At the first day of the Irish Planning Institute’s annual conference, Minister of State for Housing and Planning Willie Penrose has given some indication of what is coming down the tracks in terms of planning and housing policy and a bit more information concerning unfinished estates and land dezoning.  I’m not attending the conference, so this post is based on the reports in the Irish Times and Independent.

The Minister revealed that NAMA only has the loan book of about 10 per cent of about 150 of the worst unfinished estates that pose health and safety risks.  I’m not sure quite what has happened in the last couple of months, but it was previously reported by the Advisory Group on Unfinished Housing Developments that there were 348 estates where vacancy is over 50% that pose significant health and safety risks.  Somehow 200 estates seem to have been taken off the health and safety risk list, although it is highly unlikely there is any significant change on the ground.  Regardless, the point is that NAMA actually has influence with respect to a relatively small number of estates.  Rather, the vast majority of unfinished estates requiring substantial work were financed by foreign-owned banks operating in Ireland.  If the developer has gone bust and defaulted, then these estates are owned by those banks and the liabilities with respect to health and safety rests with them.  It’ll be interesting to see how they respond to these liabilities and the obligations they impose and complete works or make sites safe.

The Minister revealed about 28 per cent of the loans at Nama relate to land and development, about 16 per cent are in the Dublin area.  I’m not quite sure what this really means.  Dublin area is quite vague – is this the four counties, the metropolitan region or the commuting footprint or some other area? Is the Dublin portion 16 percent of NAMA loans or 16 percent of all land (ie 4.5% of all loans)?  Is the 16 percent land value or land size?  Certainly the vast majority of zoned land in the country is outside of Dublin.  Presumably much of this land has also been financed by foreign-owned banks operating in Ireland.  Either way, land values have dropped substantially in value – 75-95%, especially if it was bought at zoned prices and it has been dezoned.  If NAMA has overpaid for land, then this will be one part of their loan book that will underperform.  Saying that, the NAMA land, along with the DEHLG land aggregation scheme, represent a real opportunity for Ireland to take a long term strategic approach to spatial planning underpinned by a landbank controlled by the state.  Over the long term, if this approach is taken, the state will massively benefit in both planning and financial terms.

In terms of dezoning, 12 of the State’s 34 local authorities have so far made changes to their development plans which has led to thousands of sites being reclassified as either surplus to present planning need or unsuitable for development.  The remaining local authorities will have dezoned land by October.

There will be a national co-ordination group established to oversee action by local authorities in dealing with the most problematic unfinished housing developments.  The report of the Advisory Group on Unfinished Housing Developments will be published in the next week or so.

He stated that the planning system should be “focusing demand in a way that will rekindle market interest in stalled developments”.  I’d be very interested to see the detail as to how it is envisaged this should happen.

He reaffirmed the commitment to the core strategy approach and evidence-based requirements to planning as set out in the Planning and Development (Amendment) Act 2010.

He also stated: “We are refocusing on revitalising our city and town centres, moving against the tendency of the Celtic Tiger era to envisage extensive, even sprawling extensions of our cities and towns, drawing the lifeblood out of older, established central urban areas.”  Again it will be very interesting to see the detail in terms of such revitalisation.  The rhetoric might be good, but it is the substance that matters.

Rob Kitchin

Several newspapers (e.g., Irish Times, Independent, Examiner) are reporting that the Advisory Group on Unfinished Housing Developments has published its draft report today.  I’ve searched the DEHLG and Housing and Sustainable Communities Agencies websites but can’t locate it as yet (the main page for unfinished estates on the DEHLG website is here).   Going on what the newspapers say, there are 348 developments that are in need of immediate action to deal with public safety hazards (e.g., unsecured construction materials, open excavation pits, uncovered manholes, and partially completed buildings that could be unstable) where no current on-site work is being undertaken and the vacancy rate is over fifty percent.  These estates may also suffer from a lack of public lighting, problems with water and sewage services, poor road surfaces, lack of pavements, and a lack of open areas.  The identified developments are in every county, with particularly high numbers in Cork County (52), Cavan (34), Galway County (20), Dublin (the 4 LAs, 30), Donegal (23), Louth (17), Longford (16), Monaghan (14).  Individual estates are not identified.

Minister Finneran has announced a fund of €5m for local authorities to use to help address the worst of these problems.  Whilst the fund is very welcome, it only averages €14,360 per estate.  For that kind of money one would think that the issues would have been addressed already and it seems highly unlikely that all the issues can be tackled for that sum.  That said, it can certainly be used to address the worst of the problems, especially those that pose safety threats.  However, the bigger and longer term issue of how to finish out estates still needs resolution.  The draft guidance manual published late last year provides one roadmap, though as we noted in our own submission is far from ideal.

The issue of dangerous and developer abandoned estates is also far larger than the 348 estates identified; these are the worst estates that have the most problems.  Lots of other estates have many of the same issues and using the criteria of 50% occupancy seems a rather arbitary way of delineating the level of risk.  One could have an estate of almost full occupancy with a very severe hazard in it that needs urgent redress.  Our analysis of the unfinished estates database shows that:

  • 1,475 estates have uncompleted properties on them; 71% of these estates are non-active, i.e. they have effectively been abandoned by the developer for the time being
  • 635 estates have more than 50 per cent of units under-construction
  • 777 estates consist of 10 or more units where 50 per cent of units are either under construction or vacant  (i.e. they are ghost estates as we originally defined them last January)
  • 2,157 estates have residents (78,195 households)
  • 1,102 occupied estates are complete but have vacancy
  • 1,055 occupied estates are incomplete and may also have vacant units (454 occupied estates have more than 30% per cent of units in-complete)

Chairman of the advisory group John O’Connor, chief executive of the Housing and Sustainable Communities Agency, quoted in the Irish Times, himself acknowledges that the issues extend beyond the 348 identified estates, stating that local authorities were best placed to advise which estates in their areas were most in need of, or would most benefit from, funding to resolve public safety issues.  In other words local authorities seem to be in a position to assess estates on a “site by site, case by case” to draw on the fund to address issues.

The key issue now is for Local Authorities to start drawing down the funding available and to address the really pressing health and safety issues in order to improve the lives of residents.

Rob Kitchin

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

I missed this when it was published on the DEHLG’s website on Dec 1st.  I don’t think it was picked up by newspapers either, so to encourage as wide a response as possible I’m sharing the details here.

The DEHLG has published a public consultation draft of its guidance manual for ‘Managing and resolving unfinished housing developments.’ The manual sets out the key issues facing unfinished estates and steps and responses to managing and tackling them.  Interested parties are invited to comment on the content and proposals in writing to Ms. Katherine Banks, Housing and Sustainable Communities Agency, Cumberland House, Fenian Street, Dublin 2.  Email: admin@housing.ie. The closing date for receipt of submissions is 4 pm on Friday, 14 January, 2011.  Further details can be found here.

Rob Kitchin

This piece also in the Irish Times today:

“Emails, texts and phone calls kept coming all week as hordes of foreign journalists flew into our beleaguered country.  … [A]ll of them were hunting for ghost estates.  Images of empty Irish houses, the symbol pretty universally chosen to illustrate our plight, haunted TV screens and foreign newspapers.  But where to find them?  Bill Nowlan maintains that journalists will have a hard time tracking real ‘ghost estates’ down.  Says Nowlan  ‘It’s hard to find semi-derelict tumbleweed estates – because they’re largely a media fiction.”

As per the early post today, 1,475 estates out of the 2,846 unfinished estates identified by the DEHLG have uncompleted properties on them.  Admittedly they are not all semi-derelict tumbleweed estates, and many of them are nice estates, but one doesn’t have trouble finding unfinished estates that look worse for wear (especially on estates where there are high rates of under-construction properties).   Media fiction they are not, though the media does focus on the very worst of them (which I agree is not helpful or fully representative of the range of conditions of estates and this variation does need to enter into the discussion about them).  And as the earlier post notes, these estates have a range of real issues that need redress.  However, it is certainly not hard to find them – take a drive through any county in the country.

Unfinished estates are chosen as a symbol to highlight our plight because ultimately lending for property is at the root of the state we find ourselves in.  We take no pleasure in having to point out they exist, but pretending that they don’t or that only a handful have issues will not help address the problems residents or the property market faces.

If anyone else approaches the Irish Times and the IT doesn’t know where to point them – either direct them to the maps on the DEHLG website or refer them to www.ghostestates.com, but don’t pretend the 2,846 unfinished estates don’t exist or that the problems relating to them are trivial.  Denial is not going to make the issue go away (ask Brian Lenihan about the banking and fiscal crisis).  Next we’ll be told we don’t have any zombie hotels, or empty retail parks, or vacant offices, etc.  They too are a mirage.

Rob Kitchin

Bill Nowlan has a piece in the Irish Times today arguing that the issue of unfinished estates is relatively trivial and we shouldn’t be too worried about them.  It is full of phrases such as ‘just 2,900 estates’ (as if 2,900 is not a lot); ‘the output [from the survey] is good’; they are ‘new estate developments’ rather than unfinished (despite the fact that 1475 estates have incomplete units, 71% of such estates being non-active, i.e. they are abandoned by the developer); ‘the number of part-built houses at 10,000 is insignificant, equating to about three months work in a normal property and construction environment’ (ignoring the other 10,000 under-construction and the fact there is nothing normal about the present market and won’t be for some time); ‘there are only 23,000 new houses built and unoccupied … this is just 2 per cent of the overall national stock of homes in the country’ (omitting the 10,000 nearly complete and the 10,000 under-construction); ‘we have a housing surplus [172,000] but only 8.2 per cent of that surplus is in new housing estates’ (again, ignoring the other 20,000 in production, but also ignoring the fact that the rest of that surplus is an issue).

Where we agree is that there is a lot of misinformation in the media about vacancy and unfinished estates, with the media conflating both oversupply and overall vacancy with unsold units.  We have posted on this several times – see our key housing statistics post.

Where we disagree is about shifting the focus from oversupply to overhang and the argument that we can basically stop worrying about unfinished estates beyond negative equity.  Overhang is unsold houses.  Oversupply is the number of units in excess of household demand taking into account holiday homes and an expected rate of vacancy.  The oversupply is estimated by DKM on behalf of the Dept of Environment to be between 122,029-147,032 (NIRSA and UCD have similar estimates).  In a weak market with high emigration, high unemployment, and poor access to mortgage credit, 44,030 units (23,250 complete, 9,976 nearly complete; 9,854 where construction has started) is an issue, and so is the distribution of properties.  And the gap between overhang and oversupply is also troubling (see our post here).  To try and focus exclusively on the overhang and ignore other facets of the overall housing stock in Ireland such as oversupply is to create a different type of misinformation.

And there are a number of issues on various estates as anyone who has visited a lot of them or lives on one will be able to testify.  For the people living on unfinished estates these issues are very real and they need to be addressed.  The issues concern health and safety, security, anti-social behaviour, building control, planning compliance, bonds and finance to complete, and negative equity.  The Department of Environment acknowledge these issues exist, which is why they have set up an expert group to try and find solutions.  There are 78,195 households living with some form of these problems, on estates where on average 35% of units are unoccupied or unfinished.  As noted above, 1475 estates have uncompleted units on them.  This is not trivial.

The survey was very useful and provides a pretty good picture of unfinished estates, but let’s not lose the run of ourselves and try and now spin the situation in order to convince ourselves that these estates are not a problem beyond negative equity, that the housing market is essential fine once we work off the overhang (as if that is going to happen any time soon), and that the present boom and bust was a ‘normal’ event (its scale and extent is far, far bigger than anything else in Irish history).  Any unoccupied house that has been built for a while needs maintenance, unfinished estates need completion, low occupancy estates need residents, the issues above need redress, and the issue of oversupply rather than overhang remains in play.  The unfinished estates data can be spun in many ways, but there are real issues here and they are not going to go away any time soon.

Rob Kitchin

Monday’s Irish Times article (8-11-2010, p. 2: ‘Council appeals for developers’ bonds plan’) outlines a proposal by the Mayor of Cork County to draw down the developers’ bonds in order to finish public areas of uncompleted estates.  This is a welcome suggestion which, if acted upon, would surely go a long way towards alleviating the sense of disappointment and disillusionment being felt by numerous householders concerning their surrounding  residential environment.  However, it would still not address other related issues being experienced by many residents of unfinished estates all over the country.  Estates with public lighting need the means to turn the lights on; those with private sewage treatment plants need them to be commissioned and functioning.  Estates in which insufficient numbers of service charges are being collected (for example, if the owner of unsold houses, i.e. the developer, has gone bankrupt), are in considerable difficulties meeting these running costs.  In many cases, home-owners have no choice but to absorb these additional costs if they wish to keep their estate in some kind of reasonable condition.  In larger estates, where up to half of houses are empty, this could be too much of a financial burden to share around.  The prospects of being taken in charge by local authorities is also remote for many of these estates; apart from the problems meeting the required criteria for taking in charge, some are still within the five-year time frame allowed for completion of developments.  The problems for local authorities taking enforcement proceedings against developers who are no longer in business hardly helps the situation.  The role of NAMA is not entirely clear; if a developer’s debts and assets have been transferred to it, a question is whether it is now liable for the service charges on unsold houses in unfinished estates?

Marie Mahon

The housing units inspected by the DEHLG survey can be broken down into 5 different housing types: Detatched, Semi-Detatched, Terraced, Duplex and Apartments. This breakdown is based on all units (179,230) so also includes units that have been granted planning permissions but not yet commenced (58,025). The current summary data available through DEHLG will not allow a further breakdown of housing type by level of occupancy or construction status. Hopefully this will be available when the complete survey output becomes available.

The following two graphs detail the breakdown by unit types within each local authority. It’s clear that there is a really different pattern throughout the country with Dublin City, DLR and Fingal with an absolute glut of apartments within these unfinished estates. Cork County with the highest number of overall units (18,681) has a mix with a higher proportion of semi-ds and terraced units.

Unfinished Estates: Units by Type (percentage)

Unfinished Estates: Units by Type (absolute)

Justin Gleeson

One of the questions I’ve had from the media and also on a blog is why is there a difference between the NIRSA (and DKM/DEHLG) oversupply figure and the number of unsold units on unfinished estates as calculated by the DEHLG in their recent survey.  Essentially the difference is oversupply versus overhang, and the overhang consisting of more than unsold units in unfinished estates.  In the last few days there seems to be an attempt to shift focus to the overhang, and in my view that’s a big mistake.

Oversupply is the rate of vacancy above a base 6% vacancy rate once holiday homes have been accounted for.  It is concerned with the number of households with respect to the supply of housing units.  At a basic level, according to the DEHLG and CSO, in 2009 there were 1.96m units in the country and 1.63m households (the latter figure only released a couple of weeks ago), a difference of 330,000.  The NIRSA model estimated a difference of 338,031; DKM/DEHLG 301,682-326,685; and UCD 345,116 (so each study had pretty good alignment with the latest data – see our key housing statistics post, which also gives links to all data).  We need to take out holiday homes, as these properties are bought and serve a purpose.  We also need to take out the expected base vacancy rate – all housing markets have an expected rate of vacancy, in that not all homes are expected to be occupied.  Both NIRSA and DKM/DEHLG use a base vacancy rate of 6%.  On 1.96m units that would be 117,600 units one might expect to be vacant.  The difference between the overall vacancy minus holiday homes and the base vacancy rate is the oversupply.  These are effectively houses surplus to either holiday home use or household demand to live in them.  NIRSA estimates oversupply as of the end of 2009 as 120,248, and DKM/DEHLG estimate as 122,029-147,032. UCD estimate that it is 171,178 (using a 5% base rate)

Overhang on the other hand refers to the number of unsold units in the state, regardless of whether there is anybody to occupy them or use them.  The unfinished estates report details that there are 33,226 unsold units (23,250 complete, 9,976 nearly complete) and another 9,854 where construction has started.

So why is there a substantial gap between estimated oversupply (120K) and potential overhang (43K), and why does it matter?

Explaining the gap is not straightforward because we do not have any definitive data.  It seems likely, however, that the difference consists of three types of property:

  1. Other unsold houses.  The unfinished estates survey had some parameters – an unfinished estate was defined as estate with 2 or more houses where development and services had not been completed and estates completed from 2007 onwards where 10% or more of units are vacant.  Therefore unsold houses in estates completed prior to 2007, for example in the second half of 2006 when the market was softening were not included.  Nor does it include unsold houses in estates with less than 10% vacancy.  Nor does it include new, unoccupied one-off housing.  Unfinished estates remember only refer to 6.1% of all units in the state.
  2. Excess second hand vacant houses that have either come onto the market or which have not done so when one might have expected them to.  There are c50,000 second hand houses on the market, a proportion of which are vacant.  They might be the houses of recently deceased or those who have moved area or country.  Some of these won’t be on the market because the fall in house prices has led to the perception that the owners will not realise the full value of the property or because of issues of negative equity.
  3. Vacant investor properties bought at the height of the boom with the aim of buying to flip or buying to rent.  In some cases these properties may have no mortgage (bought for cash) or a relatively small mortgage, and therefore there is no pressure to get tenants in. In other cases, the property may have been bought in marginal, rural locations where it is all but impossible to source new tenants given out-migration and competition.  At the height of the boom, a significant proportion of property was being bought as investments.  For example, 27% mortgage business in 2006 was investor mortgages according to data cited in Derek Brawn’s book, Ireland’s House Party.  The bottom line is that in many cases units were bought for which there was no immediate household demand.

So, why does the difference between overhang and oversupply matter?  Surely, if property is bought it is no longer a problem?  All we need to do is work off the overhang and we’re back in business. In fact, shouldn’t we start building again before the overhang is worked off to make sure we don’t end up with a shortage?

The difference matters because the rate of oversupply suggests there is a strong mismatch between the number of households and housing units.  The difference between overhang and oversupply effectively represents latent supply.  They are units where there is a strong possibility they will come onto the market when the conditions are right, especially once they come out of negative equity.  Even if they become rental properties, there’s presently not enough households to fill them given net out-migration and weak population growth through natural increase.

For the housing market to recover we need supply and demand to tighten right up so that there is active competition for property.  As prices rise, latent units will come onto the market, especially as negative equity thresholds are crossed.  And even if this additional supply is slow, an expected 6% base vacancy is very generous and this could be eaten into as the new build gets going again.  In most countries base vacancy is 3-5%, so there is some slack there.  There are also the c. 50,000 secondhand houses presently on the market, some of which are presently vacant.  Starting to build before we’ve fully aligned supply and demand could extend the problem and keep the market flat.

Of course, the market is going to remain flat whilst the economy is in the doldrums, access to credit is restricted, and unemployment and underemployment remain high.  The housing market will not be well served, however, by focusing solely on the overhang and ignoring the issue of oversupply.  Ultimately reducing both overhang and oversupply is reliant on a growth in, or redistribution of, households (the latter will, of course, leave vacant units elsewhere in its wake, as will moving from rental into new build).  Unless households grow in number, then the issue of oversupply will continue for quite some time.

Talk of there being only 18 months supply of housing units based purely on the overhang figures in unfinished estates needs to be treated with caution.  It takes no account of the latent supply implied by the rate of oversupply.  It was only a couple of months ago that a figure of 3-4 years supply was being talked about based on the oversupply figure.  Nothing has changed other than swapping from oversupply to overhang, which suits the government, construction industry and aligned interests such as estate agents because it makes the size of the problem appear much smaller.  Of course, all of this varies geographically, and some areas will align supply and demand more quickly than others, but 18 months seems very optimistic regardless of location given the present market and the fact that many estates need finishing off before new ones are started and few, if any, developers can access finance to fund existing, let alone new, estates.

Rob Kitchin

The latest DEHLG housing survey has revealed that there are 2,846 estates where part of the development remains unfinished or vacant. These estates consist of 78,196 dwellings that are completed and occupied, 23,250 dwellings that are complete and vacant, 9,976 dwellings that are near complete, and a further 9,854 dwellings that are at various stages of construction activity.

The survey has also revealed that there are an additional number of dwellings that have received planning permission for development, but where no initial construction has yet begun.  The total number of planned and approved additional units is approximately 58,025.  Thankfully, these did not proceed to development or the extent of the housing crisis would have been worse.  According to the DEHLG these permissions do not pose any immediate construction or site specific difficulties as they are unlikely to proceed given the present market and access to credit.

The counties with the largest number of undeveloped planning permissions in existing unfinished estates are Fingal (9,502), Cork County (6,516), Meath (3,456), Dublin City (3,263) (Figure 1). It would be interesting to know how many of there are apartments, 3 bed semi-ds, etc.  Given their proximity to Dublin and Cork, it is likely that as estates are finished off and occupied over time, these permissions may be taken up, though developers might push strongly for a redesignation of the permission – say trying to move from high density apartments to lower density 3/4 bed semi-detached.  Such redesignation may well cause issues where estates are near to key infrastructure, such as the luas and rail lines, which were designed to increase density and the numbers within walking distance of stations.

If we normalise the permissions with respect to the number of existing households (units per 1000 households in 2006) we see a different picture emerge with Fingal, Laois, Longord and Cavan having the highest levels of excess permissions (Figure 2). Fingal presently has 2,866 units either completed but vacant, near complete, or underconstruction.  Between 1996-2006 the number of households in Fingal grew by, on average, 3,280 per annum.  If households were still growing at that rate, the unfinished estate units would last 10.5 months.  Of course, there is other vacant stock in the local authority, although it is relatively small, and the growth in households is not increasing at the same rate as 96-06.  Therefore the stock should last at least 12-24 months before present excess planning permissions will start to be taken up.  As for Laois, Longford and Cavan, given the present levels of oversupply it is highly unlikely that such permissions will be taken up any time soon.

Figure 1: Uncommenced Units

Figure 2: Uncommenced Units per 1000 households