What happens when the left hand doesn’t know what the right hand is doing? At the very least, you drop the ball.
Looking at the Dublin property market and the capital’s population strategy in general, it would seem that we are in a bizarre position where different state agencies are doing different things and, in the process, are strangling land supply in the city, driving up rents and pushing would-be city dwellers out to the commuter towns – again.
Seems crazy, but it’s true. The people who are suffering are young renters and would-be homebuyers, while those who are benefiting are the already rich who are holding on to land banks in the hope of speculative gain.
Sound familiar?
This time round, the players may be different, the names might not be so familiar, but the upshot is the same.
Let’s examine the objectives and the unintended consequences of the actions of two of the main state players in the property market: Dublin City Council and Nama, the left hand and the right hand.
Dublin City Council’s aim is to make the city more liveable. This explains the recent initiatives of making Dublin more cycling-friendly and pedestrian-friendly. In short, the objective is to make it more Copenhagen, less Coventry.
But it doesn’t matter how many cycling lanes and pedestrian zones you have. Unless you have somewhere for people to live, then by definition the city can’t be liveable. You need accommodation, and lots of it.
Dublin is full of vacant plots, and there are loads of people who want to live in the city, so why are these plots not being built on right now? Why don’t we have a sea of cranes building apartments in the city?
One of the reasons is the unintended consequences of the council trying to do the right thing. After much criticism of “jerry-built” apartments during the boom and horror stories of cowboy builders, the council has designed minimum standards for apartments.
One of these is a ban on north-facing and east-facing units. I am not too sure that many people care if their flat is east-facing; sure, it would be nicer to be west or south-facing, but let people choose. It’s not as if Dublin is blessed with consistent tropical weather which makes those long, lazy, sunny, south-west-facing evenings so essential.
The main problem for supply of this east and north-facing apartment ban is that it renders half the site worthless to a developer. So the developer will only buy the site if it comes down in price rapidly. This is one clear impediment to development, and it is a classic example of too little regulation being followed by too much; as if too much regulation now will in some way compensate for the sins of the past.
This type of regulation affects the willingness of the developer to develop, but other regulation affects whether a potential buyer can afford a place.
Take another new regulation about the minimum size of an apartment. Again, as a result of tiny apartments built in the boom, the council has deemed that the minimum size of a two-bed apartment in Dublin must now be 90 square metres. So the idea was to protect the consumer. But what has happened?
Because only half the derelict sites in Dublin can be used due to the north and east-facing ban, this rule has pushed up the cost of building.
Based on current costs (according to Ronan Lyons of Daft), a typical couple earning €45,000 can’t afford an apartment of more than 60 square metres.
Unless the Central Bank loosens its credit criterion for first-time buyers (which it won’t and shouldn’t), the average first-time buyer is being squeezed out of the city by the consequences of regulation that was supposed to protect, wait for it, the first-time buyer.
But surely the costs of sites should fall to reflect this reality? This is where the left hand/right hand dilemma comes in.
At the margin, Nama controls the property market in Dublin. It has contributed enormously to the speculative frenzy in sites.
Nama’s objective is to recover as much money as possible from the calamity of the bust as soon as possible. Therefore, it wants to get the best price possible for development land.
As huge US investment funds and Reits have come in here with lots of cash, they have driven a speculative mania in development land.
Once prices rise (and, more importantly, are allowed to rise) dramatically, the market changes. It becomes a speculative market where bids are not based on concrete cost analysis but the speculative element of “flipping”. Again, does this sound familiar?
When a market becomes speculative, land banking starts, whereby investors hoard land in the expectation of further land price increases. Nama is orchestrating this.
The foreign private equity funds that now own the prime land in Dublin are not developers; they are fund managers who are driven by spreadsheets and targets, rather than building plans and ambitions.
They might as well own stocks or bonds.
The upshot of Nama’s policy of selling to US private equity outfits is that the land is being hoarded, rather than built on. This, of course, is at odds with the government’s stated objective of making Dublin a more liveable city, and of providing affordable accommodation for Irish citizens.
So we have a situation where people who want to live in the city can’t afford to, because of too much well-intentioned but ill-conceived regulation and Nama creating a hyped-up market in land, which excludes developers and rewards speculators.
A “use it or lose it” tax could be introduced to force speculators to sell to developers, who then undertake to develop with less stringent guidelines, which in turn allow affordable apartments to be built and to be lived in.
This tax or penalty for land hoarding would bring down the cost of land and rekindle the value in city sites, allowing the true liveable potential of Dublin to be fulfilled.
All we need to do is allow the left hand and the right hand to know what each other is doing.
That can’t be too hard. Or can it?
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The article gives a fair analysis of both sides of the argument David. I don’t think there should be any leeway on minimum size of apartments. I think this should also incorporate a minimum two bedroom design if it doesn’t already.This is because developers being developers will create warrens of slum housing if allowed to get away with it.I’m in favour of family friendly cities and slums don’t attract families or tourists. The capital city is a showcase for the Country too. The east/north restriction seems bizarre and maybe an architect could explain the logic in this. Clever design should… Read more »
David, Dublin’s approach to planning policy is appalling. Dublin’s answer to lack of supply is its recent announcement it will change planning regulations to make small dingy flats even smaller and dingier. Little contributes more to social deprivation than poor planning policy, not to mention the negative effect poorly designed spaces have on ones state of mind. The new development plan for the docklands is to build a mass of low rise, dull and characterless boxes in the heart of Dublin’s business district. It beggars belief. Why can’t we in Ireland build upwards? What is the issue here? Not to… Read more »
Where first: We have tram infrastructure – We should build along it. We have the Shannon – We would be planning to expand Limerick toward Shannon and Ennis. Starting with the construction of a Luas system and using the Ennis rail link. When? now and site sizes should be bigger – Back to 50s/60s. Why – In fifty years time nobody will be working so the need to concentrate accommodation in the city centre will be gone. We need to start planning now. Some early improvements to planning standards would include. 1. Power boxes supplied with space to install photovoltaic… Read more »
The Urban Regeneration and Housing Act 2015, no. 33 of 2015 was enacted on 28-07-2015 and affects residential developments.
http://www.oireachtas.ie/viewdoc.asp?fn=/documents/bills28/acts/2015/a3315.pdf
This affects the provision of social housing [20% to maximum 10%] and the reduces the level of Development Contributions.
It also imposes a levy on sites which are not developed.
A brief synopsis of the Act is contained in the following link:
http://www.matheson.com/news-and-insights/article/the-urban-regeneration-and-housing-act-2015-has-been-signed?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original
Cynicism laced with sarcasm stifles progress. Just because the government failed to understand the incompetence’s of the regulator, who failed to regulate the banks, which hitched us with a huge portion of our debt; it does not mean we should continue to make ill-informed decisions as to the use of our land in Dublin. As I said, intelligent planning is what is required. Low rise sprawling urban centres are known to be detrimental to the social fabric of a city. Take LA as an example: wide spread low rise urban sprawl highly conducive to social unrest. As for the rest… Read more »
David McWilliams, Another error in your piece, to the rather large one that I pointed out above, is as follows; The minimum size in the DCC Development plan ( p.254 ) for a 2 bed unit, the most ubiquitous apartment size, is 80 M sq. not 90 M sq. In the boom these units were typically sized in the mid-sixties and were inadequate principally in relation to kitchen & utility areas and available internal storage. Part M or universal access / lifetime homes provisions were also found often to be sub-par. To make them really live-able in the medium to… Read more »
The 90 sq meter rules are enlightened, absolutely opposite to those across the water in the UK (who’re recently got rid of all such ‘restrictions’), and however many backward steps here are, this at least is a step forward.
I would also ban absolutely ban one bed room apartment construction.
An apartment will span more than one user’s residence lifestyle.
One bedroom restricts its use significantly.
A local authority in Dublin found with it’s head up it’s arse. Again. And it could be any one of them. I would ban developments of less than 6 stories. And after that let people build whatever they want, within certain architectural aesthetic standards. The latest trend in North American cities is a small scale apartment in the city, close to the office for young urban workers (who are often originally from another city or country). I think these are called micro-apartments. A result of the fact that you can now get so much on a mobile-phone/kindle that a bookshelf… Read more »
Regulations are simply a manipulation of the market place. One man’s meaqt is another man’s poison. all argue here about what should and should not be. Thank god you are not the regulators as you would have it all wrong for 80% of the people. North side banned when I have met people who love them. Let only south side apartments have no cross flow ventilation. I have been in many of these very same places which are stiflingly hot regardless of the wind direction. Safety regs. I can agree with. Proper access and egress in the event of fire.… Read more »
http://www.zerohedge.com/news/2015-08-23/wasnt-supposed-happen-crashing-inflation-expectations-suggest-imminent-launch-qe4
On the other hand prices may fall all around the world as we get the great reset already in progress.
http://www.jsmineset.com/
Before worrying about the real estate market one should worry about financial security.
Lastly, this is not about China, it is not a “correction”, it is not because of a “slowdown”. This is the beginning of the Great Credit Unwinding and will take EVERYTHING “credit” with it. Do you understand what “everything credit” actually is? Holter/ Sinclair
By now I probably should not have to explain what is “not credit”. Simply put, “real physical gold and silver unencumbered Holter-Sinclair cooperation
Soon, before September ends, the door opens up to silver and gold as the last men standing. Jim Sinclair
China is not a major factor in the Irish economy.
It matters to the dairy sector. And it might result in continued low interest rates. It will result in people returning from Aus, and Western Canada. But these are not the dominant factor in Ireland’s economy right now.
The current Nasdaq bubble IS the dominant factor. In fact, it has been the dominant factor for the past 5 years.
The next 12 months will be all about the Nasdaq members and their ongoing cash vortexes.
Mike Lucey Yes prime minister isn’t too far off the mark.If people have major business experience prior to entering politics they can usually handle the mandarins.If they’re career politicians they may have ideals but they usually become sales reps for the permanent civil service.Where’s our T.K Whitaker when we need one? In relation to emergency planning it’s never any harm to have a personal plan B. Would you really have any confidence in the people we’ve elected in the event of a major national crisis? We have Herr Merkel and Frankie Hollande trying to dictate immigration quotas to sovereign States.The… Read more »
http://usawatchdog.com/plunge-protection-team-losing-control-of-markets-jim-sinclair/ “This is a pre-crash, and we are not making it through September without the real thing. Everybody is on credit. Main Street is on credit. This seems to be a bubble of historical proportion when it comes to the amount of money supporting the accepted lifestyles as being the new normal. Raising interest rates is impossible today. The market is so fragile. Nothing can come out that causes people any concern or derivatives any change, nothing whatsoever. We are going through a period of time where expecting nothing meaningful is a dream. These are times never experienced in financial… Read more »
https://www.youtube.com/watch?v=GXcLVDhS8fM
Debt bomb song by Dominic Frisby
https://www.goldmoney.com/research/analysis/economics-of-a-crash?gmrefcode=gata
Brilliant synopsis of the monetary policy of the last 200 years and the pending results to soon be visited upon us all. Recommended reading.
Try living on a boat Mike. I spent 7 years on a 30″ sailboat. Plus moorage cost. 40′ would have given me entertainment space I lacked!!
Totally mobile residence. Don’t like the neighbours??? sail off into the sunset!
I also spent a year in a back garden shed of 10 x 150. surprising use of space and adaptability. There was a leanto on the side that took a bike and tools etc. I enjoyed it. It is not conducive to family life as it encourages the single lifestyle.
Dublin planning ideas are at least 20 years too late. Why is that? During the boom years, nationwide there was a once in a life opportunity to make a real difference in housing standards and town planning. Instead greed of the buyers, developers, banks and county councils took over. Now we are in a situation that young families are even more stupid than before. Young families should not accept the housing situation as it is now. Instead they stay at home and do nothing about it. At least if you’re smart and have the guts you get out of this… Read more »