Many of the posts on this blog have been critiques of the planning system, the construction sector/developers, the banking sector, and government policy or lack of. A critique of the blog is that it doesn’t do enough to put forward solutions and a positive path forward, especially given widespread unemployment amongst former construction workers and development residing at the bottom of a deep slump rather than being a productive part of the economy.
In this context, a key challenge for Ireland is to re-grow the construction sector back to a normal, sustainable level as a productive part of the economy and to get construction workers back to work without exacerbating existing issues and problems with respect to property. This is no easy task, but here is my suggested road map.
First, any attempt to resurrect construction activity in Ireland has to take place within a strategic approach to planning and property that strongly guides any development takes place. The adoption of core strategies and revisions to the Planning Act are a step in the right direction, but are specific tactics, not strategic visions.
To this end, the government needs to put in place a strategic planning and development framework that combines spatial planning (what used to be the National Spatial Strategy, NSS) and sectoral planning (what used to be the National Development Plan, NDP). The present NDP expires end of 2013; the NSS is hollow and in review. The proposed Medium-Term Economic Strategy (MTES) 2014 to 2020 will focus on macroeconomic strategy and policy actions for achieving sustainable economic and employment growth, not planning and development. The MTES needs to be complemented with a new NDP to run 2014-2020 to guide investment, underpinned by a NSS that will ensure coordination across sectors and locales. In other words, it should consist of joined-up thinking. The danger is that without a strategic approach, the development that does occur will be ad hoc, poorly linked, weakly leveraged and will slow recovery.
Both the new NDP and NSS need to be based on an evidence-informed analysis of the present state of property (housing, office, industrial, agricultural, etc), planning/zoning, and models of projected demand based on demographics, economic growth, labour market demand, etc. This requires decent property data (we have some limited housing data; no independent commercial sector data) that have temporal and spatial resolution.
This strategic framework needs to be prepared to be selective. Rather than trying to encourage growth everywhere, it should aim to grow selectively to create agglomerations and critical mass. Agglomeration is important for growing jobs and the economy. Employ a smart consolidation approach elsewhere (focus on quality of life and sustainability, rather than growth). Limit further one-off housing: it is unsustainable in service terms (utility and service provision) and environmentally (water pollution, commuting, etc) and contra to popular belief evidence suggests weakens rural communities.
Part of the strategic framework should focus specifically on housing and produce a comprehensive housing strategy. As well as planning for the future, this strategy needs to address all the issues affecting housing at present:
- vacancy and oversupply in most of the country and pockets of undersupply in specific locales
- large numbers of unfinished estates and poor build quality (issues of pyrite, etc.) that need to be retrofitted
- huge numbers on the social housing waiting list, stalled regeneration schemes, collapsed PPPs
- extensive mortgage arrears and negative equity
- the lack of mortgage credit and a large proportion of cash buyers
- the lack of finance for development and the lack of active developers
- Supply of land. Land has to be made available sensibly: land bank through NAMA, Site Value Tax/Kenny Report to get derelict/brownfield sites back into productive use, bring on strategic greenfield sites, and limit future land speculation.
Development needs to follow best practice planning principles and should be integrated in nature. Residential development cannot be simply houses but also needs to be utilities, schools, creches, public transport, etc. Piecemeal planning undermines formation of sustainable communities. When housing construction occurs, all the other elements also need to occur at the same time (not several years later).
Second, the creation and delivery of any strategic plan needs to be properly resourced in terms of staffing and finance.
Proper planning requires administrative units capable of delivering: the Department of Environment is severely understaffed with respect to planning; regional planning authorities are shells; local planning authorities are emasculated; NAMA should be part of this coalition.
Development requires finance — there is a need to source investment capital given the Irish banks are not lending. NAMA should fill the void where possible. If there is true demand the market does not need stimulating and tax incentives/subsidies should be avoided. The construction/development sector needs access to finance through loans not incentives. Do not sacrifice measures such as Part V Social and Affordable Housing provisions of the Planning Act (we need social and affordable housing).
Third, we need new entrants into the sector to replace failed enterprises.
Encourage new developers through loans/grants — many of the older ones are bust, tied up in legal cases, or cannot access investment capital. We need new entrepreneurs to enter the market who have fresh ideas and energy and do not have any of the bad habits and institutional memory of the old set.
Encourage new, large rental companies into the market and professionalize the rental sector. The rental sector is under-regulated and is dominated by amateur landlords (70% own 1 or 2 properties). Encourage cooperative and association housing and make finance available to them for new projects.
Specific ideas to re-grow the construction sector back to a normal, sustainable level and to get construction workers back to work
Invest in capital projects that will stimulate the economy beyond construction jobs (i.e. will provide the conditions that will attract inward investment and indigenous growth) — public transport, utilities (electricity grid, water system, broadband), public infrastructure (e.g. school building — 1 in 3 schools still have prefabs and the number of children is growing; hospitals; universities, etc), selective road building, etc.
Proactively address the housing issues detailed above. (1) complete viable unfinished estates and deconstruct the others; (2) address build quality and pyrite-infected homes; (3) restart regeneration projects and revive PPPs with new partners; (4) refurbish existing social housing.
Enable private housing in very select locations where there is a demonstrated demand/projected demand based on hard evidence.
Enable office development in very select locations where there is a demonstrated demand/projected demand based on hard evidence (remember >20% of office space in Dublin is vacant; in some parts >40%; similarly lots of empty retail/industrial space in Dublin and throughout the country).
Curtail speculative development of all kinds where there is no demonstrated need/demand. Under no circumstances create additional supply in areas where there is already oversupply as it will flat-line any recovery and extend related problems.
I am open to suggestions and debate with respect to this road map. We need these kinds of conversations. What I do not think is sensible is to have no strategy and plan and to simply try and muddle through and hope that inaction and the present lack of policies and direction will somehow solve our various issues. They won’t; they are more likely to cause additional problems.
Rob Kitchin
Ireland after NAMA 
November 12, 2013 at 3:56 pm
I just back from a my regular walks around southern France……..many construction workers have become employed rebuilding obscure and little used railway stations in places such as Luchon & Quillan
But it is of little use as there is little rational private (wage based) demand (which must be given a subsidy via the 1 euro train system of the Languedoc regional government.)
Why ?
Well I am generally a fan of French style Dirigisme but it is pointless because in the hard money of the euro monetary system (external) capital is all important and not labour…..capital is expressed in its monetary units.
This external capital (oil in the real physical world) will and is overpowering all domestic mainly labour based systems – the French and Germans can only grow via the extraction of other countries capital rations…..this means more cars in France and little rail travel…..the complete opposite of the more fluid Sterling union (inc northern Ireland) where rail travel has exploded (not as a result of privatization) but because of its monetary policy.
All Irish debate about so called national polices is a waste of time…..you must understand the entire country is a conduit for a banking system which has reached a epic scale of operations.
In the hard money system of Euroland there can only be a demand for credit driven products such as cars and houses which happens to destroy capital in the most efficient manner possible….this creates a scarcity which sustains bankrupt credit driven activities for perhaps another few years or even decades.
There can be no rational local or even national demand so a national debate is kind of absurd in this monetary & political context.
The Guinness family who had feet in both the hard money and soft money camps given their ties to both banking and brewing wrote a book about the economic history of Ireland which sheds some light on this.
November 12, 2013 at 11:26 pm
Thanks for the great post Rob. With the nationwide apathy around anything to do with development these days, getting people to get on board with any reform will be difficult I’d imagine. And because it’s not a popular topic, the Govt will be slow I feel to do anything really constructive about resolving the problems. However, that said, a strong National plan is definitely needed. What are some of the ways that people with an interest in this area could add to the debate and get some movement on some of the ideas you mentioned?
November 13, 2013 at 12:10 pm
@Gerloughrey
Read above
In the very home of national planning – France – national planning has failed !!
It can only wait for its resident banks to ravage the capital ration of other nations and take the surplus
The (external) money comes first in the market state…thats the problem you see – money (credit really) has created a distorted physical reality which unfortunately is very real.
There can be no effective national planning in extreme entrepot economies which in the past at least had mighty navies (now credit banks) to project transnational power.
Consider what happened to the UK when there was a global run on the BoE back in the summer of 1914 – the UK banking union only ever goes national when it has no other choice………
Producing HMT 10 shilling notes (but at interest to bail out the BoE)
Is that the sort of Keynesian national mobilization you want ?
All to bail out the Big Bank ……
Anyway we in Ireland are on the receiving end of the shells now – these mighty banking vessels have stopped all flow in this country / battleground.
When there is no flow in the system nothing will or can work which is the very point of such operations…..as I said before this debate is pointless until the war is over.
Unless you have a cunning plan.
PS the Irish energy balance for 2012 is showing some token rise in private car energy use…..perhaps we have turned the corner ?
Ever since Suez we have moments in the Irish economy where the rational domestic economy undergoes structural adjustment (i.e.is destroyed in a deflationary episode) to make space for oil / credit driven activities which overpower these former domestic systems.
Such is life in a extreme conduit economy…..a plaything of the Anglo / Dutch oil / monetary monopoly or perhaps its everybody these days.
November 13, 2013 at 2:46 pm
Global forces exerting their control over the mirco is best seen in the old working class town of Blackpool Cork City.
A place centered on brewing and other limited added value manufacturing ..i.e. very basic secondary industry much of it consumed locally as there was 20 or 30 pubs in the area when now there is less then half a dozen and falling
During the deflation of the 80s it underwent a massive economic shock — the resources now not consumed in the local area was used to expand the Cork burbs to their now unsustainable scale where discretionary spending is not affordable …..people need all of their reduced income for the now vital gas & car bills when coal was the main external fuel input of the past.
Of course the supermarket bill are cheaper then it would be if shops were smaller but their kids don’t work in the myriad of bars and shops anymore as they do not exist so cashflow is down turning the bulk buy savings of supermarket shopping into a money illusion.
Near the final stage of its collapse a supermarket was built on the flood plain of the river flowing through it when there was already a supermarket in Mayfield.
Of course the locals lost the last of their labour value when external more dynamic workers were introduced to somehow sustain profits on a country in massive physical cultural & social crisis (hidden by external credit /capital) since it joined the larger banking union of the EU.
The coup de grace was the closure of the post office this year…….. then the Butcher left the building in August
The hairdresser , fishmonger (who is far better then the guys in the English Market) the cake shop etc etc will follow.
But the monetary egg came first – these dragon eggs create the physical world around us , the non human scale nightmare world of the present modern Europa market state.
Supermarkets and stuff need a hard currency to expand operations as their business model avoids labour value so as to centralize profits and crush smaller scale operations.
If you allow this monetary vandalism to continue you cannot hope to solve real human scale (non corporate) problems.
November 13, 2013 at 3:53 pm
Any look at the Irish energy balance trajectory over the decades would clearly illustrate a decline of fuel inputs in domestic economic activity as the domestic economy declines but with the cars & house building eating the newly created surplus in a foie gras fashion until the economy was fat enough to be butchered.
Not sure of the accurate the latest transport energy inputs are given the large decline of unspecified fuel but it is showing a slight rise in private car use which is not surprising given the extreme unfiat like nature of money production by hybrid bank / car multinationals in this jurisdiction and a decline in most other transport activity as everything is sacrificed for the car and the idea of the car.
Even after all that has happened …….
Irish transport fuel balance
Year 2012 (Year 2011)
4,195 KToe (4,448)
Road freight : 651 ( 657)
Road private car : 1,919 (1,901)
Public passenger services : 161 (167)
Rail : 42 (44)
Domestic aviation : 5 (6)
International aviation : 581 (694)
fuel tourism : 300 (313)
Navigation :59 (56)
Unspecified :477 (610)
November 14, 2013 at 2:09 pm
Total transport Y2007 : 5,749 KToe
Road freight :1,139 ( Peak in Y2005 at 1,218)
Private car :2,075 (Peak in Y2008 at 2,113)
Public passenger service : 166 (Peak in Y2008 at 201)
Rail : 47 (Peak in Y2008 at 50)
domestic aviation : 24 (peak in Y2006 at 26)
International aviation : 1,021 (peak inY2007)
Fuel tourism : 642
navigation : 64
Unspecified : 571
Total transport : Y1990 : 2,019KToe
Road freight : 334
Private car : 926
Public passenger service : 52
Rail : 45
Domestic aviation :17
International aviation :358
navigation : 7
Unspecified :279
Obviously Ireland has the strangest energy balance figures on the planet both because of the credit hyperinflation and the money deflation of recent years (i.e its extreme non local commerce international credit nature)
But I contend it will get even stranger.
I believe that out energy balance figures will continue to follow a path towards 1990ish figures despite the addition of 1 million ~ extra people but if zee Germans (and the banks behind them) have their way our strange conduit nature will look even stranger.
Perhaps 2,000 Ktoe for private cars and 19Ktoe for everything else……………
The sicker your sense of humor the funnier this jurisdiction gets.
“Sarah Carey Says:
November 14th, 2013 at 12:35 pm
There’ll be two forms of criticism.
1. those genuinely worried that we might not make it
2. those disgusted that normal economic conditions might return meaning that the government has handled things well, on both meeting the fiscal targets and the diplomatic effort to assure international partners/lenders that we’re safe. Alas, certain commentators require national failure to prove themselves right.
Let the games begin.”……………………
But what is normal ?
The local managers think the 1990s were normal……..(that other banking jurisdictions in charge of primary & basic secondary economic activity is normal)
I rest my case.
Obviously countries which build extreme value added products will wish to crush all domestic economy activity in the conduit economy so as to create space for their product…….