads, plus planning permission. Too little land is zoned around Dublin (why not all land within, say, 25km of the city?), too little of the zoned land is serviced and it is too difficult to secure planning permission. One unfortunate developer was denied permission recently for a modest and low-rise apartment block in Stillorgan, a residential area with good services, frequent buses, shops and schools. The opposition was led by a phalanx of local Dail deputies and councillors, all members of political parties supposedly committed to affordable housing.

A report from the department of the housing minister released last week contains a familiar recitation of obstacles to the delivery of affordable accommodation. Land is expensive, there are development levies and the planning process is complex. The document has been prepared because policy has failed, but proposes that current policy should be intensified.

Current policy, starting with the 1963 Planning Act and its successors, should be abandoned. All unused and under-utilised land, including land currently zoned for agriculture or for ''amenity'', whatever that means, inside 10 or 15 miles of the M50 (and within it!) should be declared available for residential development, subject to planning permission. This would bring a guaranteed end to re-zoning controversies and the associated corruption. More importantly, it would solve the problem of how to capture for the State the so-called ''planning gain'' when low-value land is suddenly raised in value by fiat, by the simple expedient of eliminating the planning gain. Land prices would be driven back towards agricultural value. The current obsession with mobilising only land in the ownership of State agencies is an evasion - most of the derelict land in and around Dublin does not belong to the State.

There should also be a legal presumption that planning permission for residential development would automatically be granted, in the absence of some over-riding national, as distinct from local, objection. As for development levies, they were introduced to substitute for the loss of local authority income due to rates abolition, and are no longer needed since householders now pay property tax.

The objective of policy, if the politicians are serious, should be a steady reduction over time in Dublin prices. This would bring in its train a corresponding reduction in rents. The reduction is needed not just in prices for new construction but also throughout the second-hand market. At times one could be forgiven for believing that politicians want to see low prices for buyers with continued high prices for sellers. Either you want to deliver affordable housing or you prefer to perpetuate the crisis.

Sunday Independent

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