Oireachtas Joint and Select Committees
Tuesday, 15 October 2019
Joint Oireachtas Committee on Housing, Planning and Local Government
General Scheme of the Land Development Agency Bill 2019: Discussion (Resumed)
Noel Rock (Dublin North West, Fine Gael)
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At the request of the broadcasting and recording services, members and visitors in the Public Gallery are requested to ensure that their mobile phones are turned off completely or switched to airplane, safe, or flight mode, depending on the device, for the duration of the meeting. It is not sufficient to just switch phones to silent mode as this will maintain the level of interference with the broadcasting system. We will resume pre-legislative scrutiny of the general scheme of the Land Development Agency Bill.
I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
I welcome Mr. Tom Dunne, Dublin Institute of Technology; Ms Orla Hegarty, assistant professor, UCD; Professor Rob Kitchin, Maynooth University; Ms Karen Murphy, Irish Council for Social Housing, ICSH; and Mr John O'Connor, Mr. Jim Baneham and Ms Catriona Lawlor of the Housing Agency. I call Mr. Dunne to make his opening statement.
Mr. Tom Dunne:
I submitted an opening statement to the committee which can be taken as read. I am grateful for the opportunity to appear before the joint committee in respect of this Bill, which I believe is very important. I agree that an agency such as that envisaged by the Bill should be established as one of the tools available to the State to address the complex necessities of creating a sustainable housing sector.
Development land does not just exist. Rather it is created by putting together parcels of land, legal rights, technology in the form of infrastructure and planning rights to produce a developable site on which accommodation can be provided for housing and other purposes. This process of site creation usually takes place in response to market signals such as high prices, which provide the incentive to people to produce the sites demanded in an active property market. However, in housing as with all forms of property, the process whereby this happens is complex. Importantly, each parcel of land is heterogeneous and will have a singular set of circumstances to be addressed to create a developable site. Putting together complexity with uniqueness results in the need for bespoke processes, which is one reason property development takes time.
If one thinks of a property development site as a product used by developers, a useful insight can be grasped. It is only one of the inputs required to produce accommodation, the others being materials and labour. With such an insight, it can be appreciated that someone or some entity must perform the function of pulling the inputs together. These inputs, the land, accessible infrastructure, permissions and the finance needed to fund the creation of a developable site must be drawn together in the right way so that development on the site will be optimum.
The State in the normal course of its operations will use land and, at times, an individual parcel of land may cease to be used for the original function. Such land surplus to previous requirements should be put to new uses according to the priorities of the time and as efficiently and effectively as possible. For instance, right now, housing is a priority and any surplus land could be made available to provide for housing. In the past, for instance, the acquisition of industrial land was a priority and IDA Ireland had some functions in this area. One way of doing this is simply to sell the land on the market and allow market forces to work to produce housing. However, the property market, more than other markets, is not sufficiently effective to enable this simple strategy to work as well as it might if the market was efficient. Hence the requirement for some agency to act as the conductor of the process whereby any particular site will be provided to property developers in a form that will allow them to do what they do best, namely, develop property. Often that conductor will be a developer putting together a site as part of their pipeline of projects to keep them in business. Given the finance costs and risks, speculators perform this function but may fail for some time to assemble the right blend of inputs or be thwarted for an uncertain period by something outside their immediate control.
The State will always need development sites to produce social and, depending on market conditions, affordable housing. Acquiring sites in competition with more agile and well resourced market participants, however, will often pose a problem and can result in the state increasing development land prices if it competes in a vibrant market. Taking a longer through the cycles approach, and in the interests of the common good, it can be a properly empowered agency of the State that is best positioned to draw the inputs together to produce development sites, particularly in the case of surplus State land. The creation of an agency such as the one envisaged in this Bill, therefore, will provide the state with one of the tools it needs to facilitate a properly functioning housing sector and I support the creation of this agency.
Ms Orla Hegarty:
I thank the committee for the opportunity to attend this session as part of scrutiny of the Land Development Agency Bill. I will outline the policy context, then expand on specific objectives of the Bill and whether they are met. There is little detail in the heads of Bill and some of my commentary is based on statements made in this House, in the media and at public events.
The fundamental issues are housing affordability, sustainable growth and a resilient construction industry. All are critical to competitiveness and economic stability. Missteps come at high environmental, social and economic costs. All three are areas of significant past failures where Government policy calls for reform.
In 2016, the National Competitiveness Council pointed out that a well-functioning housing and construction sector is critical to the overall health of society and the economy. It warned: "The current escalation in residential property costs represents perhaps the greatest threat to Ireland’s competitiveness."
Since then the median price of a new-build home nationally has increased from under €250,000 to €355,000, or by 44%. The prohibitive cost of housing is a barrier to urban growth, which is a priority of Project Ireland 2040. Furthermore, if our cities are not affordable to families, the direct result is sprawl, which undermines the climate action plan, reduces productivity and limits opportunities for employment and education.
Last year, the National Economic and Social Council, NESC, identified land management as key but, more critically, the council pointed out that it is not only about land; it is about fixing Ireland's broken system. Land is one lever for change, but the housing system is broken.
Last week, the Economic and Social Research Institute, ESRI, informed the committee that rising house prices can be explained by disposable income, demographics, jobs being created and the cost of finance. However, unaffordable prices are also a factor of limited capacity, little competition and high barriers to entering the sector.
Housing supply tied to a speculative market in a boom-bust cycle results in overpriced housing and uncertain supply. Solving this problem requires specific action to support capacity building in the sector, to open markets to competition, to raise standards, and to support employment and training.
In this context, the LDA proposal raises a number of specific issues. On its remit, the proposed powers are wide ranging and removed from direct Government controls. It is unclear whether the LDA is bound by current and future Government policy.
On governance, commercial property development and construction involve large sums over long periods, which expose the State to significant financial and political risks. It is critical to have high levels of specific expertise, robust governance, transparency, external oversight and means of intervention.
Freedom of information is essential for ensuring public confidence, transparency and accountability. Given that lobbying legislation has specific provisions for planning because of the risks of corruption and the significant sums in land transactions and development contracts, the activities of all personnel of the LDA should be included in the statutory lobbying register.
The Bill proposes a new land registry. Setting up this land registry in another State agency with relevant expertise on a statutory basis would reduce administration, mitigate the potential for conflict of interests, and ensure alignment with best practice.
On spatial planning, the Bill includes lands in urban centres with a population in excess of 10,000. This extends to 41 towns in regional centres such as Cavan, Tullamore and Killarney, and in commuter belts such as Ashbourne, Greystones, Cobh and Skerries. Twenty seven of these 41 towns are in Leinster, with nine in Munster, three in Connacht and three in the three Ulster counties. This arbitrary classification has implications for transport, infrastructure and regional development.
I will elaborate on a number of issues, specifically those not mentioned by other witnesses. On construction reform, the Construction 2020 plan reflects on the "speculative greed, short-term thinking, poor planning and low standards" of the boom that resulted in "unmanageable mortgages, debt overhang, negative equity ... and sub-standard apartments". It recognises the "need to develop an overall strategic approach to housing supply".
This proposal for 150,000 homes is a planned investment of more than €50 billion in the construction industry. It has the potential to be transformative. However, indications are that there is no strategy for construction, other than to outsource development to large entities, as a means to lever social and discounted housing in a package of 60%, 30% and 10%.
An approach that outsources control of price, delivery speed, housing mix, quality and profit margin is high risk and it comes at a premium, as has been seen in other capital projects. Large entities that control local markets can also lead to high prices, low quality, and suboptimal conditions for construction subcontractors and suppliers.
In the current conditions, it is not sites that are unviable; traditional speculative development is unviable. This is what is broken, and it is potentially the Achilles heel of the LDA proposition because the objective of optimal use on a commercial basis for individual sites is the business of traditional speculative development.
It seeks to extract the maximum value from land through high market prices and minimal standards and is very vulnerable to market fluctuations. This is unlikely to lever reform or bring stability in output and price. Relying on speculative markets for delivery is also very uncertain. The Rebuilding Ireland target of 125,000 new homes in five years lacked the levers to ensure delivery and in the first three years only 47,000 new homes have been built, which is 38% of the target.
With regard to construction costs, where land is available and actual construction is derisked from speculative markets and high cost finance, it is affordable. This is confirmed by the figures of the Department of Housing, Planning and Local Government for competitively tendered social housing. In most urban centres production costs of €220,000 are achievable.
Solutions to the supply and affordability challenge lie in design, procurement and finance. I do not intend to comment on the issue of finance other than to say evidently €1.25 billion will not build 150,000 homes; it will build fewer than 5,000. However, housing, unlike other capital projects, can be built incrementally and seed funding rolled over by phasing and strategic procurement. State-led master planning and infrastructure can de-risk development, mitigate delays and reduce costs and finance for SME developers. Unbundling, which means making small lots for SME design teams and builders, can open new markets, raise standards, drive innovation and create more competition. Public contracts in small lots for SME builders can allow them to recapitalise, re-equip and undertake other private developments, which builds capacity in the sector. Mass procurement of building components, standardising details and investment in research can lead to efficiencies, productivity and skills. Affordable housing is defined in the Planning and Development Act. It is based on production costs, not on a discount on market value. These are more resilient and recession proofed strategies that accord with best practice in procurement, value for money and faster delivery. These market reforms and efficiencies have the potential to deliver truly affordability housing without State subsidies or reduced quality. The Land Development Agency's proposition does not respond to this opportunity. In fact, the recent redefinition of affordable housing as a discount, or subsidy, on market prices is regressive because it will profit developers, rather than improve access to housing for those on middle incomes, or incentivise efficiency in the sector.
At the rate at which we are building homes, every new home needs to be future-proofed for 100 years. Only 1% of housing stock is being replaced annually. A short term objective of commercial returns is wholly inappropriate in assessing the long-term social, environmental and economic needs and life cycle costs of new housing communities and their infrastructure needs. A €50 billion investment in housing has the potential to lever many other policy objectives, including reform of the construction sector, climate adaptation, architecture and placemaking, training and skills, infrastructure, transportation and spatial planning. However, a requirement to obtain a financial return for the State, as required by the LDA, is not compatible with affordability.
What is important is the long-term viability of cities, not the short-term opportunity of sites. Every euro of value extracted from public lands is not free; it is debt for future households. Every plot given away is a lost opportunity to provide for permanent affordability. Every deal that stalls due to unforeseeable market fluctuations is a family without housing. Ireland has the advantage of having a lot of land in public ownership ,but as the National Economic and Social Council stated, affordability should be an explicit objective. Supply of housing is not in itself a reliable or sustainable means of making housing affordable. Ireland must re-engineer affordability into the supply of housing.
Professor Rob Kitchin:
I thank the joint committee for giving me the opportunity to present to it. I welcome the idea of managing in a co-ordinated way public land for the benefit of the public. It is vital to deliver the national planning framework and address some of the housing supply issues. However, the Bill seems to be premised on supporting the use of public land in conjunction with private actors on a commercial basis for profit. There is an underlying ethos of marketisation and the privatisation of public assets and using their value as a means for the private sector to deliver public housing and other building and infrastructural projects, as opposed to the public sector delivering them.
As currently formulated, the heads of the Bill are thin on specifics regarding the LDA's role and operation. It would seem more appropriate to call it the "Land Development Company" as opposed to the "Land Development Agency". To my mind, an agency is more of a public actor and facilitator and more about policy formulation, oversight, regulation and so on. The LDA, however, is very much set around a commercial basis and is effectively being set up as a semi-State company. The word "agency" seems a misnomer.
It is not clear where the liability falls if the LDA's schemes or groups fail. This matter does not seem to be covered in the heads of the Bill. If there is a large State investment in projects and those projects fail for whatever reason, I am unclear as to where the liabilities will lie.
It is also not clear how the LDA would work in practice with local authorities and other public landholders or which entity has priority or control of decision making. If land is held by a local authority, semi-State agency or State agency and the LDA is interested in using it as part of a development, who has power and control and who gets to say that the LDA will use that land or can a public body decide not to co-operate with the LDA? Since the power relationship is not set out, I am unsure as to how the LDA will perform its work in practice.
Most of my comments concern governance, oversight and open government issues. For example, there is no detail of how the board of the LDA should be appointed other than it should be appointed by the Minister. If this is a public agency, then it should be appointed through the State boards process and appointees should have skill sets appropriate to the work of the LDA. Ideally, there should be representatives from various sectors, including the public sector, industry, civil society and academia. It should not be loaded with developer interests.
The LDA will be exempt from the Freedom of Information Act. This seems problematic, given that the LDA will be given up to €1.25 billion. The public should have the right to know what work has been undertaken, supposedly for their benefit. The LDA should be available to answer FOI requests, with specific queries that have commercial sensitivity being assessed on a case-by-case basis as to whether information can be made available rather than a blanket exemption. A large amount of public funding and potentially a large level of public liabilities are involved.
I am not entirely certain who owns the LDA. For example, will 100% of its shares be held by the Government or will other interests be able to own shares? Under heads 24 and 25, it is certainly the case that the Government would be able to sell shares. This raises questions around a public agency that has some level of private ownership, given issues of a conflict of interest with other entities and of providing a private entity with access to public information, which would appear to give the entity a competitive advantage. Including a provision to privatise a public agency raises issues. In that context, to what extent would there be public accountability?
Head 36 concerns the review of the LDA's achievements. It is vague and essentially just states that the Minister will assess progress. Perhaps it would be more suitable to stipulate that an appropriate set of expectations, targets or benchmarks would be set by the Minister or the Department of Public Expenditure and Reform that the performance of the LDA would be assessed against over certain periods.
It is difficult to judge performance or hold a body accountable if there is no sense of what it is seeking to achieve and what satisfactory or successful outcomes would look like.
On Head 32, the national public lands register, in my view, given the demand for open government and the Government's commitment to it, the public lands register should be open data and it should be made available through data.gov.iein suitable formats and also as data layers in myplan.ie. This should be written into the heads of the Bill rather than hope it occurs voluntarily. I do not accept there is commercial sensitivity around identifying the location of public land, which agency owns or its current status. In my view, this information should already be public knowledge, as it is in other countries.
Do we really want to have in place an agency which would be allocated up to €1.25 billion of public money, in which there is no openness and transparency in terms of appointment of the board and the assets it manages, which is exempt from freedom of information and public scrutiny, which can be semi-privatised or fully privatised and which has no defined method of expectations, targets or benchmarks? In my view, the answer is "No" and I would encourage some review of the governance mechanisms around the new entity.
Noel Rock (Dublin North West, Fine Gael)
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I thank Professor Kitchin for his opening statement and I now invite Dr. Donal McManus to make his opening statement.
Dr. Donal McManus:
I thank the Chairman and the committee for inviting the Irish Council for Social Housing, ICSH, to engage with it today on the significant issue of the delivery of homes across Ireland. I am accompanied by Ms Karen Murphy, ICSH director of policy. The focus of our opening statement is the approved housing body, AHB, sector and land supply.
The ICSH is the national federation of housing associations with more than 260 AHB member organisations that collectively own and manage over 35,000 homes at affordable rents for families, older people, people with disabilities, homeless and single people. The AHB sector has had a commitment to developing and managing social housing over the long-term and addressing the changing needs of the population.
When the Land Development Agency, LDA, was initially announced it was very much welcomed by the sector and the ICSH. For some time, the ICSH had advocated that there was an urgent need for the strategic management of State lands with an appropriate tenure mix. In our view, when it comes to the development of valuable State assets, the public interest is best served by ensuring that a significant proportion of social and affordable housing is built on State lands. Housing associations need State lands in addition to private lands to deliver social rented homes affordably. It is a simple equation - the low cost of land should feed into lower costs to deliver social and affordable homes for the taxpayer.
We welcome the proactive role being adopted here by the State in the management of land. In particular, the ability to drive strategic land assembly is a strong power which will be deployed for the public good. Any interventions which drive down the cost of land for housing are to be welcomed and supported. In our view, the current 10% social housing mandated on land development agency sites as a minimum is too low and just matches the Part V requirements on private sites. The LDA is currently active in delivering more than 3,000 homes on State lands. We would hope that within the 3,000 homes currently being delivered the social element is significantly higher than this and we acknowledge that the LDA stated view is that 10% is a minimum.
In regard to the proposed legislation, we would sound a note of caution in regard to the commercial remit of the proposed company. While there are significant differences between the current proposal and the NAMA legislation, in our view the commercial remit of NAMA meant that the social dividend came at a commercial price. We would hope that the LDA will enable the provision of social and affordable housing at a lower cost overall to the Exchequer.
On Head 8, in regard to the "objects", we would like to see the delivery of social housing, affordable rental housing and affordable purchase as part of its remit. The LDA potentially has a significant role to play in the expansion of a cost rental sector in Ireland and explicit objectives to achieve this should be included. We welcome the register and would recommend a review of the previous housing land map to ensure all State and semi-State mapped land is up-to-date and accounted for.
On Head 9, we would like to see an explicit relationship between the LDA, AHBs and local authorities for the provision of housing and related amenities.
The LDA should have the power to enter into agreements with local authorities and AHBs, which will be regulated by the State under the new Housing (Regulation of Approved Housing Bodies) Bill 2019. Compulsory purchase order, CPO, powers would also be a necessary addition to their functions.
Regarding the potential management of housing by the LDA, in our view that is not that body's central objective and should be carried out by local authorities and AHBs. If the LDA becomes a large-scale landlord, it will be distracted from its central functions and objectives. A question would also arise concerning the LDA then coming under the regulation of the RTB as a rental housing landlord.
The drafting of the legislation should explicitly provide for the use of the Public Appointments Service, PAS, in the recruitment of board members because transparency on governance arrangements is crucial. In addition, if we look at the nation’s changing demographics, we know that a much greater percentage of new housing must come in the form of lifetime adaptable housing. That will enable a growing number of older households to age in place. We suggest that, at a policy level, the new LDA should be guided to deliver within its plans a percentage of homes for older people, as well as accessible homes. That will assist the Government in meeting its housing policy objectives. The LDA should also have powers to set standards to support and achieve Government objectives in areas such as energy efficiency and zero carbon and lifetime housing, to name just two examples.
To conclude, and linking the future outputs of AHBs to land, last year the sector provided 3,219 social homes. That was some 38% of the national total social housing output and was the highest ever recorded by this sector. More than 4,000 households were taken off the social housing waiting list. As a sector, there are challenges to continued delivery at a high level and the availability of sites which are zoned, serviced and have planning permission will greatly assist the AHB sector in scaling up its future delivery of homes. I welcome any questions the committee members may have.
Noel Rock (Dublin North West, Fine Gael)
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I thank Dr. McManus. I call Mr. John O'Connor to make his opening statement.
Noel Rock (Dublin North West, Fine Gael)
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It certainly is. It cannot go on the record, as discussed earlier, but it can be uploaded to the website and will, therefore, be part of the public record. Is that acceptable?
Noel Rock (Dublin North West, Fine Gael)
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Of course, that is fine.
Mr. John O'Connor:
The three main areas I would like to highlight are the use of public land, housing supply and affordability and climate change. Turning first to the use of public lands, most of the objectives and functions of the LDA relate to the use of public lands. One area the committee might consider is the level of long-term control of public lands and the level of ownership that should be kept by the State and local authorities. I refer to retaining ownership, in some cases, and leasing that land so that control is retained. The balance of control of lands that should be retained by State is open to debate.
The Housing Agency will initially be transferring three sites in Skerries, Balbriggan and Naas to the LDA. To date, the board of the Housing Agency has applied the principle when transferring lands that such lands have to be used for public or community purposes. Transfers already undertaken to local authorities or AHBs have been for social and affordable social housing, schools or community use. The Housing Agency desires that lands in its ownership which are transferred to the LDA would, in the main, remain in public control in the long term. It is also important that the LDA is given support when lands are transferred to it from Government agencies and organisations.
The first big issue is how should we use public lands, what long-term control should we have in place and what is appropriate.
The second issue is housing supply and affordability. One of the main objectives is for the LDA to deliver housing on scale to help address the housing crisis, of which a key element is affordability. We want housing that is affordable to buy or rent in the main in terms of what is being delivered on sites under the control of the LDA. We need a mixture of tenures and income groups to build good communities.
Semi-public uses would entail social housing use, cost-affordable rental and affordable purchase housing. There has been much debate about rental versus ownership, but it is a question of getting the balance right. There is a need for both in our housing system.
The advantages of providing affordable rental housing are that the land is kept in public control and investment can be put in place to fund developments, which ensures certainty of delivery. Building in scale also helps to reduce market rents. Home ownership advantages are that it gives people a clear stake and equity in their properties and provides security, particularly compared with the private rental sector. People will also have a long-term asset as their mortgages are repaid. It is a question of getting the balance between rental and home ownership right.
The third issue I wish to highlight is climate change. It is critical that the LDA's developments be sustainable and that climate change be taken into account therein. None of us appreciates the scale of the climate change problems we are facing. In that context, the agency needs to consider how its developments will work in ten, 30 or 60 years. Perhaps the approach should be to ask how a development undertaken today will be perceived in 30 years. A development should not be considered from today's perspective.
We must ensure that we comply with the national planning framework, particularly as regards compact growth in our towns and cities where the LDA is focused. We must ensure an adequate density, particularly density of population, to support public transport and public infrastructure and reduce car usage. It is important that sustainability be a key aspect of the developments undertaken by the LDA. The agency should be a leader in this regard, particularly compared with the private sector.
These are the three key issues: how to use the public lands and what level of long-term control should we keep; affordability and how to focus on getting housing supply delivered; and how to take the climate change agenda into account in delivery. We are happy to answer members' questions.
Noel Rock (Dublin North West, Fine Gael)
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I thank Mr. O'Connor for being so considerate of the committee's time. His full submission, for which I thank him, will be available on the website. I will call members in the order in which they have indicated: Deputies Ó Broin, O'Brien and Casey.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank the witnesses for their submissions, which are helpful. I am a strong supporter of active land management and would like to see a strong, well-resourced public agency whose function is, in the first instance, to manage public lands strategically. However, I am in an increasingly uncomfortable dilemma, in that the more I read the heads of the Bill and listen to various views, the more I see that is not what we will get.
All the other stuff in this legislation undermines the part we all would like to see. I am concerned that the proposed land management functions of the agency will be very weak, particularly with the absence of compulsory purchase order, CPO, powers. While the Department has indicated that there will be amendments on Committee or Report Stage, it says they will provide for very limited CPOs for small parcels of adjoining land rather than something more significant.
My main concern, and it speaks to some of the comments today, is the commercial residential development element of this proposition. My question for everybody, and particularly for Mr. O'Connor, is: do we need to combine those two things? Would it not be better to have an active land management agency whose job is to manage public land strategically and where that land is to be used for certain purposes it would be handed over to, or the agency would engage with, local authorities, approved housing bodies or the IDA to develop it? The LDA would be about land, not residential development. It is not an exaggeration to say that if this legislation ends up in the current format, we are potentially facing a National Asset Management Agency, NAMA, mark two. When I said that in the committee two weeks ago I thought Mr. John Coleman would recoil from it, but he was kind of nodding at that point - one can look at the committee meeting recording to see it - that it is a different vehicle but is heading in that direction.
I do not wish to pick on Mr. O'Connor but the other witnesses have been very clear and I want to hear a little more about the Housing Agency's view. I know Mr. O'Connor is on the board and that puts him in a difficult position but his job is also to provide advice to the Government on housing policy. I wish to tease that out. Other witnesses should feel free to intervene but they answered many of my questions is their opening statements. First, at a time when we desperately need a large volume of social and affordable housing, and Mr. O'Connor said at the agency's annual conference last year that he did not think the political system fully understood the scale of affordable cost rental we need, is it correct to limit the LDA to a 40% quantum of social and affordable public housing or should it be bigger? Both the National Economic and Social Council, NESC, and the Economic and Social Research Institute, ESRI, said last week that it should be bigger but I wish to hear the Housing Agency's view on it.
Given that the bulk of the developments will be joint ventures where the LDA, as an independent commercial designated activities company, will be creating special purpose vehicles with other market actors, is that the best way to achieve the affordability that Mr. O'Connor wishes to see? Looking at the O'Devaney Gardens development, it is clear that the model, whatever one thinks about it in theory, will not deliver affordability. I am also concerned about, and the ICSH referred to this, the tension that inevitably will emerge between its social objectives, vague as they are in the legislation, and its commercial requirements. What happens when there are conflicts? Section 10 of the NAMA legislation said that NAMA not only had to have a commercial return, but the maximum commercial return. In this case it is different, but I am interested in Mr. O'Connor's view on how we can ensure that the need for social and affordable housing becomes the key driver. Social and affordable housing is not even referenced in the aims and objectives of the Bill. Should it be referenced in the aims and objectives?
I seek the views of all the witnesses on CPO powers. They are not provided for and, clearly, they must be. What type of CPO powers are needed?
I had not thought previously about the point made by Professor Kitchin. Where liabilities will fall if a project fails is an important point. Mr. Coleman was clear when he appeared before the committee that the LDA would be setting up special purpose vehicles. The possibility of those things ending up badly, for example, in a downturn or a hard Brexit, is not unreasonable. Do the witnesses have views on that and on how to protect ourselves from it?
To pick up on a point from Professor Kitchin, we asked the Department about the sale of shares. The officials were clear that shares could only be sold internally within the Government from one Minister to another and two Ministers would have sole ownership. Regardless of whether that is in the final Bill, Professor Kitchin highlighted the need for us to be careful that the final legislation does not allow the sale of those shares beyond the Government. That is what the current position is.
Some 60% of this housing is going to be sold at open market price. We will have the odd Shanganagh and get a little more here and there, but for this entity to remain off-balance sheet, it must be independent of the Government in its governance.
It must be a market operator and the lion's share of what it does must reflect market realities in terms of investment decisions and prices. The question I am putting to the witnesses is: "When did it become the responsibility of the State to provide open market priced housing?" All of our housing legislation is about meeting social or affordable housing need, yet the policy of the Department of Housing, Planning and Local Government is actually saying that 60% of these developments should be available for the open market. How did that change in policy happen because it almost seems to have happened at a quiet policy level in the Department and it is a fundamental shift on which I would like to know the witnesses' views?
I thank the Chair for his indulgence.
Pat Casey (Wicklow, Fianna Fail)
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I thank Deputy Ó Broin. I will start with the CEO of the Housing Agency, Mr. John O'Connor, as I think Deputy Ó Broin targeted a few questions at him. Will the other witnesses indicate if they wish to contribute? Witnesses are not obliged to come back in, should they not wish to do so. I am aware that we have five delegations.
Mr. John O'Connor:
Deputy Ó Broin's first question was on role of the Land Development Agency and whether it should be involved in active lands management or carrying out developments. Yes, there is an absolute need for active land management. I think it is important to have the Land Development Agency actually involved in development because many of the sites are very large, so one needs an organisation with the skills to deliver on the development of those large sites. I think the two roles can be combined. It is also important for the Land Development Agency to use approved housing bodies and local authorities, where appropriate. Let me explain what I mean by that. In some cases it might be best for the Land Development Agency to do the master planning of a site, put in the infrastructure on the site and then parcels of that land may be developed by the Land Development Agency, the local authority, approved housing bodies or others. The Land Development Agency working with the local authorities would do the master planning, fund infrastructure and ensure the development happens but it also needs to include the involvement of local authorities and approved housing bodies.
The view of the Housing Agency on the long-term ownerships of land, and how it has acted, is that it has normally tried to put land into the ownership of the local authority in that the local authority will be there in the long term, whereas the Housing Agency will not. In some cases the Housing Agency has transferred land to approved housing bodies.
There is a combination in terms of active land management and development. In terms of the development model, I think much needs to be driven directly by the Land Development Agency in terms of having the developments designed and constructed again in conjunction with the local authorities and Approved Housing Bodies. Where there is a form of joint venture, I take note of Deputy Ó Broin's point about the need to be careful in how things have worked out in other developments, but we must work out what is required and utilise the skills of the private sector to have the developments constructed and delivered quickly. The Land Development Agency, should work on its role as a developer.
The Deputy asked about the provision of social and affordable housing. Let me clarify the position. My understanding of the Government's decision was not necessarily related to the Land Development Agency. It was in respect of the sale of any lands by a State body; the State body must sell the land on the basis that 10% of the land will be used for social housing and 30% for affordable housing as a minimum. If it was within the control of the Housing Agency, the preference would be to specify much higher levels of social housing and affordable housing provision.
To take the land in Skerries, for example - it is one of the initial sites on which the Land Development Agency is working in consultation with the Housing Agency and Fingal County Council - the desire is for one third of the units to be social housing, one third to be affordable housing to rent and one third to be affordable housing for purchase. In the case of smaller sites, nearly 100% of the units might be public housing. It depends on the site involved. It is up to the Minister and the Oireachtas to decide how to write the affordability and provision of social housing in to the mandate of the Land Development Agency, but they must be written in in order that its obligation to deliver will be clear.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Does Mr. O'Connor mean that they should be written into the legislation?
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Does Mr. O'Connor believe it would be better to include it in the legislation?
Noel Rock (Dublin North West, Fine Gael)
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That is fair enough. Does Deputy Ó Broin want to direct questions towards anyone else specifically?
Ms Orla Hegarty:
I would like to respond to three points. The Deputy mentioned the tensions between social objectives and commercial requirements. I alluded to the broader cost of some of these developments. Mr. O'Connor has just mentioned the land in Skerries as an example. Skerries barely meets the requirement that a town have a population of 10,000 people to be eligible. Building 250 houses will raise the population by nearly 10%. If one looks at the site purely from a commercial perspective, there is obviously development potential. However, road and rail infrastructure to Skerries is already at capacity, while drainage and water supply services are under pressure. It is the antithesis of the national development plan to provide more housing in a commuter town 30 km from Dublin if there is not the capacity on public transport. If the objective of the LDA is achieving consolidated growth, many of the towns appear to be repeating some of the mistakes of the past. They are commuter towns, developed at low densities, within reach of Dublin. There are broader issues in respect of the tensions between policy objectives and the broader costs of extending schools, widening roads and increasing capacity on public transport. They may not be reflected on the balance sheet of the LDA, but they will be in the costs to other Government agencies.
My second point is related to open market rates. It does not come from the Bill but from other policy statements made in this area. My reading of the situation is that the figure is 90% for market rate housing, of which 30% will come at a discount on the market rate. The Planning and Development Act 2000 specifically refers to affordable housing being made available at the cost of providing it. The situation is the same in respect of Part V social housing. The redefining is a recent development which comes from the United Kingdom. Effectively, it is the case that the figure will be 90% for market rate housing, of which 30% of which will come at a discount on the market rate, with the cost, one presumes, being subsidised by the other units in some way.
My third point is that this will make everything vulnerable to market pressures. If 90% of the deal or joint venture is based on the sale price for the 90% of houses that will be sold at market rates, it is vulnerable to a market in which we have no control over the sale prices of houses. They are subject to many external and internal pressures. There could be an external economic shock that will knock 10% to 15% off the cost of housing. This is not within our control, yet a deal will be linked with anticipated market sale prices. That is where I see a high risk of failure. Even when deals are made - they are a long way out and will involve a lot of money - if there is a shock to market prices for any reason such as a rise in interest rates or some other factor, these large propositions will be at risk. It goes back to the question of future liabilities. There is provision for other financial instruments to allow the LDA to raise finance for these developments and get involved in joint ventures. People do not realise that, when developing and getting involved in procurement at that level, the site is compromised as soon as the deal is signed. As we have seen in the case of the national children's hospital and other infrastructural projects, one cannot reverse out of such agreements.
The site is already used, the deal is bought into. There are potentially very open liabilities here on these sites. If it is 90% dependent on market rates for housing and the State is getting into very large transactions, it is potentially very risky.
Mr. Tom Dunne:
I support the idea that the agency should have compulsory purchase powers. That is very necessary. For example, one thing that bedevils property development or site assembly and slows it up is one often finds flaws in title. The title may prohibit a particular form of development that might need to go on the site. The agency would need power to compulsorily acquire that, otherwise the agency could get into a situation where it was held to ransom. I very much support it having compulsory purchase powers.
The compulsory purchase powers available to the State are very complex. I imagine the agency would not use them widely. Many protections are built into the system of compulsory purchase. I would not be particularly worried about the agency going off and buying stuff, using its powers to buy things that it should not buy. The agency would need the powers for the specific reason I gave. I could not imagine an agency such as this operating efficiently unless it had powers.
Dr. Donal McManus:
I concur with Mr. Dunne on the agency's powers. We have come across it with things such as ransom strips which hold up developments and are very preventative of schemes. Ransom strips are probably the easier side to do as they are small parts of land but beyond that there is also compulsory purchase order, CPO, powers for other public bodies. I am not clear if the Land Development Agency would be first among equals. There is a body that is trying to assemble land, that is part of its function. If other public bodies do not agree to that, is it still possible to use CPO powers? Whether the land agency is first among equals is really the key issue in the whole Bill. The onus is on the other public bodies to say why they cannot give land for housing. It should be on them to do that, otherwise one is doing much chasing around to try to get land. CPO powers will be key for the small bits of land. Also, the Land Development Agency should be the leader in negotiations with other public bodies.
Noel Rock (Dublin North West, Fine Gael)
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That is a fair point.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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I genuinely appreciate the detailed, thoughtful submissions. The committee met with the Department for pre-legislative scrutiny, as well as with the Land Development Agency and other stakeholders, at the outset. This continues. I would reiterate a point I made to the Department and the Land Development Agency that we are doing this the wrong way around. The Land Development Agency has been established for more than a year by a ten page statutory instrument which established an agency which received €17.5 million in funding in the budget but it does not have any land and has no legal powers in real terms. We discussed this with Mr. O'Connor. I understand that no land can be transferred to the LDA until the legislation is in place and establishes the agency and its powers. We are doing this the wrong way around because there is an assumption in the Department and by the Minister that this approach will have support. The more I see it, and the more we delve into the heads of the Bill and the contributions by stakeholders, the more concerns I have with this approach. I think most of us are agreed, and know I agree with Deputy Ó Broin, that we need a land management agency. We need a co-ordinating agency that can assist on this. What I do not want to see is a vehicle that effectively privatises and further outsources the development of State-owned land and abrogates responsibility for the delivery of public social and affordable housing. I do not mean to feed into any kind of speculation at the moment but we might consider the legislative and electoral cycle. How can it be that for legislation of this importance we only have heads of Bill?
We have not seen the draft Bill. I have put the officials on notice that we will not accept significant amendments on Committee or Report Stages as happened with the Residential Tenancies (Amendment) Act 2019 and other recent Bills from the Department. I cannot see how in the time remaining in this Oireachtas this legislation will pass. There are too many unanswered questions.
Veering away from the policy areas, which I understand can pose a difficulty for Mr. O'Connor, if we take Ms Hegarty's example in Skerries and Mr. O'Connor's example in Balbriggan, two areas that happen to be in my constituency and that I am familiar with, how much preparation had the LDA and the local authority done on the delivery of those sites? The LDA told the committee a few weeks ago that little, if any, work had been done in the preparation of the eight or nine sites it had for delivery of social and affordable housing. That is contrary to the information on the ground, particularly in regard to Castlelands and Skerries. Is another agency needed or will this complicate the delivery of these lands and further delay the delivery of housing there? I would like Mr. O'Connor to elaborate on the desire of the Housing Agency that land transferred to the LDA be primarily used for public purposes and long-term control be retained. I support that but if the ratio of homes to be delivered on the land is 60:30:10 and, taking Ms Hegarty's point, which I agree with, that the other 30% is at a reduced market rate affordable housing model, it is effectively 90:10. We would relinquish 90% of the lands that we own under that model. How does that sit with the Housing Agency's view that Mr. O'Connor has put before the committee?
In respect of the Lobbying Act 2015 and FOI, Professor Kitchin and Ms Hegarty have mentioned concerns about the exemptions from the Freedom of Information Act and the Lobbying Act, which I have also raised at the committee. Are there reasons the exemptions outlined in the heads of the Bill would apply? Why would the agency seek a clear exemption from FOI? Are there, in some instances, genuine commercial reasons for that? I agree with Professor Kitchin that there is no reason the public register of lands could not be published; perhaps others do not. There was a type of register on the Department's website where we could see lands that are in ownership.
I agree with the notion of affordable rent for public housing. Affordable purchase comes under the 2000 Act. I agree with the witnesses that there cannot just be a discount on market price. We keep chasing the market price. Is it their view that one does not have to dispose of the land to deliver affordable purchase as well as cost rental and affordable rent? Models in other countries deliver a true and equitable stake but it is not necessary to dispose of the land to do so. Perhaps the witnesses can elaborate on how they see that being done.
I commend the ICSH on its work. It is in an invidious position making an input to this because we had a long discussion a couple of weeks ago about the on or off-balance sheet issue. All of us who have spoken publicly on this want the issue addressed and want the AHBs to be off-balance sheet, as in other countries. It appears that the Department wants to keep them on-balance sheet. The Department of Finance has said it is neutral on that. How do the witnesses view the work they do in delivering AHB housing but affordable purchase and affordable rent going?
If the Housing Agency continues to deliver nearly 4,000 units, if it is 6,000 or 8,000 now, when is that going to start impacting on the balance sheet? Does Mr. O'Connor see a risk of restricting the delivery of homes because the Government has not grappled with this issue of working to get the AHBs off-balance sheet? I will have a few more questions for afterwards.
Mr. John O'Connor:
I thank the Deputy for his questions. On the Skerries and Balbriggan sites, the Skerries site is 7 ha. It is constrained. There are issues in terms of infrastructure and services for that site. Fingal County Council had a local area plan carried out for it. It had planned to build 100 homes initially on part of that site ahead of getting further infrastructure in place. The plans were at an advanced stage. The Land Development Agency is coming into position with the expectation of trying to develop the complete site and all the homes. The Deputy is correct that Fingal County Council had got that to an advanced stage. The possibility with the Land Development Agency is with the complete site. The Balbriggan site is at Castlelands - the Hampton land - which is a large site of 24 ha. Fingal County Council has been working for many years on a master plan for that site and is still setting out that master plan to get it approved by the members. The council was at an advanced stage of planning on it. In terms of delivering a site on that scale, an organisation like the LDA which has the funding to provide the infrastructure and so on may be the best way to deliver it. However, without the LDA, Fingal County Council would be in a position to start.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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Could we say that both of those examples were at an advanced stage already without any other agency intervening? That is my point.
Mr. John O'Connor:
They were at an advanced stage in terms of planning. In terms of delivery, the Skerries site would have been closer to delivery by Fingal County Council. There are a lot of issues in terms of how the Balbriggan lands should be developed. Fingal County Council was just being careful about how it approached that and about the timing and phasing of the development. In terms of long-term control of State lands, it is most important that we do not have a situation in ten or 15 years' time whereby the State does not have land. The Housing Agency lands were effectively funded by the State and our view is that the bulk of the Housing Agency land should be retained in public ownership. In the transfer of that land and the form in which it is done, control should be kept in place. In respect of land from other organisations, for example the HSE, it might be a case that they need funding for other purposes in terms of hospitals and so on. It is a question for the Oireachtas as to the level of State control that should be retained in those sites. The 10% and 30% are minimum figures. The view of the Housing Agency is that in both cases, the social and affordable housing on those sites should be provided at cost. There should not be a land cost in the provision of affordable or social housing on those sites. The land should be subsumed to start with. We need to look at how we are controlling State lands and if one looks at other countries, they tend to keep long-term control. Often it is by way of leasing the land for 100 years or whatever and, depending on the use, whether one has to pay for that or not is dealt with by local authorities or by the State.
Dr. Donal McManus:
The Deputy mentioned the balance sheet issue. As far as we are aware, only one jurisdiction in the European Union is on-balance sheet and that is the UK, though a couple of years ago, it decided to get all associations off-balance sheet. In the UK there are joint ventures between housing associations and private companies on a not-for-profit basis. If we provided more cost-rental accommodation, it would help our balance sheet argument. EUROSTAT referred to three or four areas that indicated being on-balance sheet, one of which was income. If we had cost-rental accommodation, or even affordable rental, it would help. We have re-engaged with the Department as to what is required.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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When will we get to the stage when Dr. McManus's organisation is fishing in the same pool as local authorities for funding because it is on-balance sheet? Would that restrict its development?
Dr. Donal McManus:
In a few years, with the money coming onto our balance sheet from the Exchequer every year, we will compete in the same fiscal space as local authority housing, roads and so on. In the context of the national debt, people may see it as a rounding error at the moment but the debt in our sector is accumulating quickly. We estimate that it will become a bigger issue in the next couple of years.
Ms Karen Murphy:
The impact is not as visible or urgent at the moment because we are still under the Rebuilding Ireland targets. The target of one third of the 50,000 units is stitched in, which brings us up to 2021 when we will enter into the unknown to some extent. The different priorities will impact on the on or off-balance sheet statement but it has been two years and there is some urgency now.
Ms Orla Hegarty:
Affordable ownership gets to the crux of the issue. A lot of people want to buy a house but many in Dublin cannot afford to. There is a mismatch between the ESRI research into income levels and property prices in Dublin. We could provide everybody with expensive houses and subsidise them to maintain the market or we could crash the market and put everybody who has a house in negative equity again. The issue is finding some way to have a parallel system through leases, community land trusts or something else that creates a secondary market in housing, affordable to people within their own means but not competing directly with the private market. The scale of the challenge for affordability in Dublin is enormous and a niche scheme for a certain percentage of the market, or a discounted market, will not meet the need. The ambition needs to be much greater.
External oversight is important in the context of confidentiality and freedom of information. I have experience of looking for information under the FOI Acts where the local authority decided it was confidential. I took the case to the Information Commissioner for a determination on the legal aspects. It would be within the remit of the LDA to withhold information on the basis of commercial sensitivity in a narrow area such as market rates, though there should not be a blanket exemption. There is a provision for an external determination on points of law.
Noel Rock (Dublin North West, Fine Gael)
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We have written to the Information Commissioner to seek his views on that point and we are awaiting a response.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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According to the Department, it is.
Professor Rob Kitchin:
It is not, then, outside FOI. If it were, it would be a big issue.
I believe that the blanket exemption is simply put under the notion of commercial sensitivity, so everything the agency does would be commercially sensitive. I do not accept that this is the case. Many public agencies around the State work with companies. Universities, for example, do a lot of research through Science Foundation Ireland funding, for example, or with companies. We are not exempt from FOI on that, and why would we be? It is public money being used supposedly in the public interest, and it has a commercial angle. Unless there are specific reasons, I would not go with a blanket ban. As Ms Hegarty said, there might be rulings where it is believed to be outside of FOI and someone could go to the Office of the Information Commissioner to get a specific ruling on that. A blanket ban, however, does not seem to be in the public interest. In the past, this was an area in which we had a lot of issues. Let us consider the era of the brown envelope, or the many scandals relating to various planning issues, development sites and land, such as the Liffey Valley site. There were also issues around risks-----
Noel Rock (Dublin North West, Fine Gael)
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If Professor Kitchin does not mind, I ask that he please be careful with regard to specific examples.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is on the record now.
Professor Rob Kitchin:
In a general sense, one could get The Irish Timesand find lots of issues around this and I am sure we could go back through various hearings and find various examples of poor practice in planning decision-making. There are big risks and potential liabilities, as Ms Hegarty said earlier. The Chairman has me worried about naming other examples but a lot of money was lost in the Docklands on certain sites and State agencies were investors in sites when the crash happened. A lot of money was lost by State agencies. There are potentially significant liabilities. In that case, hundreds of millions of euro were lost, which was not an insignificant amount. There may be issues also regarding lobbying, insider deals, financial irregularities and so on. To be outside any kind of lack of transparency would create possible accountability issues downstream. I would be very cautious about that.
Reference was made to ownership of land. There are models in Europe where the land does not leave public ownership. In the Netherlands, for example, land is leased and it does not leave the state's control. There are such models, which may also serve to reduce development costs because the land price is not included in the development costs.
Noel Rock (Dublin North West, Fine Gael)
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I thank Professor Kitchin. Does that answer the Deputy's questions for now?
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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Yes.
Pat Casey (Wicklow, Fianna Fail)
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I thank the witnesses for their contributions. The more we go through the Bill, the more holes we find in it and the more questions are raised about it. How we manage land now and into the future is how we will develop affordability, so we are considering critical legislation. Something is needed to try to control and manage land but I do not know if this legislation is the vehicle to do that.
Over and again I have addressed my concerns on over-marketisation and privatisation, as mentioned by Professor Kitchin. Ms Hegarty also mentioned commercial viability and profit. This is referenced throughout the heads of the Bill. If we keep using that terminology and keep looking for that return, we can never deliver affordability. This is because we are not just looking at land costs; we are looking at the market value of land costs. It does not work as a starting point.
We all have concerns regarding oversight. Deputy O'Brien had negotiated a €6 million cap for local authorities to spend, up to stage 4, before they had to go to the Department for approval. Clearly, the Minister is now saying that this will not happen and that we do not have faith or trust in the way local authorities do their work to give them this sanction, yet, the Government will hand €2.5 billion over to an organisation with what we believe are significant issues in respect of transparency and oversight.
Perhaps we might get the delegates' views on that matter.
Ms Hegarty has mentioned that the policy will change because of the circle of Governments. We have discussed on a number of occasions whether the legislation should include a minimum number of affordable or social houses that need to be delivered, rather than depending on what Government will be in power tomorrow. It all comes down to delivery.
On the issue of land use and how we control same, Ms Hegarty mentioned something that I was following, namely, a State-led process of drawing up master plans for infrastructure. The other issue is whether infrastructure is more critical than sites. If all of the land zoned in Ireland was of tomorrow morning to have infrastructure, would it help significantly in delivering affordability? If so, tools such as site taxes and vacant site levies could be used to trigger it. Perhaps I am wrong, but Ms Hegarty seemed to suggest the State would draw up master plans for towns with a lot more detail. Perhaps she might expand on what she said. We could lay out clearly how every town would be developed, provide the infrastructure and then unbundle it, as Ms Hegarty said, before phasing it and delivering it in sections. I had not thought of unbundling until Ms Hegarty mentioned it this morning because it is quite apparent that the construction industry is relying on a number of key contractors to deliver. We have lost the small and medium-sized builders that were able to build schools or 20 houses. They have been nearly wiped out completely. That is not good for the market because we are seeing that because of the margins large construction firms are beginning to demand more and more. This is adding to the challenge in delivering affordability.
We cannot proceed with the Bill. I cannot see us supporting it under the current policy under which 60% of homes are private, 30% are affordable and 10% are social. It is not a model I can support in moving forward. It goes back to whether it should be included in the legislation.
As I have lost my train of thought, I might come back in later.
Noel Rock (Dublin North West, Fine Gael)
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The Deputy has asked more than enough pertinent questions, but he is more than welcome to come back in in a second round of questions. We might go to Ms Hegarty first and Mr. Kitchin thereafter.
Ms Orla Hegarty:
I will start with the issue of master plans. The legislation is in place. The local authorities have the power to develop master development plans and local area plans; they just need the resources to do so. There is a hierarchy of plans from national level to regional level to local level. The advantage in the local authorities carrying out the function is they have the expertise and the planners. There is a broader remit. As they also carry out their local housing strategies, it is a case of having joined-up thinking, rather than duplicating the effort somewhere else, if the resources are provided to enable the local authorities to do this.
Unbundling has been done successfully elsewhere in Europe. In drawing up a local area plan the local authority will know roughly what infrastructure will be provided on every site and what its capacity will be. That in some way will put a cap on the value of land because it will already be known what will happen. Providing the infrastructure means that builders can plug in on the edge of a site, be it for street lighting, drainage, water services or whatever else. It also means the roads will already have been built. It also means that there will be channels for lots of smaller SME builders to become involved. One of the issues that is a real barrier to expanding the construction industry and the creation of gainful employment concerns how fractured it is and it has become even more fractured. There are large entities at the top that might be receiving a lot of public money, as in the example of Carillion, but that money might not be filtering its way down under the terms of the public contract. Rather, it might be filtering down in private contracts into subcontracts to people who are often working in difficult employment conditions. They might be unable to take on apprentices or carry out training or they might be waiting for long periods to be paid. All of this makes employment precarious and it is a barrier to young people becoming involved in construction. What it all means is that the sector is fragile.
If we want to rebuild, we will need the SME builders and the people who perhaps have a contract for ten council houses, out of which they can buy machinery, take on an apprentice and buy a piece of land for a private development. That is how we will build capacity in the housing sector and get some competition going. The other difficulty with bundling these large sites is that there is very little competitive tension if there are few entities which can tender for this work. If the tendering is for small builders, there will be a lot of competition in the market and people whose standards fall short can be weeded out and the work can be prioritised with those who do a good job. In bundling into large entities, all the work is subcontracted and it is very hard to track where the poor practices are. It is also hard to include social and other clauses that could be put into public procurement that would improve some of the other issues in the sector.
Professor Rob Kitchin:
We are all agreed that active land management is necessary, is a useful thing for local planning and for large-scale strategic spatial planning and is key to the national planning framework and being able to deliver on that. The real issue is how it will do this. We are pretty poor at infrastructure. We tend to build the housing and then try to do the infrastructure afterwards. We do not have a strong track record, with a few exceptions such as Adamstown and so on, of thinking about the infrastructure going in before or at the same time as the housing goes in. There potentially will be a move towards doing that in the Land Development Agency with proper master planning towards co-ordinating and putting in infrastructure at the right points and making sure of that. It is very evident in places such as the unfinished housing estates where there were houses but no roads, water, sewerage or street lighting because of the point at which they failed. In other countries it was the other way around. Photographs on Google Earth in 2009 showed that in the US, there were the roads and infrastructure but the houses were missing because the infrastructure had to go in before everything else so that when people move in they have what is needed.
Co-ordination of that would make a lot of sense. If that does not happen and pressure is put on the transport or health systems, because only the housing estate is dealt with and nothing else around that is co-ordinated, then that becomes a problem. It needs to move towards larger-scale local development plans where there is joined-up co-ordinated planning around that, as opposed to just developing specific sites. If we get into the business of creating specific sites, we will create a series of other related issues around schools and health centre capacity, water or sewerage or whatever else. In other European countries, development companies like the certainty of planning. Construction companies like knowing what will be developed over the next 30 or 40 years. They know their phasing, they know there is certainty in the market and that this is almost certainly going to happen. They like the certainty and profit. They are often not looking for mad profits but for a good 5% or 6% return. They are not looking to make a huge buck and get out. It would be positive if we can move towards that. Whether our developer or construction industry would like that is a different matter but perhaps we can move the planning mindset onto having much more co-ordinated long-term planning. The Land Development Agency is a good vehicle to do that and we should be landbanking. We know the population will go up by 500,000 over the next 20 or 30 years and that we are going to have to build infrastructure and so on and we should be doing it in a co-ordinated way.
Mr. Tom Dunne:
The question of active land management and the issues around that is one of the great deficiencies of our planning system and needs to be addressed for sure. I did not see this agency as being a particular way of doing that but thought that it would have a role in it. The sense I got from the legislation was that it was intended to take lands that are already in the ownership of the State in various forms, which are often just there and are not needed for the purpose for which the entity that holds them is going to make use of in the future, so the question about such lands is what does one do about them.
The option preferred by the local authority, the HSE and other agencies is to flog that land, to put on the marketplace and see what happens. The Land Development Agency, LDA, is intended to prevent that from happening. Instead those lands will be taken and managed by the Land Development Agency. Active land management and the related issues are a different question. While I agree with a lot of what has been said about active land management, which is one of the great deficiencies in our system, this is meant as a more specific agency, which I believe the State needs. The State has a management agency in the Office of Public Works, OPW, which largely looks after the management of properties used by the State. The Land Development Agency is intended to take the lands that are no longer needed by the State and which must be put to some other use. With the current crisis in the sector, the most logical thing to do with all that land is to use it for housing, if it can be converted to that purpose. Some 15 or 20 years down the road we might have a shortage of land for industrial purposes, as we had in the past. This agency is intended to perform a more specific function. It should not be opposed because it does not perform a range of other tasks which are definitely needed in our planning system, like active land management. That is why when I read this Bill I felt the State needed a tool like this agency to perform this specific function.
Noel Rock (Dublin North West, Fine Gael)
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I thank Mr. Dunne. As no other speakers wish to comment, we will go back to Deputy Ó Broin for his second round of questions. The Deputy has two minutes.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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As this is important legislation, can I take the time of the members who are not present?
Noel Rock (Dublin North West, Fine Gael)
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The Deputy has limitless minutes.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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The Chair can let him go on forever.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That is the plan.
Noel Rock (Dublin North West, Fine Gael)
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With deference to the witnesses, we will try to be brief.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a couple of quick questions. I would like to return to Mr. O'Connor's point about the Land Development Agency providing master plans and servicing sites. My question relates to Ms Hegarty's comment. Local authorities already do that. We have just agreed a very substantial strategic development zone for Clonburris. Local authorities have a huge amount of skill and expertise. Adamstown, also in my constituency, is a good example of that. The value of those processes is that they have some democratic input and some public consultation and engagement. Not only did the LDA lack any of these skills when it was set up, thereby being obliged to acquire them, it lacks the statutory requirement to engage with elected representatives or members of the public. I still do not see what added value the LDA provides that we could not have got from better-resourced local authorities, including master planning and site servicing.
Moreover, because we are spending a lot of time talking about residential development and all the associated difficulties, we are not talking about active land management as much as we should. With reference to Mr. Dunne's point, the Government is making two claims about this agency in its conversations with us. The first was already mentioned; this agency will take Donnybrook bus garage from the CIÉ or vacant lands in Cork from the HSE and will use them for something better. However, the Government also talks about other active land management functions. We are not getting proper sight of that. If people have models of best practice, perhaps they could share them with the committee.
Partly because he sits on the board of the LDA, I am interested in Mr. O'Connor's response to Ms Hegarty's point about affordability being delivered by cost rather than by market discount. The published figures for O'Devaney Gardens really show the risk of applying the market discount. We are told that two-bedroom apartments and three-bedroom houses will retail for approximately €310,000. That is at a discount of 35%. That means that Bartra Capital has priced those units in at €477,000 before knocking off a discount of 20%. The State then steps in and cross-subsidises a further discount through its equity share. While the house will be sold at €310,000, Bartra Capital will be paid €370,000. If the affordable purchaser ever buys out that equity, he or she will essentially have paid €340,000, €350,000 or €360,000 for the house.
That can be compared to the cost model, which I know Mr. O'Connor strongly advocates and which Ó Cualann Cohousing Alliance and others have delivered. This would deliver exactly the same house or apartment for €250,000. Given these figures, how can we ensure that the LDA delivers affordable units on the basis of the economic cost of delivery, rather than large companies' inflated market tenders at a discount? Given the heads of the Bill, I fear the price will be the market value minus the discount, rather than the cost. This will not merely fail to guarantee affordability; affordability will not be available at all.
Noel Rock (Dublin North West, Fine Gael)
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I thank the Deputy for keeping to his allotted time. It was impressive. I call Mr. O'Connor.
Mr. John O'Connor:
On master planning and the role of the LDA in that regard, I agree with other speakers that it is best when local authorities make detailed plans. As part of devising local area plans, they do more detailed master planning, although that is not currently the case throughout the country. It is done to a limited extent but there needs to be more of it. If the LDA has control of large tracts of State land, it can assist in the master planning. While it will have to work with the local authority in question, it will have the ability, and potentially the funding, to deliver the infrastructure upfront.
On affordability and affordable housing, we often get caught up with the market value and the market rent. We should approach it with the intention of determining the cost of delivering the housing. If land has been provided at no cost, we should seek to determine the minimal cost of building a house while ensuring a high quality and that the long-term maintenance costs are low. We should consider it from a cost base, rather than be sucked into viewing it from the perspective of the market and trying to discount from there. We should focus on the cost of delivering the housing and on the builder, who wants to be paid a normal return with a modest profit.
Noel Rock (Dublin North West, Fine Gael)
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I thank Mr. O'Connor and call Ms Hegarty.
Ms Orla Hegarty:
On the market value versus the cost of production, another current issue is the cost of finance. For Part V projects I have recently examined, in some cases up to €20,000 was paid in finance costs because developers have to borrow at high rates. That is a poor use of taxpayers' money if finance is available elsewhere. Some of the cost of delivery concerns public contracts where, under a normal construction contract, the builder is paid monthly and does not have to finance the entire development. That is a much more strategic use of capital, as well as being a quality control. In decisions about outsourcing to large developers who will finance projects, there is a heavy component of finance cost.
Noel Rock (Dublin North West, Fine Gael)
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That is a fair point. I call Ms Murphy.
Ms Karen Murphy:
I agree that the cost approach makes most sense and there is a legal precedent, given that it is done every day through Part V planning agreements. The cost is not always affordable, however, and sometimes in actioning the delivery, the cost can be above what is affordable, not in respect of market but of incomes. We need to stitch in subsidies where necessary to ensure that the cost base is supported by some measures.
Pat Casey (Wicklow, Fianna Fail)
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On the role of the LDA, I did not read into the legislation what our guests have read into it. Unless the LDA has a function in acquiring land for future use, it will not serve its purpose. One of its primary objectives is to stockpile land for future use. I have an issue with State land being sold to the LDA at market value. Whether it is HSE or CIÉ land, the State bought it originally and I do not know why it should pay market value on the land to be given to the LDA. If we continue to use the term "market value", affordability will never be delivered.
On the point about on and off-balance sheet - and I recognise that the Irish Council for Social Housing is here today - what happens if the Land Development Agency is proven to be on balance sheet tomorrow morning? Nobody can tell me whether it is guaranteed to be off-balance sheet tomorrow. It all depends on the capital and the control of local authorities over who gets into housing, as our guest have said. Tomorrow morning, the Central Statistics Office, CSO, or EUROSTAT, could say the model is wrong and the agency should be on-balance sheet. What impact would that have?
On the topic of land ownership and leasing arrangements, I lease my own business back to the State for a penny a year for 200 years, if demanded. I have no freehold but I am allowed do whatever I want on it, whether that is to develop it, expand it or apply for planning permission. Is that the type of model we might be looking at for residential properties? If it is, there are already examples of it in Ireland.
Mr. Tom Dunne:
I did not understand that to be the Land Development Agency's only function. That would be its major function but it will clearly have a role in supporting local authorities that are not well supported or resourced with the kinds of professionals needed for residential development. That is also an important part of the function of the Land Development Agency. Its functions are not as narrow as the sense of them I may have given.
The State will have land, from various sources, which it may not need. Something needs to be done about it and it is important that the State has a credible agency that understands how to manage land and pass it through its various functions in order for it to become a resource that is available to developers and builders to build on. That is what I saw this agency doing. I did not see the function of this agency as stockpiling land and it should not be doing that. Stockpiling land is just parking a resource that should be used for some more immediate purpose. If an agency such as this gets into stockpiling land, the scheme will have gone entirely wrong.
Pat Casey (Wicklow, Fianna Fail)
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I would not call it stockpiling but buying strategic land in advance. Otherwise, we are back into the market cycle again where the State comes in too late to purchase land that has already been zoned.
Mr. Tom Dunne:
That is a function of local authorities but they need assistance. We do not do it, and that is another story, but I want to make the point that we should not be stockpiling land because it then becomes a resource we do not use.
Accounting conventions that we have established for imposing discipline on Government agencies insist that we take land from agencies at market value. Land is just another resource, like all the other things that are valued as inputs into whatever a hospital has to do. Land is just one of those resources. It happens to be on balance sheets at its market value because that is what is done under accounting conventions. If land is taken out, one must pay in because it is a resource. How to handle resources in organisations is a very big question. I do not know if it is right to do it or not.
Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The point Deputy Casey is making is that land is not registered at current market value in many instances. Large volumes of public land sit on the balance sheet of a public agency at the value at which it was acquired rather than the open market value. If I understand the point Deputy Casey is making, the market value should be the compensation level if it is then coming off balance sheet.
Mr. Tom Dunne:
I may be out of my depth on this because it is a long time since I have studied accounts but my understanding is that land can be left on the account at the historic cost. Accounting conventions require that to be revalued periodically and, in any event, if it is going to be disposed of or transferred out, that would have to be done at market value. That is my understanding.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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I suppose the point Deputy Casey is making is that the State owns land and is then buying it back from itself for an inflated price.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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A market price which, if one is buying land in Dublin right now, most people would say is approximately 35% above what it should be.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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That is the point but we could talk about that all day.
Noel Rock (Dublin North West, Fine Gael)
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I am conscious that this type of questioning about market-to-market accounting is really for the accounting specialists within the Department itself.
On a point that Ms Murphy made, ultimately when there is an operation such as one under Part V, the money does not disappear. It comes from reducing the value of the price of the land when it is bought initially. The person who pays that is the landowner. I am not objecting to this as I believe it should be done that way. Theoretically, land prices should be really low. They are really just evidence of scarcity. The way to solve that problem is to manage the process of land administration properly and to have a supply of land on the market regularly that meets the demand. The trouble in our country is that this requires resources. Deputy Casey made the point that it is the infrastructure that is crucial. The land is available but it is the infrastructure that is crucial.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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That is it. Ms Hegarty mentioned the northern commuter belt. The northern commuter line, including at Skerries, is operating over-capacity. Where there is no investment in capital infrastructure for a sustained period and no new interconnector in the city, and where rail capacity cannot be increased to get people into the city, it presents an issue in that an increasing number of people are just shoved onto existing infrastructure. It is about balancing against the need for people to live somewhere and have homes. Politicians are the ones who have to accept, amend or reject the legislation. This is why it is very useful to hear all the points of view. Ultimately, as Deputy Casey said, if we were to establish an agency and capitalise it with €1.25 billion, effectively on a commercial semi-State basis, and if we were not happy there was proper oversight, the people would be asking us in ten years why we passed the legislation on the nod. That is why we have to tease all these things out.
Darragh O'Brien (Dublin Fingal, Fianna Fail)
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Absolutely. Land management. I agree.
Mr. Jim Baneham:
The Deputy is correct that leasing of land is not new. It is one of the ways to ensure a certain level of control is retained over the use of the land. With regard to the agency site in Stepaside, called Enniskerry Road, it was provided to the two approved housing bodies on the basis of a 150-year lease. There are covenants in the lease requiring cost rental dwellings to be such dwellings for a period of at least 70 years. As mentioned, it is a means by which the State can provide land but restrict how is used in the future.
Dr. Donal McManus:
Matters should not be over-complicated. In the past, there were very good examples of where sites were provided for affordable housing. The old low-cost sites scheme of local authorities was very much localised. It was a national scheme but it was rolled out fairly well. Most of our sector expanded on the basis of the scheme. A small builders scheme linked into this structure activated the construction market over time. Confusion arises sometimes when trying to create a structure in addition to supports to deliver land.
Maybe the mechanism was initially for larger sites but we see it applying to smaller sites also. I refer to the ability to impose a CPO on land and to then use a mechanism such as the low-cost sites scheme to deliver housing. One can link the two together. It is not an either–or situation. Some initiatives worked very well. The low-cost sites scheme was a real driver of our sectoral expansion, as well as for individual owners wishing to build homes. Small builders schemes, as mentioned, attached conditions to how land was used and to building standards. Sometimes people over-complicate things. What is driving this may be a discussion about the market operator. Deputy Ó Broin referred to this. The starting point is probably the market operation and how this could be passed by EUROSTAT and not be on the balance sheet, as with Irish Water. That is driving the discussion in addition to the functional aspects. Things did work before, albeit very much in a piecemeal way. We hope the mechanism under discussion will co-ordinate all the measures under one roof.
Noel Rock (Dublin North West, Fine Gael)
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I thank all the delegates for contributing time, expertise and answers. I certainly appreciate their time today, as do the other members of the committee.
I thank the witnesses for engaging with us today.