The ideas on the property market are coming thick and fast. The disappointing level of housing completions last year – just over 30,000 – has set alarm bells ringing in Government and Taoiseach Micheál Martin said the Government needs to work out how to get completions up to 50,000 plus a year. But which of the ideas now being floated makes sense and which are better forgotten? And what might actually happen?
Let’s first note that there are two main types of intervention – those involved in trying to increase supply and those supporting demand by helping people to buy, Higher supply is key. Demand supports are popular, but once introduced are hard to do away with and can keep prices higher.
Here is what is on the agenda of the new Government, drawing on the Programme for Government and a variety of leaks and ministerial comments and how to make sense of it all.
1. Planning and zoning:
More land needs to be zoned for housing – in the right areas. There is talk in the air about pushing local authorities to move more quickly in zoning land and of greater Government powers to make them do so, or go over their heads. Let’s take a step back here first. The Government needs to quickly finalise a revision to what is called the National Planning Framework (NPF), which is the framework for development across the State. This is due in the summer, we are told. In turn it needs to make sure that these guidelines flow down into regional and local authority development plans. This is all detailed work and not as glamorous as a new “ scheme “ but it is vitally important to set the groundwork.
The latest housing crisis ‘solutions’: Which could work and which are hare-brained?
Remote working is here to stay and has whole new language about ‘hidden hybrid’ and ‘mouse jiggling’
Here’s why Ireland is on Donald Trump’s tariffs hit list, as sweeping new measures announced
The Dubs win again: The difference between Ireland’s richest and poorest counties
2. The new Planning Bill:
Speaking of things that are not too glamorous, here we also come to the new 870 page Planning Act, passed in the dying days of the old government. This is designed to speed planning and development – though some of its provisions are controversial. It will probably take 18 months plus to implement it in full via ministerial orders. And only after that will we see if it does enough to speed development. Had the new planning act and the NPF been progressed more quickly by the last government, we could be further down the road now. But as they say, we are where we are.
3. A new Strategic Housing Activation Office office:
The Commission on Housing had called for a powerful independent executive to oversee housing delivery, a plan immediately dismissed by the Department of Housing as introducing another layer of bureaucracy. The Programme for Government, however, revived the thought, promising a special “unit” within the Department of Housing to co-ordinate land, water, power and the vital delivery issues. Now – with the Taoiseach and Ministers starting to reference the Housing Commission in detail for the first time – we are promised the new activation office. Anything which helps to join up the various bits of housing delivery – planning, water, power supply and so on – is welcome. Along with a Cabinet subcommittee it could take on an important role. However, it will not be easy. Housing Minister James Browne promised in a Sunday Independent interview to appoint a ” maverick” outsider to head the office; one close observer said that this person ” will need to descend from the sky wearing red underpants and a cape,” to have the desired impact.
4. Tax breaks and supports for developers:
An Irish Times report that the Government was considering new tax breaks was followed by talk of the return of Celtic-Tiger style incentives and also specific incentives aimed at particularly kinds of development, Finance minister Paschal Donohoe slapped down the return of Celtic Tiger type tax breaks but his comments did seem to leave room for more focused measures and the idea still seems to be in the mix.
Whatever happens to tax breaks, the Government will certainly continue to provide significant and increasing supports to developers, already happening through a variety of programmes such as the two Croi Cronaithe schemes and a variety of other schemes used to support cost rental housing and provide financing for development. This is in addition to the activities of the Land Development Agency, now going beyond State land to develop other properties which already have planning permission and State support for Approved Housing Bodies and local authorities to provide social, affordable and cost rental housing. which has also stepped up sharply. A significant chunk of the housing budget is now going on some of these schemes and it seems more are now on the way. The Programme for Government also promises a new compulsory purchase order bill with strengthened powers to allow the State to buy unused land.
Massive resources are being deployed here – accounting for a big chunk of the overall direct State spend of €6 billion on housing this year. One way or another all involve the State stepping in to close what is seen as a “viability gap” facing developers and to try to influence the location and type of what they are doing. The Department of Public Expenditure has warned that spending resources at this level cannot continue indefinitely and the Department of Finance is known to have serious concerns about State exposure in some areas, such as the activities of approved housing bodies. However, the Coalition is looking at stepping up its guarantees and supports to developers further, with the Programme for Government promising a ” backstop” under which the State would take on some apartments for cost rental itself as an extension of some of the existing schemes.
While the blizzard of schemes is confusing, the key point is that the State is intervening at various stage of the process to spend money to help bring projects on stream and more is on the way via either spending of tax breaks. While State supports are clearly needed, there is no published assessment of the schemes already under way and some of the money is effectively to compensate builders and developers for other problems – such as the high costs of building in Ireland and interminable planning delays. A good strategy would also address these crucial factors and ensure the costs are brought down and – crucially – delays and uncertainty caused by planning and water, wastewater and electricity provision are addressed. In development, time is money. And some of the subsidies the State is paying are effectively to compensate for delays and costs imposed by the system and its own agencies.
5. Starter Homes:
The Government is promising a new “starter home scheme” to “promote home ownership. However, as outlined in the Programme for Government this mainly entails supporting buyers via an expanded Help to Buy Scheme and an expansion of the First Home Scheme – in which the State takes an equity stake – to include second-hand homes. These demand supports are controversial – the State says that by helping buyers they also encourage supply, but critics say they only push up prices. Gradually phasing out these supports over time would seem a better plan and extending the First Home Scheme to second-hand houses shows that how, once introduced, demand schemes tend to expand. With such dire shortage in the second hand market, extending this scheme seems to have little logic, bar helping those who bought originally under the scheme to sell on their property to another first-time buyer.
6. Planning relief for back garden development:
The well-discussed cabin in the back garden proposal – under which no planning would be required under certain circumstances – seems a sensible enough move, even if discussion is needed on what would qualify. And, crucially, would it just be for use of family members or for increasing rental supply too. There are signs of suburban pushback, with ministers reportedly concerned about suburban cabin sprawl. Here we get into the NIMBY arguments which have made it harder to develop anything in built-up areas. Why not set some rules and trial the cabins quickly in a few areas? The huge shortage of options for many families and or rental property means it is worth a try. But this is now going into a “consultation process” and “stakeholders” may try to drive a stake through its heart by restricting it with too many conditions.
7. Changing rental rules:
In fairness to the Government, this is a politically impossible one. Rental pressure zones, which limit rent increases in many areas, appear to be a factor cutting inward investment and reducing private rental supply. But changing the system will, in some areas, inevitably lead to higher rents, even if existing tenants can be protected. Some change in the rules is needed, but not a free-for-all, and it needs to be accompanied by a drive to address the other problems surrounding apartment building and also accelerate cost rental supply. If the Government abandons the zones and all that happens is more high-priced units come on to the market, it will be storing up big trouble for itself.
