Building slowdown to hit councils

The building slowdown threatens to hit a key source of local government funding that was worth almost €700 million to the Republic's city and county councils in 2006, writes Barry O'Halloran.

The State's local authorities will see a fall in the level of development contributions collected from builders as the residential construction slowdown worsens over the next year.

Planning laws oblige developers to pay the contributions to councils, who use them to fund general services in the areas under their charge.

Local authorities collected a record €671 million in development contributions when house building reached an all-time peak of 88,000 new homes in 2006.

However, most analysts and economists agree that the number of new houses built in the Republic this year will be around half the 2006 high.

As house building accounted for around two thirds of all development in the Republic in 2006, the fall off will wipe out a high proportion of the cash collected from builders.

Most of the development contribution schemes operated by councils require builders to pay a set fee for each house or apartment they build.

The Construction Industry Federation says these can range between €7,000 and €15,000 for each home.

While planning legislation requires councils to earmark the money for public infrastructure, they are not obliged to spend the cash collected in respect of a given housing scheme on providing services for that development.

According to the Department of the Environment, Heritage and Local Government, the cash can be used for general services such as roads and road maintenance, car parks, bus lanes, drainage and waste water schemes, and a whole range of other infrastructure. Department figures show that the total development contributions collected by local authorities grew to €671 million in 2006 from €110 million in 2000.

As it is estimated that around 70,000 homes were built in the Republic last year, the return from the charge is expected to be strong.

As the levy is directly related to development activity, urban councils, or those whose jurisdictions bordered on big towns and cities, benefited the most in 2006.

Fingal County Council in Dublin collected the highest amount, getting €72.5 million from developers. Dún Laoghaire-Rathdown County Council came second with €62 million, while Cork County Council came third with €57.3 million.

Further evidence of the residential building slowdown emerged at the weekend with the news that new home registrations with construction guarantee agency Homebond, hit a record low of 925 in December.