Residential Players Call For State To Provide Capital And Planning Lifeline
The Irish government needs to step in to provide more capital incentives and must act to prevent proposed housing schemes becoming mired in objections and judicial reviews, or money for new development will look elsewhere, residential players say.
The ease with which objectors can delay projects and add substantial court costs to development budgets compares unfavourably with many comparable European markets and is deterring international investors, an executive from U.S.-headquartered investment giant Hines and other speakers said at Bisnow’s Irish Residential Conference at Aviva Stadium in Dublin on 9 November.
Yet all said speeding up the delivery of new homes had never been more important and required serious political will to help the industry deliver on ambitious targets.
O’Flynn Group Chairman and CEO Michael O'Flynn said that the supply situation meant the industry was “a lot worse off” than in the past and pointed to a residential shortfall that could total as many as 300,000 units.
“We stopped building houses for seven or eight years after the financial crisis. That's why we're in this mess,” he said. “No one wants to acknowledge that it’s a crisis. We're probably doing at most 60% of what we should. Politically, it’s frustrating. Running at 60% of potential would be considered a failure in any other scenario.”
He said that the Irish government needed to recognise the scale of the issue, and although he described the recent narrative as improved, he said that he feared investors from Europe would not view Ireland favourably because of the planning challenges.
“We have to face up to the fact we have a serious problem,” O'Flynn said. “We need to strategically plan for what's needed, but we're dezoning land [from residential] where housing is needed. [The state and the private sector] need to work together, open book, with transparency. Let's get on with how we deal with it. The cost base is one of the big issues, and we'd always be happy to do open book.”
Daft.ie report author and academic Ronan Lyons said that while “conditions on the ground are worse and the backlog is bigger,” policy changes that are producing circa 30,000 units annually instead of 15,000 were to be welcomed.
“The debate over whether there is too little or too much housing has gone,” he said. “Population growth and net migration have consistently surprised on the upside, and even now, projections into 2040s are very conservative. As important as population growth, household size is a major factor. We would need 30,000 extra units annually just for [more people seeking their own homes].”
He said that over the next 25 years, Ireland would need to add 50,000 to 70,000 new homes per year and insisted that “acknowledging that is the first step.” He added that the onus was on the state to understand housebuilding costs and connect viability and the provision of social housing.
Hines Ireland Managing Director Ian Lydon said that although the company had moved on after all legal objections to the construction of more than 1,000 homes on two neighbouring brownfield sites, Bailey Gibson and Player Wills, in south Dublin had been dropped on 8 November, investment committees for international investors were looking at planning disputes. Hines’ board saw Dublin as a very difficult place to invest, he warned.
“The result we got this week has been a big boost for the company. When you do progress with a good-quality product, then if you can keep at it, you can get it through,” he said. “But the national planning framework and targets need to be reset. Central government needs to put a body in place to look at what local authorities are doing and how they are interpreting the rules.”
Turner & Townsend Director Bryn Griffiths said the government also needed to look at the type of residential supply that was being encouraged to market and said that he was an advocate of compact development for urban areas.
“Typically there are less planning issues, less capital is required, and they can be self-financed, with the sale of some blocks funding future builds,” he said, also calling for more incentives for adaptive reuse, such as fast-tracking office-to-residential.
“There’s definitely something that can be done there,” he said. “We are in the right place in terms of high standards. That's not the problem. But we do have high costs in terms of construction and also incredible cost inflation. We need to remember that a full range of accommodation is required for different needs, not just three-bed, semidetached houses and apartments, but PBSA, co-living, smaller starter homes, then later living.”
Grayling Properties Director and co-founder Peter Horgan also brought up the potential opportunities for repositioning offices into housing.
“If we can, then that’s great for tenants and also for sustainability. If it happens, we'd be very excited, but there needs to be a lot more alignment with regulations and planning laws, especially for historic buildings,” he said of more pragmatic approaches to what standard older stock and historic buildings could realistically be brought up to.
“We should have a whole separate set of regulations for office-to-residential conversions,” he said.
However, Horgan said things were “going the other way in planning in terms of regulations,” and he called for “top-down” alignment on policy and supply requirements.
Looking at some of the help that the government can provide, Land Development Agency Head of Property Phelim O'Neill pointed to the activation of apartments in city centre core areas, with a residential scheme in Cork the first in over 15 years to receive assent.
“We have this affordability and viability issue, and there are a number of models, such as forward-purchase and -funding model, with a pilot at Hacketstown, Skerries, County Dublin,” he said. “In that scenario, we are using the developer skill set to give land with planning, negating that risk. It’s a form of private-public partnership, for want of a better description.”
O'Neill said previous activations of larger-scale construction of residential schemes were typically completed when a lot of capital was available.
“I think it needs to be an action from the state,” he said. “Ultimately, right now, that’s where helicopter capital is coming from.”