Executive Summary1. Adjustment of the housing market to sustainable balance is being pursued, against an increasingly dynamic context. Despite this, the analysis presented concludes firmly that rates of increase in prices of new and existing houses in Dublin and nationally have slowed down sharply since the middle of 1998, the time from which Government measures to redress market imbalance were instituted. Thus, the peak rate of inflation in the new house market was 26.2 per cent (1998Q1), countrywide and 37.5 per cent (1998Q1) in Dublin. By the first quarter of 2000 these rates had halved to 12.9 per cent and 12.9 per cent respectively. In the existing house market the annual peak rate of inflation was 36.9 per cent (1998Q3), countrywide and 41.3 per cent (1998Q3) in Dublin. These rates too have more than halved to 13.7 per cent and 17.3 per cent respectively in the first quarter of 2000.
2. The increasingly buoyant economic conditions are fuelling demand for housing and making the task of securing housing market stability more difficult. Over the past two years, economic growth has been even stronger than the generally bullish forecasts for the period. Falling interest rates through 1999 and strong inward migration flows have had a reinforcing influence on housing demand. Moreover, these influences are likely to add further pressure into the medium term. For example, a recent report by an Inter-Departmental Review Group has estimated that gross immigration of 200,000 workers will be required over the coming seven years to sustain economic growth. Allowing for other migratory flows and the likely age patterns of people making up these numbers the impact on housing demand from this source alone is likely to be in the range 8,000-10,000 units per annum.
3. The sharp moderation in house price inflation since the Government's first package of measures to bring stability to the market owe much to the expansion in housing supply, which has accompanied them. The pattern of house completions, through 1999, follows that of previous years, with numbers tending to increase in each successive quarter. For 1999 as a whole, total completions amounted to 46,512 up 9.8 per cent on the level in 1998, which in turn was 9.0 per cent higher than the previous year. Private house completions amounted to 43,024 and accounted for the bulk of the growth in house completions. These levels of completions are the highest that have ever been recorded in one year. The rate of output has doubled since 1993.
4. In fact, the rates of increase that have occurred in the past two years have been equal to or greater in magnitude than the predictions made two years ago of the supply that would be required to achieve stability in the housing market. The main reason this has not happened is that demand has strengthened to an even greater extent than was envisaged at the time. Other contributory factors have been that some of the supply increase has been focussed on meeting demand for holiday homes. Finally, the rate of change in supply associated with the rate of change in price (i.e. the price elasticity of supply) appears to have fallen in the past few years.
5. While considerable progress has been achieved and against an increasingly complicated backdrop, the market remains some distance from a sustainable equilibrium in which affordability is improved. The favourable trend in aggregate average house price inflation in 1999 masks higher inflation facing first time buyers. The level of average new house prices is outside the reach of many Irish workers, although some improvement in affordability occurred in 1999.
6. Looking forward, further progress towards achieving stability is in prospect, as the effects of supply-side measures, already in train, begin to accumulate on the ground. Nevertheless, there are also significant challenges. These arise from the prospective strong demand for housing which will accompany continuing economic growth and which it is government policy to sustain into the medium term. A recent report by an Inter-Departmental Review Group has estimated that gross immigration of 200,000 workers will be required over the coming seven years to sustain economic growth and this will be front-loaded over the coming three years. Allowing for other migratory flows and the likely age patterns of people making up these numbers the impact on housing demand from this source alone is likely to be in a range of, say, 8,000-10,000 units per annum. As regards supply, there are challenges too. These include, ensuring a high standard of quality in planning applications; adequately resourcing the planning system to enable it to deal with the current and prospective workload; delivering necessary infrastructure in a timely manner and to schedule, where it is needed most, facilitating the construction sector in overcoming capacity constraints and achieving sufficient scale to meet prospective demand.
7. Based on the projections for growth in disposable income and expected demographic developments, private house completions need to continue expanding, to around 54,500 per annum on average over the period 2000-2005. The expected pattern of development of demand and supply contained in the projections imply continuing pressure on real house prices for some time, although continuing the established pattern of moderation.
8. It seems clear from projections of Population and Labour Force, produced by the CSO in July 1999 that there will be significant growth of population and household formation in the Dublin & Mid East Region, in particular. Developments in this area are crucial for price trends in other parts of the country. Housing demand in Dublin and the Mid East Region of at least 20,000 units per annum is considered likely, over the coming five years. How this demand will split as between Dublin City and County and the Mid East Region will depend, inter alia on relative house price developments and access times between the two areas in public and other transport terms and relative endowments of social and recreational infrastructures and facilities. Personal preferences, as between city and suburban or outer suburban, will also play an important part. It is considered unlikely that in the short term Dublin City and County will meet much more than about 11,000 per annum from new house completions. However, it is within the scope of the Mid East Region to meet the balance, but output would need to be expanded very substantially above the rate of completions in 1999, which amounted to a little over 5,000 units. In these circumstances it is likely that there will be upward pressure on prices in these areas in the short term. In the medium term, beyond 2002, the actual supply of new completions in Dublin City & County could be significantly higher, than is projected as is the case also in the Mid East Region.
9. At present there is considerable uncertainty in the housing market in relation to when and where significant amounts of additional serviced land will become available in Dublin City & County. As a result, demand is being fuelled for development land and speculative elements of demand are persisting, including the artificially bringing forward of demand for housing.
10. An effective supply response strategy needs to be characterised by:
Credibility, in the sense that what is proposed by way of a supply response will be matched with the necessary commitment of resources to ensure that undertakings are translated on the ground into serviced sites on which the necessary planning consents can be obtained.
Clarity, as regards where development is to take place and that all the necessary infrastructure to facilitate the development of secure and stable community living will be put into place, including especially access to transport facilities.
Certainty, as to when development can commence. At present, it is difficult to predict with any certainty when making a planning application, when in fact work will be capable of commencing. Matching demand with supply in such circumstances is extremely difficult.
11. Considering the analysis of prospective demand and supply the most appropriate course of action is to pursue a supply response to meet underlying demand growth and having the characteristics noted above. In addition, the approach should be supported with measures to curb any significant speculative or transitory component of demand, which may be present. Such a response holds the prospect of achieving a more rapid return of the market to stability with increased affordability. A response relying entirely on supply measures to meet all categories of demand, fundamental and speculative or transitory, would be less appropriate and in any event, will take longer to achieve stability. In the meantime, affordability for many new house buyers would move further away.
12. On the basis of this assessment proposals are made in Section 5.5 for additional actions.
Proposals for Further Action
Accelerating the Process of Securing Required Planning Consents on Significant Sites in Dublin City & County
13. The local area planning process as outlined in the Planning and Development Bill 1999 will clearly provide for better housing environments and more sustainable development and should be adopted in the case of all larger scale developments. The flexible time scale implied by the consultation and approval process and the available appeal procedures may make it difficult to predict ultimate yields and firm delivery dates for the supply of housing on sites, which are the subject of Local Area Plans.
14. Therefore, it is proposed that the potential for providing more certain delivery dates and for concentrating staff resources offered by the procedures as described in Part 9 of the Planning and Development Bill 1999 for the development of the Strategic Development Zones should be pursued. The aim should be to ensure that the land use, transportation, servicing, social infrastructure and civic design context in which major housing applications are to be made can be resolved in principle and to a certain extent in detail, at the outset in a planning scheme. The opportunity can then be given to interested parties to make their views known. A right of appeal to An Bord Pleanala would be enjoyed by those aggrieved by the provisions of the planning scheme, but following the Board's determination, proposals which conform with the scheme should be capable of commencing without delay.
15. Therefore, in order to provide an appropriate context for the lodgement of significant residential proposals it is recommended that the powers and procedures as described in Part 9 of the Planning and Development Bill 1999 be utilised to designate sites as Strategic Development Zones for housing which, in the opinion of Government, are of strategic importance for the national economy.
16. Following the designation of appropriate Strategic Housing Development Zones by the Government, it is envisaged that the timetable for the schemes would be as follows:
Scheme preparation - 12 weeks.
Publication, public consultation and preparation and submission of Manager's report to elected members - 12 weeks after publication of notice.
Consideration of planning scheme by elected members, within 10 weeks of submission of report by Manager (scheme comes into force 4 weeks later unless appealed to An Bord Pleanala).
Time scale for appeal - 4 weeks after decision by Planning Authority.
Decision by the Board - 20/28 weeks approximately.
The total elapsed time therefore, would be in the order of 58 weeks. In certain cases, by incorporating work already done in preparing draft Area Action Plans for designated sites the timetable outlined could be shortened further.
17. Applications within the zones, which conform to the approved scheme, may then be granted permission with or without conditions and no appeal lies to An Bord Pleanala. Allowing a minimum of 4 weeks for the Planning Authority assessment, the total elapsed time would be in the order of 62 weeks. This compares with an optimistic, average elapsed time of 94 weeks in the case of Local Area Plans, (see Section 3.4.1).
18. The adoption of the SDZ mechanism would not inhibit the making of applications to the Planning Authority for parts of an SDZ area under the ordinary planning process. If it can be demonstrated that such applications would not compromise the potential offered by the overall comprehensive development of the zone, such applications could be favourably considered.
19. In considering sites for inclusion as Strategic Development Zones for housing, it is recommended that the following criteria should be included in any relevant assessment:
The number of housing units and the timing of their arrival which would be delivered by the inclusion of lands within an SDZ.
The potential for comprehensive planning offered by the nature and scale of the land and its ownership structure.
The existence of water and sewerage services or the prospect of early delivery of new services.
The location of the lands proximate to existing or proposed public transport corridors.
The need to deliver a high quality of design and layout and to ensure the provision of ancillary shopping, social and leisure facilities at appropriate development stages.
20. An examination of the Dublin, Cork, Galway, Limerick and Waterford areas indicates that several significant greenfield sites may be cited as examples which appear to satisfy these criteria. The local area planning of some of these areas is at an advanced stage, while others have just commenced the process. All have significant potential housing yields.
Dublin
Balbriggan (circa 5,200 units) - Draft Area Plan in preparation.
Lusk (circa 2,400 units) - Draft Area Plan in preparation.
Baldoyle/North Fringe (circa 8,300 units) - Draft Area Plans published by Dublin Corporation for Grange Balgriffin & Belcamp and under preparation by Fingal County Council for Baldoyle.
Castaheany (circa 5,800 units) - Area Plan not commenced.
Stepaside (circa 3,500 units) - Draft Area Plan in the process of adoption.
Ballycullen/Stocking Lane (circa 3,000 units) - Draft Area Plan in preparation.
Lucan South (circa 8,000 units) - Draft Area Plan in preparation. i.e. a total of circa 36,200 housing units.
Cork Corporation
Mahon (circa 450 units) - Area Plan not commenced.
Galway Corporation
Merlin Park/Doughiska (circa 2,940 units) - Draft Area Plan prepared.
21. The appropriate procedures under Part 9 of the Planning and Development Bill 1999 (when enacted) should be initiated to ensure their rapid development in the context of a programme which will set out clearly, certain dates for the delivery of their housing yield.
Improving the Deployment of Existing Planning Resources
22. It has been represented that the processing of domestic planning applications i.e. those in excess of 23 sq m, are placing a disproportionate load on the Development Control process. Furthermore, they involve utilising the skills of trained planners who might otherwise be employed in the production of Local Area Plans or in pre-application discussions assisting large-scale housing developments.
23. The Forum for the Construction Industry, amongst others, has suggested a relaxation of the exempted development threshold as a means of freeing resources. This would be beneficial.
24. Therefore, it is recommended that the area of 23 sq m in Article 1 (a) of Column 2 of the Second Schedule, Part 1 "Exempted Development - General" of the Local Government (Planning and Development) Regulations 1994 should be altered to 40 sq m. Furthermore, it is recommended that conditions and limitations protecting the amenities of adjoining neighbours be added to Column 2.
Increasing the Resources Avail- able to the Planning System
25. In order to ensure proper planning and sustainable development, it is essential that local authorities and An Bord Pleanala have sufficient professional planners available in relation to the development of planning policy and the operation of the development control process. Professional planning skills are key skills if the necessary increase in output is to be provided in a way that creates high quality living environments with all necessary facilities and respects the quality of the environment. The number of planners qualifying annually from UCD should be increased and the potential of other courses, such as those offered by DIT, should be pursued. In the short term however, professional planners will have to be recruited from abroad. It is recommended that special incentives should be made available to attract sufficient number to meet critical needs.
26. It is recommended that an assessment should be made of prospective manpower requirements for planning and what initiatives require to be undertaken, if any by way of expansion of courses so that these needs are met.
Increasing Residential Densities
27. The Residential Density Guidelines for Planning Authorities issued by the Minister in September 1999 have resulted in the inclusion of policies and objectives in newly adopted Development Plans supporting increased densities, particularly on lands proximate to existing or proposed public transport corridors. An examination of the range of applications lodged in the Dublin area indicates that the market has responded by proposing schemes based on increased densities. Anecdotal evidence suggests that these have generally been well received but that in some cases and particularly outside the Dublin area, undue emphasis may be placed by some Planning Authorities on conformity with established densities, to the detriment of increasing housing yields. Equally, the move to higher density schemes, which require a greater level of design skills may prove to be beyond the capabilities or capacities of some designers, and result in unconsidered or substandard proposals. However, a review of several significant decisions of An Bord Pleanala indicates that well designed schemes, which adhered to the principles set out in the Guidelines, have been upheld. Refusals have issued only in cases of proposals, which had inherent defects or ignored the controls and safeguards outlined in the Guidelines.
28. In relation to implementation of the Residential Density Guidelines, it is through the Development Plan and the exercise of their development control functions that Planning Authorities can take effective action to achieve higher levels of residential density. In issuing the Guidelines, the Minister for the Environment and Local Government asked Planning Authorities to review and vary their Development Plans to give full effect to the recommendations and policies contained in the Guidelines, where they have not already done so. The Planning Authorities and An Bord Pleanala have been told that the Guidelines are policies to which Planning Authorities under Section 7 (1) of the Local Government Act, 1991 and An Bord Pleanala under Section 5 of the Local Government (Planning and Development Act 1976, are obliged to have regard. To date, 29 of the 38 County Councils and County Borough Corporations have confirmed to the Department of the Environment and Local Government that they are either in the process of or will be in the near future be reviewing or varying their Development Plans to ensure full compliance with the provisions of the Residential Density Guidelines.
29. It is noted that the Department of the Environment and local Government will be conducting an assessment in September 2000 of compliance with the Densities Guidelines. It is recommended that, if the findings of this assessment indicate significant non-compliance, additional measures should be applied, including that The Minister for the Environment and Local Government should utilise his powers under Section 7 of the Planning and Development Act 1992 or Section 9 of the Planning and Development Bill 1999, when adopted, to direct Planning Authorities to adopt a more proactive approach towards increased density developments, which, because of their location, would contribute to the principles of sustainability. Such a Directive might be based on the "Residential Density Guidelines for Planning Authorities" issued by the Minister in September 1999 and incorporate the recommendations and safeguards, which they contain.
Overcoming Infrastructure Bottlenecks: The Position in Relation to Proposed SDZs
30. It would be pointless to accelerate the planning process in relation to key development sites if any significant infrastructure constraints were not at the same time redressed. Therefore, it is recommended that the following actions should be adopted.
Public Transport
31. Many of the potentially high yielding new or expanded areas are located on existing mainline rail. The provision of a significant amount of housing without consequent improvements in quality public transport would lead to increased commuting by car and militate against the creation of independent sustainable communities. The provision of quality public transport infrastructure is particularly important to release the full potential of the significant areas of zoned and serviced land and would permit an increase in densities in areas 20,23,24 and 25 in Appendices 25 particularly.
Roads
32. In virtually all of the significant areas of potential housing, new roads will be necessary to distribute traffic and to link them to the national network. It is anticipated that these roads will be provided as part of the housing projects themselves and constructed by the developers either directly or by contributions. In Lucan South (area 37) however, the construction of a significant section of the Outer Ring Road link will be essential before the full housing yield can be realised.
Water Supply
The water supply situation in the period to 2011 remains difficult. Supplies from the River Liffey are clearly limited and the examination of new resources is thus extremely important. The Department of the Environment and Local Government proposes to commission studies on the feasibility of extraction and treatment water from the River Barrow, as well as ground water extraction to Kildare and Fingal.
34. In the meantime, several infrastructure projects are considered to be essential for the release of housing land. These include:
Sandyford High Level reservoir - To be completed July 2002
Bog of the Ring Ground Water Source - To be completed June 2001
Swords Trunk Watermain - To start August-September 2000
Jordanstown Reservoir and network strengthening North of Swords - In early planning
Lucan High Level Reservoir - To be completed June 2002
Boherboy Water Supply Scheme - To be completed June 2002
Leixlip to Ballycoolin Rising Main and Reservoir - A third rising main from Leixlip plus reservoir - To start 2001
North Fringe Water Main - To be completed end 2002.
Waste Water
35. The following schemes will release significant areas of housing land. In particular:
North Fringe Sewer - To be Completed mid-2002
Cherrywood Loughlinstown Main Drainage - To be completed 2000
Glenamuck Kiltiernan Main Drainage - To be completed May 2001
Kilgobbin Ballyogan Extension - To be completed September 2000
Ballinteer Main Drainage - To be completed December 2000
Swords Main Drainage - To be completed end-2001
Balbriggan Skerries Sewerage - Interim scheme to start and finish in 2000. Main scheme to start 2001.
Portrane/Donabate Sewerage - Start 2002
Rush/Lusk Sewerage - To be pursued as a Public Private Partnership (PPP)
Malahide Sewerage - To be completed October 2001
Newcastle Saggart Rathcoole - To be Completed December 2001
Dodder Valley Catchment - Study to be completed June 2000. Work to start January 2001
Pelletstown Water and Sewerage Scheme - Start June 2000. To be completed June 2002.
South Lucan - Start May 2000. Discussions on Public Private Partnership (PPP) ongoing.
36. A key issue is to ensure that these projects are implemented and delivered at the earliest possible date and at least to the planned schedule. The experience gained in bringing forward the North Fringe Sewer is instructive in this regard. The project, which originally was scheduled to be completed in 2004, is now expected to be completed in mid2002 with the advance section serving Meakstown Poppintree to be completed in mid-2001. The structures that helped achieve this acceleration in the programme for the project were:
a dedicated project steering group comprising the Department of the Environment and Local Government and the local authorities was established to deal exclusively with this project;
hand-in-hand with this, a dedicated project office was established comprising representatives of two engineering consultancy firms and local authority engineering staff to oversee them;
the two consultancy firms were assigned separate parts of the design, which were carried out in parallel;
a specialist engineer was hired to deal with the acquisition of wayleaves;
all key issues (e.g. rail crossing, foreshore licence, etc) were dealt with up-front.
37. It is therefore recommended that a series of Project Offices be established in the local authorities where SDZs are designated - these offices would be responsible for, inter alia:
Delivery of key water, sewerage and non-national roads projects required to bring the SDZ into development. This will involve bringing the projects through planning (land acquisition, wayleaves, Part X, EIA, etc) to construction, management of the projects during the course of construction, and management of any consultants appointed;
Assisting with the drafting of development contributions' schemes or other agreements for the SDZs;
Liaison with public transport providers to ensure early delivery of key public transport projects;
Facilitating pre-planning discussions with developers.
Similar structures should be put in place to drive groups of key water and sewerage projects in the main urban areas for locations not designated as SDZs.
38. In addition, it is recommended that proposals for the augmentation of the Grand Canal Sewer (which serves lands to the North and West of the City and which is presently working at capacity) or other proposals which would provide necessary drainage capacity for these areas should be put in place as a matter of urgency. The aim should be to ensure that it can cater for all of the serviced land within its catchment by 2006.
Fiscal Penalty on Non-Realisation of Potential of Proposed SDZs
39. The recommendation to designate a number of key strategic sites as Special Development Zones, with the accompanying fast-track planning process amounts to a significant commitment to secure the earlier release of the lands involved for housing development. It is important to ensure that development does indeed take place at an early stage following the proposed process.
40. Therefore, it is recommended that an annual tax of £3,000 per housing site should be applied to the owners of land who: (a) have not applied for planning permission in accordance with the approved planning scheme for the lands contained within the SDZs, within a period of 12 weeks after the scheme has been approved; and/or (b) do not commence implementing a planning permission in accordance with the terms contained therein, within 26 weeks of the permission having been granted.
Proposed Revisions to Stamp Duty Regime
41. House price increases since the revision of Stamp Duty rates in June 1998 have resulted in an increase in the burden of stamp duty, making it again a potential barrier to first time buyers entering the existing house market. This is significant because first time buyer housing needs are being met, increasingly, from the existing house market. Both stamp duty receipts and Department survey data indicate that activity in the market is increasing. First time buyers continue to account for around 45 per cent of the total market but, as indicated by the fall in the number of new house grants paid, of 11 per cent between 1998 and 1999, fewer first time buyers are purchasing new houses.
42. Current analysis of the housing market suggests there is a significant element of speculative or transitory demand, which hampers efforts to meet fundamental demand with increased supply. Accordingly, it is considered appropriate that measures should be incorporated to dampen this element of demand. Stamp duties provide an appropriate means of achieving this since they relate to all housing transactions, whether mortgage financed or not.
43. Therefore, it is recommended that stamp duties should be revised along the lines contained in the table below.
Proposed Revisions to Stamp Duty Bands & Rates
Anti-speculation Property Tax
44. The housing market is attracting speculative demand. In some cases, this takes the form of individuals taking a view about prospective house prices and buying residential property, as opposed to another form of investment. In other instances, speculative demand takes the form of a transitory increase, following from demand being brought forward, so as to avoid expected future price increases. These various kinds of speculative demand forestall the movement of the housing market to stability. As this happens, there is a tendency to stimulate further speculative demand and in this way a "bubble" can develop. If allowed to develop unchecked, such a process has the potential capacity to threaten overall stability of the market. Of course, the pursuit of a strategy centred on a vigorous supply response, with the characteristics of credibility, clarity and certainty, will influence the formation of rational expectations about future market trends. However, it is considered that expectations of future returns from housing market speculation should be supported through the introduction of an annual tax on dwellings, which are not principal primary residences.
45. Therefore, it is recommended that an annual tax, say of 2-3 per cent of the declared value of such properties acquired in the future should be introduced.
Measures to Secure Improvements in the Quality & Availability of Rented Accommodation
46. The Commission on the Private Rented Residential Sector is due to report about end-June 2000. The Commission is expected to make recommendations in relation to the objective of increasing investment in and the supply of rented accommodation and removing any identified constraints to the development of the sector, as required by its terms of reference. It will be necessary that measures implemented on foot of both this report and the Commission's report are consistent and produce the desired impact. In recognising this fact, and the need for measures designed to encourage a greater level of long-term commitment by investors to the provision of professionally managed private rented accommodation, the following recommendation is made:
47. A mechanism should be developed to exempt landlords from the tax measure proposed in paragraph 45 above, where certain specified conditions apply, including compliance with the standards and other requirements of the regulatory regime and there is evidence of a commitment to the availability of the accommodation for renting on a long-term basis.
Strengthening of the Institutional Framework for Securing A More Effective Housing Response in the Greater Dublin Area
48. It is considered that it would be appropriate to strengthen the present institutional framework available for co-ordinating and executing plans, initiatives and projects which impact on the current and prospective future supply of housing in Dublin City & County and the Counties of Kildare, Wicklow & Meath.
49. Therefore, it is recommended that there should be an expansion of the role of the housing supply function in the Department. It should be charged with ensuring delivery of key infrastructure in association with the local authorities, and co-ordinating the delivery of other facilities and services required for new housing development and provided by other relevant Government Departments and State Agencies.
50. A considerable strengthening of the housing supply function in the Dublin authorities is required to ensure that there is a "one-stop shop" for housing supply issues in Dublin. This is required to ensure that new housing development is brought on stream including in the designated SDZs at the earliest date and to oversee the project offices in the SDZs.
51. It should be required to submit a report to the Department each quarter. This should deal with implementation of the housing strategies covering house completions (private, local authority and voluntary), serviced land status, planning permissions granted, progress on key housing related water, sewerage, roads and public transport projects (compared to original critical paths), constraints on achievement of the housing strategy targets and any adjustments to factors underlying the strategy, etc.