Dysfunctional development land systems in UK and Ireland - Part 2
By Michael Hennigan, Finfacts founder and editor
Oct 8, 2014 - 7:09 AM

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In Ireland agricultural land is claimed to be the most expensive in the world and houses prices in Dublin are up an average 25% in a year while in some areas of the capital they have jumped by a third -- the explanations for both are shortages of supply.

In the first half of 2014 it was estimated that half the house sale transactions were via cash while the number of home mortgages was at the lowest in 40 years - - at 1974 level.

Dublin City Council is reported to be “seriously looking” at building prefabs on derelict sites to house homeless families while the Dublin city social housing waiting list is close to 20,000 applications.

The results of a survey by Allsop Space, the UK auctioneers, show that 46% of Irish respondents have indicated they will buy a home in the next year while new Central Bank guidelines to take effect from January 2015 means that a deposit of 20% of a property value will be required for most buyers taking out a mortgage.

Lending data show that the average price of a new house in Dublin was €309,000  in Q1 2014 and a second hand house price was €350,000.

Average national earnings was €36,000 in 2013 according to the CSO.

In 2004 Brian Cowen, then finance minister, said that 28% of the cost of a new house comprised VAT and other public levies.

Ronan Lyons of Trinity College using data put the average cost per square metre in 2013 in South Dublin at close to €4,000.

A report last month from the Society of Chartered Surveyors Ireland says:

  • Zoned land can deliver approximately 102,500 additional housing units under the minimum recommended density scenario.
  • This can result in the provision of housing for approximately 269,000 additional persons.
  • There is a minimum housing unit requirement of 35,433 between 2014 - 2018. However, currently there is only a total of granted (extant) planning permissions for 26,580 units, resulting in a shortfall of 8,853 units over the five-year period.

We have previously reported that the price of Irish agricultural land is more than four times the level in France and this year a Financial Times survey showed that the average price of farming land in Ireland was €9364 an acre/ €23,100 per hectare - -  the highest in the world compared with average farm income of €25,639.

The number of Irish sales transactions as low as 0.2% of agricultural land is at a very low international rate and compares with 0.9% in France.

Site sales, public Common Agricultural Policy payments, work outside the farm for about a third of farmers work outside the farm and rent, keeps sales low.

The price per hectare of arable land in Ireland rose from roughly €5,000 in 1990 to €12.500 in 2000 to €50,000 in 2007, before falling back by 50% by 2009 and Brendan Kearney said land sales have fallen from a peak of 2.1% of utilised land in 1978.

A hectare was valued at €524 in 1970 and the average price of a new house in Dublin was €7,051 according to the CSO.

The size of course was bigger than the current average size.

Finfacts: Dysfunctional development land systems in UK and Ireland - Part 1

See Charts on Page 30 here [pdf]

Teagasc slide presentation [pdf]

Land rezoning

Land rezoning has been a huge stealth tax and for landowners in County Dublin it has been manna from heaven thanks to artificial scarcity created by planning authorities.

During the bubble most developments involved objections with demands for compensation or some free upgrading of adjacent areas.

Seán Dunne, the high profile developer wanted to build a 37storey tower on the site of the former Jurys Hotel in Ballsbridge but about a 200 metre walk from the site, on Shrewsbury Road where he lived, he objected to the demolition of the former Chester Beatty Library. A High Court judge was reported to have accused him of making a ‘‘spurious’’ complaint.

Dunne in turn faced a huge number of objections to his tower plan.

In the 1960's two "skyscraper" office developments were built in Ireland - - Liberty Hall in Dublin and the County Hall in Cork. Also in the sixties, the building of a series of high rise blocks in Ballymun, North Dublin, were seen as a solution to a public housing crisis.

The experience at Ballymun - - public housing for young families with limited or no amenities - - with no resident management and where no one had a personal stake in their units - - was a social disaster that has led to what can be termed "Ballymun Syndrome."

High-rise buildings have become a taboo in Ireland and apart from Ballymun, the process has been aided by a ramshackle /corrupt planning system and the power of nimbies (not in my backyard) with a spectrum of interests.

Rezoning of land inevitably promoted corruption at ministerial and local level and fifteen years of public tribunal hearings have had a minor impact on how the system operates.

RTÉ’s Prime Time television programme highlighted in November 2007 the involvement of elected representatives in the land, development and property business.

A total of 22% of councillors dealt in or developed land through their day jobs as estate agents, landowners and builders. In Mayo, that figure rose as high as 45%; in Offaly it was 44% and in eight other counties it was 33% or more.

Prime Time found that in Clare, declarations of interest showed that 97% of elected members had no beneficial interest even in their family home. In ten counties, two-thirds or more of the councillors had not declared an interest in the family home.

The 1973 Report of the Committee on the Price of Building Land - -  known as the Kenny Report - -  recommended that local authorities should be allowed to cap compensation for compulsorily acquired land in designated areas at existing use value plus 25%.

While the committee, headed by Mr Justice Kenny, believed such a proposal would not be found unconstitutional, successive governments ignored the report to avoid upsetting farmers.

Jerome Casey, an economist who was editor of the 'Building Industry Bulletin' in a report in 2003, said that site costs accounted for 42.5% of a house nationwide. Casey said that typically in the mid 1990s, Durkan Brothers sold apartments off O’Connell Street, Dublin for £35,000 to £40,000 (€44,440 to €50,790) for which the site cost was €5,000.

In 2006 the Irish Council for Social Housing and private house builders were reporting city house site costs at up to 50% of the house price. Outside the cities, site costs were up to 40% of the house price.

The Green Party in government in 2009 succeeded in having a windfall tax of 80% on profits from rezoned land and property interests are now calling on the government to cut the tax to the capital gains tax rate of 33% -- not even the income tax rate.

While some tweaking of the tax maybe merited, given the toxic history of rezoning, it would be stupid of the Labour Party in particular to agree to abandoning the tax without a major reform of the rezoning system.

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