Bold action is urgently needed to fix our dysfunctional housing system and deliver more affordable homes in Ireland. This is the central message in a new report from the Irish National Economic and Social Council (NESC). That action should be focussed on bridging the supply gap by actively managing land and locational value for public good; and bridging the affordability gap by engineering-in permanent affordability.
Speaking on the publication of the report Dr Larry O’Connell, the Director of NESC said ‘the Council considers that ‘The dominant business model results in a land-price trap. Development is normally close to the margin of viability, and competition is happening at the wrong stage, within the volatile land market rather than in the housing market’.
The Council’s research concludes that fundamental change is required to move to a permanently affordable, stable and more sustainable system of housing. ‘Direct public-policy influence is needed now to make affordable development happen. The Council is setting out the actions necessary to bridge the key gaps in supply and affordability’ Dr O’Connell said.
The NESC report outlines actions under three headings. First, institutional change is required to ensure key public actors have a strong developmental mandate and the executive capacity to drive sustainable urban development, including:
- Establish the Land Development Agency (LDA) on a statutory footing as a matter of urgency with an enhanced mandate, including to provide land for social housing, and equip it with a planning role and the tools to assemble land and engage in direct development (including compulsory land acquisition/CPO, master-planning, and land value capture); and
- Create specialist teams, potentially within the LDA, to help local authorities undertake necessary, complex tasks around procurement, site-unblocking, CPO and master-planning.
Second, more impactful application of existing measures can spur more affordable development in the near-term, including:
- Establish a national cost rental programme at scale, with access to land on favourable terms, low cost finance, and with conditions to ensure that homes remain subject to public ownership the rents are affordable;
- Tailor the application of Part V to make it more effective by increasing the proportion which must be ‘affordable’ but tailored on a ‘county-by-county’ basis following housing-need/demand analysis, allowing 5 or 10 per cent increments, applying it to all housing units, and provide policy incentives for cooperation; and
- Introduce separate Serviced Sites Fund/LIHAF/URDF funding streams focused on high impact, in terms of the number of affordable houses provided and clear link to compact growth.
Thirdly, new solutions or ways of working around long-standing challenges must be devised, including:
- Tackle the persistent ‘on-off balance sheet’ conundrum by exploring with the LDA, AHBs and others the potential of a new affordable rental scheme that combines State and capital market investment, which can transition from being initially on balance sheet, to being off it;
- Examine how the State could be supported to acquire land—both zoned and undeveloped and not currently zoned residential—in designated development areas at existing use value plus some premium as per the Kenny Report and the All-Party Oireachtas Committee;
- Examine the use of Land Value Capture instruments, tailored to specific sites, that could be used by the LDA and other institutions; and
- Identify and systematically address any barriers (e.g. land value register) to the development and introduction of a Site Value Tax.
Further, the report recommends a national programme of flagship projects as an important method of demonstrating how a system-wide approach to change can deliver tangible results, and be a catalyst for innovation in the vital construction sector. (The full set of Council recommendations can be found in the report at www.nesc.ie)
Dr O’Connell said that prior to the Covid-19 crisis Ireland faced significant challenges in the housing sector including insufficient housing output, acute affordability pressures in the private rental sector and high unmet need for social housing. ‘The Council believes that the response to the pandemic, the Programme for Government, and the upcoming review of the National Development Plan provide a new context in which to consider urban development, land management, and housing supply and affordability’, he said.