Mr. Patrick Sweetman:

I thank the Chairman, who got my disclaimer in before me. We are both here in a personal capacity because the Law Society is not a policy-making forum and does not create policies. Any views we express are very much our own views. I will address the question of compulsory acquisition, which the committee has had some debate about earlier on. The committee will be glad to hear I will not give it a dissertation on the law on compulsory acquisition because we would all be asleep in minutes. However, in the context of the previous discussion, I should preface my remarks by saying that I agree with the conclusions earlier on. There is no bar on using compulsory acquisition to acquire land for housing. The question, and my approach when looking at this issue, is whether it is a sensible approach. Is it value for money? Is it a cost-effective way of proceeding? I come to the conclusion that it is not. One can use the process which is a lengthy one. Mr. Honohan said earlier on that one could make the order now and only have to pay for it in two years' time. That is true. However, one pays interest in the meantime and at quite a high rate. Therefore, from an economic point of view, it is not something that is very attractive.

The process can be lengthy and open to challenge. It involves two teams of experts that will argue for the value of land on the basis of its current open market value. One then has an arbitrator who has to make that decision on foot of legislation that goes back almost 100 years. The process tends to lead to a higher open market value than one might otherwise think, if one were negotiating on the open market. In fact, I will touch on the Kenny report because it was suggested I might do so. It recognises, if one looks at the compulsory purchase order, CPO, procedures, that the outcomes are likely to lead to higher values than if one were to purchase property on the open market. On the basis that it is lengthy, technical, one has all the professional fees and the outcome will probably be greater than what one would get if one went to buy property privately, it does not seem a very attractive option. I will come back to that.

If one looks at the Kenny report, it actually dates back to 1974. The terms of reference date to 1971 and the report was issued in 1974. One might say it is a little out of date at this stage. If people want me to dwell on it, I am happy to do so in questions. However, I do not propose to dwell on it in this opening submission. There are many misconceptions around the Kenny report. The thinking around the Kenny report is that one could use a CPO to acquire development land at its current use value and that the windfall uplift that would fall to a landowner whose land happened to be zoned would, therefore, go to the benefit of the State rather than the individual. In fact, that is not what the Kenny report says at all. What the Kenny report concentrates on is what it calls betterment, that is, if the local authority provides services and those services enhance the value of the land, then in that situation the land owner should not get the benefit of it but that benefit should, through a fairly complicated procedure involving a High Court judge, go to the public good.

Interestingly, the Kenny report actually looked at the question of whether zoning should be a ground for compensation and whether one should discard or discount zoning and the windfall it might give and said one could not do that on constitutional grounds.

Of course the committee that produced the Kenny report was chaired by Mr. Justice Kenny, an eminent judge who would have been very up on constitutional issues.

Why do people talk about compulsory purchase orders in the context of housing and homelessness? A fairly well-established myth or principle in political terms is that developers hoard land and in this way they inflate the value of development land because they do not release it to the market. I am not even going to touch on the truth or otherwise of that because I believe it is irrelevant now. That is because NAMA has all of the land that might have been with developers in the past. Even to the extent that it might have been true in the past, I am compelled to argue that it is not true now. Therefore, the argument about CPOs in that context is really not relevant.

Let us consider the current situation. There is a good deal of residential zoned land. Some developers still hold some of it, obviously. Those financial institutions which were not participating institutions under the NAMA Act still hold some of it, although a good deal of that land has been sold off at this stage. NAMA still retains a fair amount of it. Private equity funds - they are referred to around here as vulture funds, but I use the term private equity funds - have acquired quite a lot of it. However, they are all willing sellers. All of those backers of people are willing sellers. The idea that some authority would go along and decide to take the land of these groups by compulsory purchase is difficult to credit. The only rational explanation for doing that would be on the basis that the authority would get it cheaper. If some authority asked these funds to sell land, they would say "Yes". Normally, private equity funds want to turn profit on the assets they acquire within a three-year to five-year timescale. Therefore, if a fund is available to acquire land, there should be no difficulty in simply buying it through negotiation.

The CPO procedure is normally more appropriate where there is a specific piece of land of strategic relevance. The example I offer relates to motorways. In such cases the developers have to buy the land. They cannot have someone who holds a particular piece of land and who would stop the entire development going ahead because they hold a critical piece. In those situations, developers use a CPO to acquire the land.

CPOs can have relevance in the context of local authorities and acquiring strategic land as well, but they are going to pay for it. The reality is that if a local authority uses a CPO, it will be paying somewhere ahead of the current market value of that land. There is a danger for a local authority if it were to announce that it was looking at using the CPO process to acquire lands. What that would actually do, perversely, is stop or constrain the market in development land. This is because the relevant people may decide to hold on until they see the CPO process in case they get a better price. That would actually push any trading in development land out for a couple of years. Therefore, I would be wary about taking that route.

However, I believe certain things can be done and if the committee will indulge me I will go through some options. There are two alternatives. Either the State, through the local authorities or otherwise, provides all of housing or there is a mix between the State and private developers providing solutions. In the private sector, the funding is actually in place. Committee members will have seen newspaper reports of hundreds of millions being raised in the London market and elsewhere for the purposes of providing residential property in Ireland. Far more could be raised if people were persuaded that it was a good investment. What is not here at the moment is the market. The market is not here at the moment for a number of reasons. It is not here because, to a large extent, it is not feasible to build at the moment for many developers. It is not feasible for them to build because people cannot afford to buy. People cannot afford to buy because first, the price is too high, second, because of Central Bank restrictions and, third, they simply do not have the wherewithal to put together deposits even outside of those restrictions.

In fact, a site fine, which is relevant in the context of a CPO, is not the determining factor in the price, because a site fine will be determined by what a given property trades at. If I buy a piece of development land, I will look at what it would cost to build a house on it, the costs of putting the infrastructure in place and the cost of development contributions. Then, I will price what I am prepared to pay for the piece of land on the basis of all of that when I calculate what it is that I would be able to sell the land for. The way to free up the market is to make it profitable for the private sector to provide the housing.

This can be done in several ways. I understand the Central Bank issue and the separation of powers and if it is felt inviolate that the Oireachtas cannot use the Central Bank, then it needs to find other ways of dealing with it. Home ownership is far too serious a social issue for the country to allow it be the hostage to fiscal responsibility. The Central Bank has other tools as well. There should be a national discussion on home ownership. It is the first and most important determining factor in breaking down existing class structures - it is the way for families to dramatically improve their financial circumstances. It allows them to support children in third level education and to look after themselves for nursing home care or somewhere to live when they retire. Ultimately, if people cannot buy houses and all houses are rented or are local authority housing, there is a huge pension time bomb. This is never recognised in the debates on economic and fiscal responsibility: if people do not buy their houses, those who rent all their lives will have to be looked after in their old age and their pensions will have to facilitate their having a house. Whereas if somebody buys a house now, or under the many local authority purchase schemes, such as the recently announced Dublin City Council tenant purchase scheme where people own the houses, while they will need a pension in old age, they will not need a house as well. That is never factored into this question. We should have a national discussion on home ownership, as a very important policy and one which, if it is encouraged through the proper Government incentives, would be transformative. It would also have the knock-on effect that in times of financial difficulty, there would be a new source of taxation because people who have homes will have an asset that can be taxed.