It’s perhaps the most frequently asked question of Ireland’s housing crisis. Why doesn’t the State step in and build? Whether the chronic undersupply or the lack of affordability meet the definition of market failure is immaterial, housing is now a block on the State’s future development.
Perhaps the most galling aspect is that we don’t lack the means to address it. The exchequer is awash with tax receipts and there is an abundance of State land, either idle or underused, to be built on.
In such circumstances, the Government’s overwhelming reliance on the private sector to deliver housing is difficult to weigh up particularly when the political fallout has been so severe.
Some argue that the Government is ideologically wedded to the idea that the market is the most efficient model for dealing with the State’s housing needs and by extension opposed to the type of large-scale social housing projects we’ve had in the past.
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This neoliberal tendency can be seen in the shift away from building social homes directly in favour of providing rent supports – the so-called shift from bricks to benefits. And by the fact that the social housing which is provided comes – almost entirely – from the private sector.
Of the 2,706 new-build social homes delivered up to the end of September last year, 72 per cent were acquired by way of so-called turnkey purchases – where the local authority or approved housing body (AHB) enters into a forward-purchasing arrangement with a private developer – or through the Part V rule, which stipulates developers must set aside a certain portion of their developments for social housing.
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Others argue that because the majority of voters here are homeowners who benefit from rising house prices, the Government is averse to a major intervention, which might depress prices and displace a significant chunk of private-sector activity. That seems unlikely, however, given the political heat the crisis is generating, And the days of governments benefiting from rising house prices are well gone.
Policymakers may get it wrong but to suggest they’re harbouring hidden motives on housing seems overly conspiratorial. There is a simpler explanation, and one that seems to grow like a weed in Irish society: bureaucracy.
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For all the criticism laid at their door, local authorities here are so tied up in red tape and process when it comes to the provision of housing that purchasing units directly from the private sector has become a more efficient use of resources and time.
More than Covid, more than higher construction costs, local councils link the undersupply of social housing to what’s known as the “four-stage process” – the heavily bureaucratic and massively time-consuming process that the Department of Housing and the Department of Public Expenditure and Reform makes them go through when they want to build directly.
To secure capital funding to build under the Department of Housing’s Social Housing Investment Programme (SHIP), councils must first make the business case for the project before securing pre-planning approval. The first two phases are said to be relatively straightforward.
However, it’s the next two stages where the problems start. Under the pre-tender design stage – stage three of the process – the local authority’s architects must engage with the Department of Housing’s architects to agree the final design, a back and forward process that can take months.
When the final design is agreed, the councils, under the final cost-appraisal and procurement stage, must haggle with the department on what they think the tender price should be, mindful of various price caps set by the department, and rather weirdly before actually going out and procuring a builder to do the work.
The price they agree with the department may not be the price they can secure in the marketplace. In a period of rapid cost price inflation, this process has become extremely difficult.
The department also forces councils to adopt a new procurement process for each project rather than allowing them keep a panel of prospective builders on tap through a framework agreement like in other sectors.
If the proposed project is a mixed tenure development with affordable and disability-adapted units alongside standard social housing units, there are adifferent funding streams, each requiring their own four-stage process, that must be navigated in parallel.
All in, the pre-construction process is meant to take 52 weeks (with an additional one to two years for construction). In reality, it takes two or three years before a brick is even laid on the ground. Central government imposes these cost-control strictures.
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But they are so rigorous that councils say they are effectively disincentivised to build, an irony given the lack of cost control we’ve seen with some of the bigger capital projects like the children’s hospital.
Either way, a great public-sector housing build, something that is badly needed and something that could ease pressure right through the system, evades us.
The social housing delivery target for 2022 is 9,000 units (the full-year figure hasn’t been published yet) but it’s not likely to be achieved and is likely to be in the region of 6,500-7,500, according to insiders. In 1975, the then government, with a fraction of the financial resources of the current one, built 8,800 social homes, a record that is still to be eclipsed despite the severity of the current housing crisis.
