Ireland after NAMA

Prompted by a colleague, I’ve been browsing the CSO Census report, The Roof over our Heads.  It is full of information from the Census 2011 on households and housing in Ireland.  I’ll probably blog about some of the other material at some point, but I thought it might be useful to point to some of their data on housing vacancy, a familiar topic on this blog.

In the report, the CSO produce an interesting map of all vacant residential address points in the country classified as vacant houses, vacant apartments and holiday homes.  There is little chance of identifying individual properties from this map as it is a scale of 1: 1 million, but by plotting the individual units as opposed to shading in areas we can get a sense of the scale of the issue (which in numeric terms is: 168,427 vacant houses; 61,629 vacant apartments; 59,395 holiday homes; out of total stock of 1,994,845 residential units).

Map of vacant properties in Ireland

There is clearly a patterns to holiday homes, concentrating on the coast, as well as the upper and lower Shannon.  Vacant apartments are mainly confined to large urban areas.  And whilst, there is much media talk at present concerning a shortage of family homes in Dublin, the data reveal there is no shortage of apartments.  In fact, there are 16,321 empty apartments in Dublin City, let alone the other Dublin local authorities.  As for vacant houses, they are everywhere.  The few blank spots are mountains or remote areas.

The CSO report also provide some data on towns with the highest levels of vacancy, both including and excluding holiday homes.  The table below lists the seven towns with the highest levels of vacancy excluding holiday homes.  In the case of Tulsk and Ballaghaderreen, two places I have some familiarity with, there is a strong correlation with the presence of unfinished estates.  However, as we have discussed elsewhere, unfinished estates are just one element of vacancy given that there are only 16,881 vacant properties on such estates, meaning there is a high degree of background vacancy in many locations beyond unfinished estates (see our AIRO VacantIreland interactive mapping tool that let’s you examine vacancy at Small Area level and individual unfinished estates).

Rob Kitchin

On Friday we published the 500th post on IrelandAfterNAMA since starting the blog in late November 2009.  It seems like an opportune time to thank all the blog’s readers and commenters for stopping by and engaging with our ideas and analysis.  IrelandAfterNAMA has more than fulfilled our expectations as way of sharing timely analysis, data and commentary on social, economic, environmental and planning issues affecting Ireland and elsewhere.

To date the blog has generated 396,372 views and 1,913 comments, and there are presently 350 email subscribers and followers.  Around three quarters of all visits are from folk in Ireland, followed by visitors from the UK, US, Germany and Australia, and in 2012 there were visitors from 158 countries.

The blog has provoked some interesting debate through its comments and helped mould and clarify our thinking.  A fairly substantial number of the posts have been picked up by local, national and international media (we’ve documented over 600 citations in newspapers or appearances on radio and television) and to led to us presenting talks at various events and meeting people doing interesting work.

So, thanks for reading and engaging with our posts.  We hope you have found them as useful as we have in writing and discussing them with you.  Hopefully we’ll continue to publish useful material, you’ll keep stopping by and we can keep the conversations going.

IrelandAfterNAMA collective

Eurostat, the European statistics agency, recently released the Q3 2012 results for its pan-European house price index (HPI).  The data charts house prices on a standardized basis for 2007-2012, baselined against Q2 2010 (=100).  The index tracks price changes of residential properties purchased by households (flats, detached houses, terraced houses, etc.), both newly-built and existing stock. The Member States’ HPIs are compiled by the national statistical institutes, while Eurostat calculates the euro area and EU HPIs.

The AIRO team have compiled these data into an interactive data visualization accessible on the AIRO website.

What the data allow is a comparison of whether house prices have gone up or down over time with respect to the baseline.  For example, if we consider Ireland against a baseline of 100 in Q2 2010, in Q3 2007 house prices were indexed at 151.7 but had fallen to 75.3 by Q2 2012.  In other words, house prices had halved in valued over that period.

What the data reveal is that during this period of European financial crisis property markets behaved in four different ways across Europe.

1. Prices have declined continuously, either steeply in the case of Ireland, Spain, Romania and Bulgaria or more modestly such as the Netherlands and Cyprus.

2. Prices declined and then have either levelled off (e.g. Denmark, Slovenia) or have bounced back modestly (Estonia, Latvia, Lithuania, which all experienced very dramatic and rapid declines).

3. Prices have bounced along within a few percentage points of the baseline (e.g., Austria, Czech Republic, France, Greece, Hungary, Italy, Malta, Slovenia, UK) and effectively have flatlined.

4. Prices have increased modestly but steadily (e.g., Belgium, Finland, Germany, Luxembourg, Sweden).

These differences arise due to issues such as the nature of the national housing markets (e.g. proportion of renters/owner-occupiers), the robustness of the wider economy during the crisis, and wider property market issues such as levels of oversupply where excess supply, coupled with a financial crisis linked to property, work to depress prices in the absence of sufficient demand that would halt decline.

There is tentative evidence that the Irish decline might be starting to level off, but we need a few more quarters of data to reveal whether this is a sustained trend.  The decline, however, has been the worst in Europe in terms of sustained, rapid decline with no levelling off or bounce back.

Justin Gleeson, Eoghan McCarthy, Rob Kitchin

Yesterday Minister Phil Hogan announced that the National Spatial Strategy (NSS) is to be scrapped and replaced by a new policy in about a year’s time.  He said that said the present ‘strategy had failed’ because ‘the gateway and hub cities and towns never received the resources to ensure their development and “nothing has happened” in the ten years since they were designated.’  Continuing that ‘there was no point in having a designation without the resources.’

It is certainly the case that the NSS did not live up to its expectations, despite its promise and intent.  The initiative failed for a number of reasons, of which resourcing is just one.

First, there were flaws in its initial design with respect to the designation of too many hubs and gateways and there were accusations of stroke politics in location selection.

Second, because it was introduced in 2002 it missed its logical initial resourcing stream, the National Development Plan (NDP) 2000-06.  It did underpin the NDP 2007-13, but then the crisis hit and the NDP got quitely dropped and funding for NSS initiatives, such as the gateways fund, was one of the first things the DECLG dropped from its programme.

Third, there was weak political buy-in across the board, especially within government.  This was made abundantely clear by the decentralisation programme introduced by Charlie McCreevy in 2003 that sought to move government departments and state agencies to just about every location except gateways and hubs.  Decentralisation seriously undermined the rationale and impetus of the NSS.

Fourth, the NSS was not put on a statutory basis and up until 2010 planning authorities only had to give ‘due regard’ to it, rather than complying with it.  In a period of developer-led, laissez faire, localist planning this was a license to largely ignore it.

What this meant was a very partial implementation, though the NSS did have some effects on other policy (e.g. NDP, Transport 21, Rural Ireland 2020, etc) and was significantly boosted by the introduction of regional planning guidelines and the Planning and Development Act (2010) and the introduction of core strategies (in which planning decisions have to demonstrate they fit local, county, regional and national policy objectives).

So what happens now? Is this the end of spatial planning in Ireland?

Well one would hope not. If Ireland ever needed a strategic plan to make the most of limited resources in order to facilitate inward investment, stimulate and support indigenous growth, produce sustainable development and create of better places, it is now.

The logic of spatial planning is to align and coordinate sectoral initiatives (such as transport, energy, jobs, property, utilities, communications, public services, etc) across territory in order to leverage complementarities, reduce redundancy and duplication, increase competitiveness, and create multiplier effects (where the sum is greater than the simple addition of parts).  It does this by selectively prioritising areas for different kinds of activities in line with its demographics and local resources and distributing funds suitable to enable targetted investment and coordinating development across sectors.

Rather than abandoning spatial planning and the NSS, we need to do a fundamental rethink and produce a new NSS that is suitable to the present context. Localism and ad-hocism is not the solution to the economic and social crisis and will not create a sustainable, competitive country into the long term.

The challenge over the next year is to produce a new NSS based on a robust evidence base, learning from international best practice, and involving detailed stakeholder consultation, that is strategic and is prepared to make difficult decisions given limited resources.  Once agreed upon, the new NSS needs to be put on a statutory basis, as advocated in the Mahon Report, and it needs to be implemented through a series of interlocking programmes and initiatives.

My hope is that we can rise to this challenge and produce a spatial planning framework that will serve us well.

Rob Kitchin

For a good introduction to the present NSS, see the recent special edition of Administration 60(3), The National Spatial Strategy: Ten Years On, guest edited by David Meredith and Chris van Egeraat.

Revisiting the National Spatial Strategy ten years on – David Meredith & Chris van Egeraat

The National Spatial Strategy: Rationale, process, performance and prospects – James A. Walsh

Economics – The missing link in the National Spatial Strategy – Edgar Morgenroth

Perspectives on Ireland’s economic geography: An evaluation of spatial structures – David Meredith, Jim Walsh & Ronan Foley

Gateways, hubs and regional specialisation in the National Spatial Strategy – Chris van Egeraat, Proinnsias Breathnach & Declan Curran

Urban specialisation, complementarity and spatial development strategies on the island of Ireland – Des McCafferty, Chris van Egeraat, Justin Gleeson & Brendan Bartley

Governance and the National Spatial Strategy – Placing spatial policy at the heart of the diagonal public service – Séan O’Riordáin

Shrink smarter? Planning for spatial selectivity in population growth in Ireland – Gavin Daly & Rob Kitchin

Yesterday’s Observer newspaper highlighted a shocking ActionAid report about the tax activities of Associated British Foods, a corporate giant with operations across the world. The report explains how ABF have managed to minimize the amount of tax they pay in Zambia, one of the world’s poorest countries, where they grow sugar under the name of Zambia Sugar, which is owned by Illovo Sugar, a member of the ABF group. Indeed, the report finds that “ABF’s Zambian subsidiary has, overall, paid less than 0.5% of its US$123 million pre-tax profits in corporate income tax,” even though the corporate tax rate in Zambia is actually 35%.

The role Ireland plays in all this is a disgrace. In stark contrast to the ‘development’ relationship between Ireland and Zambia (one in which Irish Aid provided €16.3m in development aid to Zambia in 2011 alone), Ireland thoroughly undermines Zambia’s tax-raising powers, to the tune of about US$17.7 million since 2007. For example, ABF has paid management fees to an Irish company that employs no-one here; it has exploited a lop-sided tax treaty between Ireland and Zambia to minimize tax it pays to the Zambian exchequer on interest on loans it took out; and it has taken advantage of tax treaty loopholes to shuffle profits via some of its subsidiaries, including in Ireland. Thus, as the report makes absolutely clear, ABF’s tax activities have been helped along by Ireland (including the tax treaty with Zambia and the ‘light tough regulation’ that oversees activities in the International Financial Services Centre). To their credit, ActionAid don’t mess about when it comes to noting the hypocrisy:

“Not only does this tend to nakedly boost Irish revenues at the expense of Zambia – ironically for a country which is one of Ireland’s nine long-term development partners – but it also allows multinational companies to ‘treaty shop’, as we have seen, using Ireland as a tax-free conduit for transactions between Zambia and other countries. While Ireland gives aid to the Zambian government with one hand, Zambian government revenues flow out again thanks to its Irish tax treaty” (p.24).

Given all this, the report recommends that: “Ireland should urgently either renegotiate or cancel its bilateral tax treaty with Zambia, to allow Zambia to levy the tax rates it chooses on payments of royalties, dividends, interest and service fees from Zambian to Irish companies” (p.36). I completely agree. But more also needs to be done. This issue isn’t just about Ireland’s tax treaty with Zambia. As Colm Keena reported in the Irish Times in NovemberIreland’s place in the world helps other giants minimize their taxes, including Microsoft. He writes, “The Irish centre is responsible for retail sales in Europe, the Middle East and Africa. Because Microsoft Ireland Research has the right to sell Microsoft products in that geographical zone, profits on the sales of Microsoft products in that vast portion of the globe end up in 70 Sir John Rogerson’s Quay.” This sort of arrangement is great news for Microsoft shareholders: its Irish subsidiaries helped reduce the company’s 2011 US tax bill by $2.43 billion (€1.87 billion). But it absolutely stinks. As Keena says: “Seen from the perspective of Africans, it must be very rum indeed to see profits from sales in their countries being taxed in Dublin, to fund a society a million miles away from theirs in terms of development.” Thus, not only should Ireland renegotiate or cancel its tax treaty with Zambia, the government should also make a commitment to ending our involvement in this sort of tax evasion.

The even bigger story here is about what sort of post-crisis Ireland we want to see. Is scamming the neighbours – near or far – a good development strategy? Of course, we don’t want to have this image of ourselves. We’d probably all prefer to think of our country as climbing the development ladder by engaging in a race to the top, for example by attracting investment from the likes of Google and Facebook. Yet, what the ActionAid report highlights is the extent to which we’re also still very much engaged in a ‘race to the bottom’. By undercutting tax rates, undermining tax revenue regimes, and underpinning the tax evasion strategies of some of the world’s richest companies, we’re putting pressure on countries such as Zambia to reduce their corporate tax rates down to the Irish floor.

Maybe we’d prefer to celebrate our potential as a small country that can make a big difference. Indeed, just such a claim was made by Tom Arnold and Jamie Drummond in last week’s Irish Times, when they noted how Ireland, “can make a disproportionate impact at international level. Due to our 19th-century history of famine, we have a unique legitimacy in making hunger a priority of our foreign policy in the 21st century.” I’m sure Ireland can do a lot to help the fight to eradicate hunger while it has the EU presidency and then again at the G8 meeting in Fermanagh in June. But as the story about ABF’s activities in Zambia highlights, Ireland must recognize that its role in the eradication (or, indeed, the production) of hunger is absolutely also about how it facilitates tax evasion. Appallingly, Ireland is undermining the ability of foreign, often much poorer governments to address the sorts of inequalities that generate a prevalence rate of undernourishment in Zambia of 47.4% in 2011. This has to stop.

Alistair Fraser