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.