Land price windfalls fuel housing crisis and corruption

In Poor People, Poor Places, a book published last year by the Geographical Society of Ireland, the Maynooth-based town planner Brendan Bartley describes a place that attracts media attention only when its creators feature in tribunals or its inhabitants appear before the courts.

"What one sees if one ventures into north Clondalkin," he writes, "are littered and unkempt approach roads, rundown neighbourhood centres, public buildings which are invariably surrounded by large palisade fencing and shuttering, poorly kept open spaces, a skyline dominated by large electricity pylons and housing estates which face inwards and turn their back on the public areas. The neighbourhood centres which were to be at the heart of each neighbourhood have failed."

"In the meantime," Bartley continues, "the villages of Lucan and Clondalkin, located at the edges of the proposed new town, have become thriving shopping and business centres, while north Clondalkin, which was intended to be at the heart of the new town, is effectively isolated from both villages and is almost devoid of facilities."

From the late 1960s onwards, north Clondalkin was supposed to be one of three new towns in west Dublin and a site for its town centre was assembled by Dublin County Council. For reasons that are now becoming clear, however, that site was replaced with the most infamous development in Irish planning history, the Quarryvale shopping centre. North Clondalkin's town centre was left to the weeds, the litter and the dogs.

While the developers had money to spread around, the people who actually live in Quarryvale, one of the main estates in north Clondalkin, were among the poorest in Ireland. In the early 1990s, when Frank Dunlop was acting as an ATM machine for some county councillors, 60 per cent of the heads of household in Quarryvale were unemployed. While one councillor was allegedly receiving £40,000 in a single payment, the average gross income in Quarryvale was £131.72 a week, much less than half the average industrial earnings.

The corruption of the planning process, in other words, both reflected and deepened the poverty of the local community. Ironically, that corruption is also now reflected in a completely different kind of mirror - the problems of Ireland's new wealth.

The continuing rise in inflation which this week reached almost 5 per cent is fuelled, in part, by the rising cost of houses. No less than the blight of deprivation which is all too evident in north Clondalkin, the over-heating of the economy is significantly shaped by the exorbitant cost of building land. The massive profits to be made from land speculation are paid for in political corruption, appalling planning and inflationary pressures that threaten to derail the economy.

The economics of rezoning are pretty obvious. An acre of agricultural land in Co Dublin sells for something between £30,000 and £60,000. The same acre with a residential zoning and planing permission for housing sells for between a million and £1.5 million. From figures published last December by the Construction Industry Federation, it seems likely that landowners in the Dublin area made close to £1 billion from the sale of land for new housing last year alone, most of it pure profit.

These profits, moreover, tend to go to a very small number of people. A study by Tom McEnaney in an issue of Business and Finance magazine last January reckoned that just eight property developers control "the vast majority of building land in Dublin". The largest, Gerry Gannon, is said to have a land bank of 800 acres, mostly around Malahide and Howth. The others include Michael Cotter of Park Homes; Mickey Whelan of Maplewood Homes; Michael and Tom Bailey, who have featured heavily at the Flood tribunal; Joe O'Reilly and Brian Wallace of Castlethorn Developments; David Daly who owns up to a thousand acres around Swords; Joe Moran of Manor Park Homes; and the Zoe Developments group.

There is no suggestion, of course that any of these individuals or companies are involved in corrupt practices. What is clear, however, is that, at any one time, a small group of people is in a position to make enormous profits from speculation in building land. This profit is made at the direct expense of people buying houses. While builders, mortgage lenders and auctioneers are certainly doing very well, by far the most profitable and fast-rising input into housing costs is land itself.

For social, economic and political reasons, it seems obvious that the State should intervene to end a situation in which vast profits can be made merely because a piece of land has been rezoned by a public body. An end to rezoning windfalls would cut off the incentive to bribe councillors. It would make planning disasters like north Clondalkin less likely. And it would help to keep inflation in check by stabilising house prices.

This is so obvious that it has been urged at an official level for over a quarter of a century. In 1974, the government published the Kenny Report, which recommended that speculation in building land be ended by forcing owners to sell at current (i.e. agricultural) market prices. And in recent times, as the housing crisis has evolved, variants on the Kenny proposals have been put forward by bodies ranging from SIPTU and the Labour Party to the top officials of the four Dublin councils to the Educational Building Society.

SIPTU's president Des Geraghty raised the issue again this week in discussions on the inflation figures. A year ago, in a report to the Department of the Environment, the senior managers at the four Dublin local authorities asked the Government to dust off the Kenny Report and suggested that a system of levies be used to force the release of already serviced land for development.

The head of lending at the EBS, Martin Walsh, in an interview with Business and Finance in January, proposed that the State should buy up all or most of the agricultural land in the Dublin area.

"The Government," he said, "must give a strong signal to prospective house buyers that 20 per cent increases (in house prices) will not go on forever. A substantial purchase of unzoned land - enough for 20 years' supply - beside all the main commuter routes out of the city, using compulsory purchase orders, would be such a signal."

When a policy seems so obviously necessary to a wide variety of interests, including an official inquiry whose report has been on the shelves for a quarter of a century, the public is bound to wonder why it has not been implemented. There is no good reason why a private individual should make huge amounts of money merely because a public body has changed the designated status of a certain field. The oft-cited constitutional difficulties are almost certainly chimerical, since the courts have consistently insisted that private property may be taken into public ownership where the common good demands it and where fair compensation (in this case the current value of the land) is paid to the owner.

The most obvious reason for doing nothing, then, is that a change of policy would be against the interests of a tiny number of very wealthy people. That may be an unfair conclusion. But knowing what it now knows, the public may well be inclined to believe it unless and until the Government proves it wrong.

fotoole@irish-times.ie