The long winter of the Celtic Tiger: Regulatory failure writ large on the urban landscape

As the general election looms into view, the political and economic discourse is increasingly framed by a post crash narrative of economic recovery and political stability. Budget 2015 was dubbed an ‘election’ giveaway because the government engaged in a modest redistribution of some of the fruits of the emerging economic recovery. Ministers Noonan and Howlin both engaged in a fit of hubris to trumpet the recovery. They argued that the budget was beginning the process of repaying people for their sacrifices endured during six years of austere budgets. While listening to the budget speeches one was reminded of the opening soliloquy in Shakespeare’s Richard III:

‘Now is the winter of our discontent
Made glorious summer by this sun of York;
And all the clouds that lour’d upon our house
In the deep bosom of the ocean buried’ (Richard III, Act 1 Scene 1)

While the ‘winter’ may indeed be behind us, stark reminders of its dark legacy have a rather inconvenient way of making themselves visible. And so it was that amidst the debate and discussions that preceded and followed the budget, problems with fire safety in a residential building emerged. This time it was in Longboat Quay, an apartment complex in Dublin’s Docklands – once more a grim reminder of the unresolved inadequacy of the regulatory system in the construction industry during the boom.

Longboat Quay on Sir John Rogerson’s Quay Dublin

The 600 residents occupying 299 apartments located in Longboat Quay face a repair bill of €18,000 each, the overall repairs are estimated at €4.75 million. This development was built in 2006 by Bernard McNamara, who like so many of his developer colleagues massively over extended their portfolios. When the crash inevitably arrived he sought refuge in the UKs bankruptcy process. Consequently when it comes to fronting up for the repair work in Longboat Quay, McNamara will not be put upon, despite the fact that the apartment complex was built to a shoddy standard. A number of critical features were lacking: walls were not built with proper fire stops, important smoke vents were not installed resulting in a highly dangerous disregard for fire safety. These regulatory failures could have resulted in a tragedy of multiple fatalities given the numbers of people residing there.

Priory Hall undergoing refurbishment

The issues in Longboat Quay have emerged just as another icon of regulatory failure, Priory Hall, is nearing the completion of the first phase of its refurbishment and is apparently being readied for market (although from a recent visit to the site it would seem that the development is far from finished). Priory Hall in North East Dublin is in many ways a monument to the years of property driven excess in Ireland. Built in 2007 by developer Tim Mc Feeley, it contains 189 apartment units and was home to 249 residents. However, on November 17 2011, the residents were evacuated when concerns emerged about fire safety of the building.

This evacuation sparked a controversial saga that spanned the next two years, a period that saw the re-housing of the residents, the developer going bust, and the tragedy of one resident committing suicide due to the pressures of the situation. McFeeley, like McNamara, fled to the UK to declare bankruptcy. He was initially successful but it was later rescinded as court proceedings were taken against him in Ireland. He was subsequently declared bankrupt by the High Court in Ireland. Finally due to the sustained and determined campaign by the residents of Priory Hall for justice a deal was reached whereby the owner occupiers had their mortgages written off and owners of buy-to-let properties were given a moratorium on their mortgage payments. The overall cost of refurbishment is estimated at €27 million, borne by Dublin City Council – although the owner occupier apartments will be sold to recoup some of the cost to the council. This is a tale symptomatic of the crash, whereby the state is required to step in for the failures of the private market.

The hopes and aspirations of most of the former Priory Hall residents now lie elsewhere. The Priory Hall development is slowly being re-launched. Interestingly the name ‘Priory Hall’ is notably absent from advertising hoarding surrounding the redevelopment works and now the name, and its sordid story, seems consigned to history.

Priory Hall residents protest outside Dáil Éireann

Longboat Quay, Priory Hall and other developments such as Riverwalk in Ratoath, County Meath that have come to light thus far, pose the question: are these simply isolated or coincidental examples? The geographic spread and the different developers involved would suggest that coincidence is an unlikely explanation. The other common factor they share is that they were all built in 2006-2007, the final furlongs of what had been a marathon of building frenzy in Irish property development.

The reality is that these developments illustrate a more generalised problem with the certification of building regulations that was particularly exposed in the building frenzy of the Celtic Tiger. It also reveals both the failure of the state’s enforcement powers but particularly the unwillingness of the state to monitor and control private development in any meaningful way.

The foundations of these regulatory failures were laid in 1990 when the building control regulations were relaxed by the then Fianna Fail Minister for the Environment, Padraig Flynn. This represented an attempt to remove obstacles that would be seen as a disincentive to the construction industry. It also reflected broader changes aimed at enticing and encouraging private finance into urban development, such as the introduction of the Urban Renewal Act in 1986 and the Finance Act in 1987, which used tax incentives and financial inducements to encourage the private sector. In a further illustration of this new founded entrepreneurial ethos by policy makers this period also heralded the establishment of the IFSC and its new low corporate tax structure.

The easing of building regulations represented a system of light-touch regulation aimed at speeding up and facilitating construction projects. However, it was a move that has proven to be a disaster for many people in the ensuing property frenzy. Annual housing construction output increased rapidly in the boom, reaching a phenomenal 93,419 housing units in 2006. Local authorities are responsible for the monitoring and enforcement of the building regulations. They simply did not have the staff to effectively monitor this scale of construction nor were they provided with the financial resources to recruit more personnel. Hence there was little independent oversight of building standards, meaning in effect a system of self certification existed whereby an employee of the developer could sign the certificate of compliance. The consequences of this model is plain to see in Priory Hall and Longboat Quay.

There has been no national audit of the quality of the residential construction undertaken during the Celtic Tiger, so given the short cuts and shoddy practices that have emerged thus far, it is not unreasonable to suggest that many more properties could be at risk. In 2014 the regulatory situation was tightened under the Code of Practice for Inspecting and Certifying Buildings and Works. The technical documentation that accompanies developments on commencement and completion must now identify a person in the design team as an ‘assigned certifier’. This individual must be an architect, an engineer or a surveyor who is named and can be held responsible if issues arise at some future point. Clearly this is welcome but it is not without its problems. Firstly, there is no obligation for the assigned certifier to be independent of the developer or the project and secondly, concerns have been raised that the indemnity falls on the shoulders of the ‘assigned certifier’ who in reality is signing off on a project on behalf of the builder – meaning that they can be the ‘fall guy’ between the builder and the consumer.

These changes don’t mean that a new Priory Hall couldn’t re-occur. In many respects they are attempts to deal with a situation if and when a problem arises. There needs to be more emphasis on prevention under the guidance of some form of Building Control Agency which would maintain independent oversight. Responsibility is critical but someone being held responsible after a person or people have died is, while worthy, scant consolation to people potentially left behind, as is all too graphically illustrated in the recent tragedy in Carrickmines.

Michael Murphy

Michael Murphy is a PhD candidate in the Department of Geography at Maynooth University.

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Potential time bombs for home buyers/sellers?

I’ve been asked a few times two related questions: (1) what do I think are potential issues relating to residential property that might have been overlooked or skirted around by the media which might have long term consequences for the property market? (2) what issues would you keep an eye out for if you were buying a home?  Here’s five of those issues, which may be ticking time bombs that will not be revealed until owners try to sell.

1) Units that are poorly built and/or used poor materials.  From talking to people in the construction/planning sector I worry that Priory Hall is the tip of an iceberg.  A massive amount of property was built between 1995-2007.  It was put up quickly in a system that largely  self-certified.  The emphasis was often on speed and profit, not quality and standards.  Any system that pays people by quantity (think brickies per block) and does not have adequate oversight will lead to shortcuts and bodges. As the scandal around pyrite in homes has revealed, materials too were often sub-par.  It’s estimated that 20-60,000 units have problems of pyrite.  Without widescale, independent inspection it is difficult to know the scale of the quality and safety problem. I worry that the DECLG, local authorities, banks, construction insurers, and developers are not keen to undertake or commission such a systematic survey of new properties for fear of cost, disruption, legal wranglings, and political fallout.  A survey would reveal the scale of issues, provide confidence for all units meeting standards, and highlight what does need to be addressed.  That has to be better than burying our heads in the sand and hoping it’ll all be okay.  It’s clearly not okay.  Ask anyone in a pyrite house or Priory Hall or have other construction issues.

My advice for buyers: do as much research about the builder/developer/estate as you can and get the house thoroughly surveyed, especially if it is built in the last 15 years.

2) Housing built on flood plains.  Again, we know this has happened – they’ve flooded.  Just because a house has not yet flooded, does not mean it is safe from future flooding.  We do not know the full-scale of the issue.  It would be possible to calculate by plotting the location of all the houses in the state onto floodplain data.  Knowing what houses are at risk enables us to start to try and do something about it, like prepare flood defenses.  Flooding causes great damage and causes much distress.  We also need to prevent future development on flood plains – simply stated, local authorities should dezone floodplains and not zone there again in the future.

My advice for buyers: do some research on the likelihood of a property flooding.  Look at myplan.ie and the OPW floodplain data and talk to local residents who have lived in the area for a while.

3) Housing that lacks building regulation certification.  As noted above, in a system that requires self-certification, corners can be cut.  For relatively small jobs, that are being undertaken by small building firms that do not have company engineers/architects or are being carried out by the owner themselves, one of the corners that can be cut is getting the building quality and standards certified.  A lot of people seem to think that they only need to comply with planning legislation for their extension or garages/outbuildings.  Not so.  There are a whole suite of building regulations that have to be complied with.  It is impossible to get a full compliance certification retrospectively as there is no way of testing the foundations, etc.  The best one can get is partial compliance based on an inspection of what is visible.  My sense is that many extensions built during the bubble do not have full certification.  This can cause a major problem to prospective sellers/ buyers as mortgage companies are reluctant to lend money on such property at this time (they didn’t care so much during the bubble as captial appreciation offset the problem caused by the extension).  They might only lend money to the value of the house minus the extension, or ask that the price of the property be dropped to that minus the extension.  They might also ask for the extension to be knocked down as it is a liability on the prospects of selling the property in the future.

My advice for buyers: even if you are buying with cash, make sure that the property has building regulation compliance certs – not having them will affect your future ability to sell.

4) Housing that lacks or fails to comply with planning permission.  We do not know how many houses were built/extended in the bubble without planning permission, though we know it did happen.  It could be calculated by cross-referencing properties built over the past decade or so (using geodirectory) with local authority planning files.  Unlike building regulations certs, planning permission can be regularised after seven years through retention.  The question that lurks at the back of my mind is, if the person who built the property deliberately did not comply with the planning system, what other corners have they cut with regards to build quality, standards and compliance?

My advice to buyers: make sure the property, including garages, etc, comply with planning permission.  If they do not comply and the property is over seven years old, then make the present residents get compliance before completing the sale.  If the property is less than seven years old, then seriously consider your position (the mortgage lender might well make the decision for you).  Make sure that no other corners, as per above, have been cut.

5) The location vis-a-vis public services.  This issue has no legal consequences, but is important for quality of life and future prospects of sale.  Most development in the bubble preceded public services such as schools, doctors, playgrounds, creches, public transport, etc.  In many cases the crash occurred before they could be put in place.  Given the perilious state of the Irish economy, there are questions as to when they are going to materialize any time soon.  Some people will little care about these things, but if you have children local services might be an important consideration.  If these services are missing, it may well make the property more difficult to sell in the future.

My advice to buyers: do a thorough scoping of the local area and the services you think you’ll need to use.  Take a look at local area plans (see myplan.ie) and take a look at local newspapers to get a sense of what is likely to happen in an area.

Another issue to consider, which has been extensively covered in the media is levels of oversupply.  It is clear that some parts of the country has more oversupply than others.  The alignment of supply and demand is a fundamental aspect of prices.  Oversupply might mean that as a buyer you can get a great price for a property.  It might also mean it’ll be more difficult to sell that property in the future.  Again, it would be useful to research this issue to get a sense of the future trajectory of property locally.  Our AIRO mapping tools, such as VacantIreland, might be useful for that.

Buying a home is the most expensive single purchase you’ll ever make. There are a number of issues that are coming to light after the bubble and bust that home buyers need to be aware of and to take into consideration when evaluating potential purchases.  It is worth taking the time to research thoroughly what and where you are buying and it pays to hire professionals to give you advice.  Their expertise might be an additional cost, but they could save you an absolute fortune and the misery of living with the consequences of the issues detailed above.

Rob Kitchin