Draft Guidance Manual for Managing and Resolving Unfinished Housing Developments – NIRSA Submission

Here is the NIRSA submission on the Public Consultation Draft of the Guidance Manual for Managing and Resolving Unfinished Housing Developments published by the Department of Environment, Heritage and Local Government.  It was submitted last Thursday 13th January.

NIRSA welcomes the publication of the draft Guidance Manual for Managing and Resolving Unfinished Housing Developments by the Department of Environment, Heritage and Local Government.  Given the nature and scale of the unfinished estate phenomenon in Ireland, and their various associated problems, it is vital that a strategy, including appropriate policy and statutory instruments, is developed and implemented to address and resolve the issues these estates face.

General comments and recommendations

Whilst we welcome the Department’s public consultation draft, and feel it is a step in the right direction, we are of the opinion that the guidance manual needs significantly more work if it is to be effective in tackling the various issues that unfinished housing developments face.  Indeed, without significant changes to the proposed way forward we would envisage many estates progressing very little from their present circumstances over several years.  In particular, there are nine general concerns that need further attention.

a)  The lack of compulsive mechanisms to ensure that issues are resolved.  The proposals in the draft manual are highly voluntaristic in nature and seek to encourage, rather than compel, various stakeholders to address specific issues.  It is proposed that all elements of Site Resolution Plans (SRPs) are negotiated between stakeholders, with discretion left to Local Authorities as to whether to pursue stakeholders with available legislative instruments.  This voluntary nature makes it likely that some stakeholders will seek to avoid addressing the problems developments face. There is thus a real risk that the guidance will not achieve its stated aim of finalising the development of incomplete estates.  In addition, given the centrality of SRPs as the prime mechanism to address issues related to unfinished estates, this instrument should be detailed very early in the document.

SRPs should be composed of compulsory elements which are rigorously enforced to ensure compliance.

b)  The lack of time frames. The present proposals are not accompanied by any proposed time frames for development and implementation.  This is a significant oversight that will potentially lead to enormous drift and the potential for very little to happen over lengthy periods of time to rectify the problems of unfinished estates.  Issues of health and safety, for example, need immediate attention.  Some estates have been in their present state for a number of years.  The delay in recognising the seriousness of the unfinished estates phenomenon, the time taken to undertake and analyze the DEHLG Survey, and the time taken to formulate this consultation document has meant resolutions to existing problems have already considerably delayed corrective action.  The absence of time frames will extend the delay to action even further as stakeholders drag their feet to suit their own agendas.

Time frames should be added to the various steps involved in SRPs and this timetable should be rigorously enforced.

c)  The lack of conflict resolution mechanisms.  Whilst the manual sets out the idea of SRPs, it does little to spell out how such SRPs would work in practice or how to resolve conflict between stakeholders within SRPs.  Given the varying vested interests of stakeholders there is significant potential for conflict, especially around issues of finance and liabilities.  This is especially the case whilst SRPs are voluntaristic in nature as stakeholders seek to minimize their risk and costs and maximize their benefits.  Without a well defined conflict resolution mechanism for managing SRPs the danger is that many SRPs will stall and little progress will be made to address the problems facing estates.

A conflict resolution mechanism should be devised that will ensure that SRPs do not stall and fail.

d) The lack of clearly defined SRPs suitable for different kinds of estates. The manual talks of a spectrum of unfinished estates, but only provides a broad description of a SRP.  It would be much more useful to present a typology of unfinished estates accompanied by model SRPs, with defined policy instruments and pathways mapped out to resolve the issues facing each kind of estate.  These should be also summarized in tabular form.  This would provide much clearer guidance on the expected routes of resolution and outcomes in relation to different kinds of unfinished estate.  It is acknowledged in the document (p. 33) that some sites might be assessed as not having a viable future, and one model SRP should outline what happens in these cases (which is not done at present).  The case example provided in Appendix 3 is far too thin on detail and substance to fulfil the role of a model example SRP.

A typology of unfinished estates should be devised and ideal type SRPs set out for each category, including well defined policy instruments and pathways to resolution.  This should include cases where a SRP has designated an estate as being unviable.

e) The absence of embedding within wider housing, planning and public policy strategy. The manual discusses a range of potential statutory instruments that might be used by Local Authorities when negotiating with stakeholders.  However, there is little attempt to embed the approach taken to resolving unfinished developments within wider housing, planning and public policy strategy, including the National Spatial Strategy, National Development Plan and four year economy recovery plan.  There is a single page (p. 29) that discusses unfinished estates with respect to core planning strategies (development and local plans, regional planning guidelines) and wider housing policy concerning public housing and sustainable communities.  This isolates SRPs from the wider context of, and initiatives in, planning and housing policy that should be providing vital framing for SRP formulation.

The approach to resolving the problems facing unfinished estates needs to be embedded within and framed by wider housing, planning and public policies.

f) The lack of a single agency tasked with ensuring that SRPs are properly formulated and implemented.  Without sufficient oversight, it is likely that the process of developing SRPs will drift significantly meaning:

• they will vary in form enormously across the country;
• there will be variances in their delivery and execution (leading to a ‘postcode lottery’ with respect to resolutions reached depending on the competencies and efficiencies of local authorities);
• conflict in the resolution process will be ineffectively and inefficiently dealt with.

A single agency charged with oversight will ensure that SRPs are pursued as envisaged, that they are consistently applied across the country, that there is a skilled hub of expertise and experience for mediating conflict in SRPs, and that SRPs are aligned with other strategic policies relating to local core strategies (development and local plans, regional planning guidelines) the National Spatial Strategy, National Development Plan, and so on.

A single agency should be appointed to oversee and be responsible for the successful delivery and implementation of SRPs.  In our view that should be the Housing and Sustainable Communities Agency.  This agency should be sufficiently resourced to undertake the task.

g) The need for greater clarity on the parameters of estates needing SRPs

The manual uses the DEHLG’s national housing development survey to initially define those estates that SRPs will be applied to.  Further narrowing of the remit is undertaken by excluding “developments that are substantially complete and might only have minor outstanding issues that are normally addressed by the taking-in-charge or maintenance processes”. Neither does the document focus on dwellings that are being occupied or dwellings that have not commenced and will not therefore be causing problems in relation to safety or visual impacts.  There are a number of problems with these parameters.  First, the DEHLGs survey is limited to post-2007 estates and there are estates completed prior to 2007 that have issues that need redress.  Second, just because an estate is considered ‘complete’ does not mean it does not have issues that need redress.  For example, a completed estate might have low level of occupancy that makes an estate management company unviable and therefore is missing adequate services such as street lighting or bin collection or communal electricity to power sewage treatment plants.  Third, because houses are occupied does not mean an estate does not suffer from problems relating to road surfaces, lighting, sewage, and amenity areas.  Fourth, SRPs do need to consider dwellings not yet commenced to assess whether such dwellings are desirable and viable

There is a need to revisit the parameters defining what unfinished developments will be tackled through SRPs; this will be aided by the taxonomy recommended in point d above which should identify the problems faced by different kinds of estates.

h)  The issues of finance, resourcing and NAMA.  The draft manual is very thin on the issues of finance (a single page, p. 28), a crucial element in the ability to be able to tackle most issues facing estates.  The manual has little to say about what happens when a developer is insolvent and therefore little or no credit is available. The manual also offers little on the possible mechanisms and risks associated with different financial approaches.  A second gap in the discussion is the resourcing of the SRP process in a time of declining municipal capacity; how will resources be made available to stakeholders to facilitate SRP creation and implementation. Finally, the manual is relatively silent about the role of NAMA in the process of resolving issues on estates within their portfolio.

There is a need to set out all the possible mechanisms to overcome financial shortfalls, including a cost benefit and risk analysis of different approaches.  The resourcing of the SRP process should be clarified. In addition, how NAMA will operate with respect to SRPs, including the office within NAMA who will be responsible for negotiation, needs to be agreed and set out.

i)  The issue of estate management.  Many unfinished estates, especially apartment complexes but also some housing developments, were conceived as being run as private developments that would be serviced by estate management companies, rather than being taken in by Local Authorities.  Many such estate management companies have become insolvent or are unable to discharge their duties because there are not enough residents to provide sufficient fees.  In these cases, existing residences are suffering from a number of issues such as a lack of proper services with respect to bin collection, lighting, sewage treatment, security.  The issue of estate management is not dealt with in the manual.

There is a need to include estate management companies as a stakeholder group for SRPs and for the issues faced by residents when an estate management company goes bust or cannot operate effectively to be covered by SRPs.

Brendan Gleeson and Rob Kitchin

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Haunted by past mistakes

NIRSA Op Ed in Sunday Business Post

Housing in Ireland is in crisis.  House prices have fallen on average 35%.  Development land has plummeted in value by 75-90%.  Farmland is down 50% or more.  A quarter of a million households are in negative equity and over 32,000 households are more than 90 days in mortgage arrears.  Housing oversupply is in excess of 120,000 units and there are 620 ghost estates where over half the properties are empty or under-construction.  The National Assets Management Agency (NAMA) has been created to supposedly save the banks and Irish taxpayers by transferring €88 billion worth of ‘toxic’ and poorly performing property assets and rolled-up interest to the state.

These disastrous facts demand two questions.  What went wrong?  What needs to change to make sure it never happens again?

In our report, A Haunted Landscape, we deal extensively with the former.  Our principal argument is that both levers used to control development – fiscal and planning policy – failed.  Banks were poorly regulated and lent too much money, and tax incentives fuelled the boom.  Planning did not act as the counter-balance to the excesses of the building frenzy, zoning too much land and giving out too many planning permissions.  The result was oversupply of houses across the whole country, with some counties particularly badly hit.

What needs to done?  First, we urgently need an independent inquiry that provides a systemic review of the planning system.  This does not need to be a tribunal-style blame game that will last for years.  Rather it should take the form of the recent Honohan, and Regling & Watson reports on banking and financial regulation that were completed in a matter of months. The final report would provide a synoptic overview of the entire system of planning and development, focusing on how planning policy is produced and implemented, and the organisation, operation and regulation of planning within Ireland.

The government has said that such an inquiry is not needed because it is already undertaking reviews of planning decisions in six local authorities and that the new Planning and Development (Amendment) Act addresses the major problems that led to poor planning decisions.  These reviews are focused on specific cases and are not designed to provide a broad analysis of how the entire system worked, or failed to work.  And whilst we welcome the new Act it should be seen as the first step to reform, but it should not be the only step.  An inquiry would provide strong evidence for the next steps.

On a practical note we need to get to grips with ghost estates.  There are thousands of families who are living with the stress of negative equity and few neighbours, in many cases in estates that are unfinished and abandoned.  Estates may be lacking in basic infrastructure and public facilities and amenities, and residents may have to negotiate serious issues of health and safety.

We need an action plan to address the hardships of those people trapped on such estates – to finish out the development, demolishing units if needed.  At the moment, residents are unsure who to turn to for help – developers, banks, local authorities, government departments or NAMA – and nobody seems prepared to take responsibility.  Our view would be that local authorities be given the task, along with sufficient resources to do so.

We also need a plan to cover the maintenance of properties while they lie idle.  Once damp and cold enter a house the infrastructure starts to decay and very soon it becomes unliveable.  Failing to look after stock will mean the loss of perfectly good houses that might be needed in the future.

The government has established the Social Housing Leasing Initiative, which will use some ghost estates for social housing.  However, we need to consider alternative uses for other estates.  Those in remote rural locations are simply not suitable for social housing given the lack of public transport, social amenities or access to employment, but perhaps they might be useful for small businesses or cultural activities.

There are a number of specific issues that should be addressed in the short term with regards to the planning system.  Planning permissions and regulations need to be rigorously overseen and enforced.  The evidence base used in the planning system needs to be radically improved.  There needs to be a proper house price register and all housing data to be generated and released at a local level.

The process of land zoning should be evidence-based and zonings time delimited.  Housing and patterns of development should be based on local need, not greed, and guided by the National Spatial Strategy and not localism and zero-sum comparisons.  Future tax incentive schemes should be evidence-informed, fully debated and have set targets.  They should have defined end goals and points, and annual evaluations.  All those involved in the planning process should receive mandatory training in planning issues and policy, and the principles of local and regional development.

There should be a commitment that all future local planning be community and plan-led, not developer and speculator-led.

With respect to NAMA, the public need to be reassured that the agency will succeed in its aims.  NAMA is soon to be the largest controller of property in the state.  It is purchasing assets, supposedly on behalf of tax payers, yet there is a worrying lack of transparency about the organization.

We would be concerned as to whether NAMA can succeed given the sums being paid by the state to the banks for their assets, and the make-up and geography of the portfolio.  Irish developers and speculators seemingly forgot the well worn mantra of ‘location, location, location’, and much of the land and property heading into NAMA is in marginal locations with weak and falling demand.

Unless valuations are taking into account existing levels of oversupply and evidence-informed, long-term projections of an area’s demography and labour market then NAMA is potentially overpaying for assets.  Further, if land is purchased by the state on the basis of existing zoning then any future dezoning, as proposed by government, will deflate its value and lead to a loss on the investment.

Ultimately, to recover the state investment, NAMA requires the property market to be re-inflated back to higher levels, which have already proved unsustainable.  The uncertainties concerning NAMA will only be dispelled through full transparency in the agency’s workings and the assets it is managing.

As a nation we need to learn the lessons of the Celtic Tiger years.  We have to go back and review what went wrong, fix the system that created the mess we are in, and make sure that it does not happen again.  NAMA and the Planning and Development (Amendment) Act are not the only answers.  And we have to make sure they do not make the situation worse.

We are three years into the housing slump and yet we still haven’t got to grips with addressing the various problems we face.  We need a plan of action and we need to implement this plan.  And we need to do it sooner rather than later.

Rob Kitchin

 

Planning must be built on sustainable foundations

NIRSA Ed Op piece in today’s Irish Times.

As well as a catastrophic failure in Ireland’s banking and financial regulatory system, there has been a disastrous failure of the planning system. The Government has two principal levers through which it can regulate property development. The first is through fiscal policy with respect to regulating access to credit and determining taxation rates. The second is through planning policy, the zoning of land and the granting of planning permission.

Explanations of the Irish property bubble have focused almost exclusively on the former while, to date, the role of the planning system in creating the property bubble has been little considered. And yet, the banks could have lent all the money they desired, but if zonings and planning permission were not forthcoming, then development could not have occurred in the way that it did.

In a housing boom, planning should act as a counter-balance to the pressures of development to maintain a stable housing market and try to prevent boom-and-bust cycles. Planning should provide checks and balances to the excesses of development and act for the common good, even if that means taking unpopular decisions. However, during the Celtic Tiger period a laissez-faire approach to planning predominated at all levels of governance.

Planning decisions were not sufficiently evidence-based, and in many cases did not take account of realistic long-term demographic demand, market conditions or issues of sustainability. Cautious voices were marginalised and ignored.

Both the fiscal and planning levers of development were overly pro-growth.

As a result, not only was there an unsustainable growth in property prices, but this was accompanied by a property building frenzy that led to a significant oversupply of housing (as well as of offices, retail units and hotels) in almost all parts of the country. Between January 1996 and December 2005 more than 550,000 housing units were built. In the same period, the number of households grew by just 346,000.

Yet from 2006 to 2009, 244,000 new units were built, despite a vacancy rate of 12.2 per cent, excluding holiday homes, in 2006.

While local authorities like Fingal, Kildare, Galway city, Meath, Wicklow and south Dublin did a reasonable job at keeping supply and demand aligned, others did not heed good planning guidelines and regional and national objectives; did not conduct rigorous demographic profiling of demand; and did not take into account the fact that much of the land zoned lacked essential services such as water and sewage treatment plants, energy supply, public transport or roads.

Instead, permission and zoning were facilitated by the abandonment of basic planning principles by elected representatives on the local and national stage and driven by the demands of local people, developers and speculators and ambitious, localised growth plans framed within a zero-sum game of potentially being left behind with respect to development.

Further, central government not only failed to adequately oversee, regulate and direct local planning, but actively encouraged its excesses through tax incentive schemes and the flaunting of its own principles as set out in the National Spatial Strategy through policies such as decentralisation.

The level of over-development that has occurred could take years to correct and seriously hamper the recovery of the housing market and the operation of Nama.

At the National Institute for Regional and Spatial Analysis, we are calling for an independent review of the operation of the planning system during the Celtic Tiger years to be undertaken to consider fully the role of planning in the creation of the property bubble, similar to the Honohan (2010) and the Regling and Watson (2010) reports on banking and financial regulation.

The review would examine planning policy formation and application and the organisation, operation and regulation of planning within and across different agencies and at all scales in Ireland. It would investigate all aspects of the planning system and its operation, including the extent to which there was: joined-up thinking between agencies and authorities; high-quality data and evidence-informed decision-making; strong levels of oversight, monitoring and control of clientelism and cronyism at play in the system.

The inquiry should not take the form of a witch-hunt or a blame game, but rather constitute a systemic review of how the planning system failed to counter and control the excesses of the boom and provide a more stable and sustainable pattern of development.

There are seven key issues that need to be addressed before consumers regain confidence, property prices bottom out and the housing market starts to function properly.

Supply and demand will need to be harmonised. There has to be a sustained growth in the economy with an associated fall in unemployment. House prices have to align more closely to average industrial earnings. Affordable credit has to be available for first-time buyers and those trading up. The uncertainties concerning Nama and its operation have to be dispelled, especially since it will be controlling a sizeable share of property and land. This necessitates full transparency of the agency’s workings and the assets it is managing.

Consumers have to be satisfied that the banking crisis is truly over and that financial institutions are properly regulated. And, finally, substantive changes need to occur in the planning system to ensure that it works for the common good and produces sustainable development.

In the short term, we need a clear plan of action to deal with ghost estates and to implement this plan speedily. This should include addressing the social and economic conditions of those living on such estates and a full assessment of alternative uses.

Our analysis suggests that there is little need for housing development in the State in the immediate future beyond selected social housing provision. This is not to say that there is no requirement for construction, however.

Where construction could be fruitfully undertaken is with respect to public facilities like schools and hospitals, public transport, roads, energy and broadband infrastructure.

Such a targeted capital investment could, on the one hand, stimulate the economy in terms of employment and investment and provide multiplier effects across the private sector and, on the other, provide world-class infrastructure to facilitate and encourage indigenous growth and inward investment. Any such investment should align with the National Spatial Strategy and National Development Plan and be delivered through a rigorous, responsible and sustainable planning system.

Rob Kitchin, Justin Gleeson, Cian O’Callaghan and Karen Keaveney

NIRSA Working Paper 59: A Haunted Landscape: Housing and Ghost Estates in Post-Celtic Tiger Ireland

RTE Prime Time: A Haunted Landscape

 

A Haunted Landscape

The NIRSA Working Paper 59 – A Haunted Landscape: Housing and Ghost Estates in Post-Celtic Tiger Ireland – was published this afternoon.  It will be discussed on Prime Time tonight at 9.30pm.  Discussed on Morning Ireland earlier today.