We need to unclog the housing pipeline
Posted by admin on 30 Mar, 2016
Bill Nowlan, Sunday Business Post, March 13, 2016
Solving the housing crisis is possible if the next government grabs the bull by the horns
The banana you ate this morning for your breakfast came to you fresh, at a price you could afford and because of the operation of a complex, efficient and well-managed supply chain for bananas. Your car, your phone, your cornflakes were equally dependent on an efficient supply chain to get them to you at a price you could afford and when you wanted them.
Unfortunately, when one examines the housing construction market in Ireland, none of the characteristics of an efficient supply chain exists. Instead, the reality is a lack of economies of scale, no overall supply management, no control over the critical raw material of land and an adversarial regulatory system.
It could be different if someone took proper responsibility for the problem. We did it in the 1940s, 50s and 60s when the Irish government of the day empowered county councils to acquire land, design and build new housing and provided the houses with state cash. It happened at the same time in Britain with the construction of the highly successful new towns such as Hemel Hempstead, Cumberland and Bracknell.
It happened also with the Dublin Docks authority, which designed and managed the development of our highly successful IFSC and South Docks. It worked extremely well and without it we would not now have the Googles and Facebooks in ‘Silicon Docks’.
The difference between the 1950s and the IFSC approach is that some 60 years ago, government money paid for the new towns and the council estates. That cannot be repeated now due to Eurostat rules on the treatment of ‘off balance sheet’ government investments and the pressing demand for all available cash to go to repairing our creaking public services. It was strong state leadership that helped private money build the IFSC, which has delivered large returns to the state in terms of employment and urban regeneration.
Today, private money is available in the truckloads to provide additional housing to rent and for owner occupation, if only someone would take the political initiative.
In a paper that I presented at a recent Sunday Business Post seminar I pointed out that we had no housing strategy. Instead, Ireland has 13 different government agencies, from the Central Bank through to an Bord Pleanála, all with different agendas and often pulling in different directions. It is like having 13 musical instruments playing together with no common score or conductor – a raucous noise.
I called then for a minister for housing sitting in cabinet, a suggestion that many others in the industry support, but which no politician has taken up as an issue, no doubt because it is fraught with hard decisions and cross-departmental barriers – a politician’s nightmare.
Building is the easy bit. We have a highly competent and efficient design and construction industry, but the barriers to its effective delivery are ‘up stream’ in the supply chain: slow and uncertain planning regulations and lack of infrastructure to service new sites. In Ireland, the average time from a developer identifying a site to producing his first house is five years, with the actual house construction time only taking about 10 per cent of that time.
We also have a pricing problem, with the cost of a new three-bedroom semi
at just over €300,000 which is more than the price of similar second-hand houses in 66 per cent of Dublin. The way to get pricing down is through the joined up thinking and efficient supply chain approach I am advocating and requires the following actions:
• The managed release of land from state control, either via Nama, the local authorities, or the Housing Agency
• A radical overhaul of the planning process to speed up and bring certainty to decision-making
• A review of the Vat rate on housing, particularly social housing. In Britain, developers pay zero Vat on all housing
• The push for economies of scale rather than small piecemeal developments
Changing the status quo will require the active support of the Taoiseach (whoever that will be) and some knocking of heads together at the cabinet table, but it is eminently doable if
the will and leadership is there. One final thought. This argument is not simply about providing well-off families with comfortable semi-detached homes in the suburbs. Ireland’s current homeless and social housing crisis is caused by a waterfall effect as lack of supply and high rents mean demand cascades down, leaving nothing for those at the bottom of the socio- economic ladder.
The only solution is a masterplan for all housing. Will the next government grasp the shovel?
Bill Nowlan is chairman of WK Nowlan Property and is reading for a PhD in housing finance at University of Ulster. He is writing in a personal capacity