Land Development Agency should stop spending and focus on State sites

Buying private land crippled local authorities in the last crash

Minister for Enterprise  Heather Humphreys, Taoiseach Leo Varadkar and Minister for Housing  Eoghan Murphy  during the launch of the establishment of the Land Development Agency, at the Department of Social Protection, Dublin. File photograph:  Gareth Chaney Collins

Minister for Enterprise Heather Humphreys, Taoiseach Leo Varadkar and Minister for Housing Eoghan Murphy during the launch of the establishment of the Land Development Agency, at the Department of Social Protection, Dublin. File photograph: Gareth Chaney Collins

 

There is much about the Land Development Agency (LDA) that seems sensible, to the point it is a wonder that it didn’t exist sooner.

It is difficult to argue against having an organisation to look at the surplus lands of, for example, the HSE and match them with neighbouring Dublin City Council lands and devise a plan to provide houses; or exploring the potential of an underused Irish Rail site, or a local authority site for which there are no plans, and do the same.

It’s a motherhood and apple pie concept. Where things start to look a little less wholesome, is when the State starts to talk about buying private land.

The establishment of the LDA was flagged back in 2016 as part of the Government’s Rebuilding Ireland plan to get the housing sector off its knees.

When the agency was eventually set up last September, the Government announced it would build 150,000 homes over 20 years, using State land, and the “strategic land assembly” of private sites.

Up to 60 per cent of the houses built could be for the private market with 30 per cent affordable housing and 10 per cent for social housing.

Familiar refrain

Opposition to the plan focused on the sale of houses on the open market, which was described not just by the hard left, but across Opposition parties, as the privatisation of public land. It’s a familiar refrain, but one that masked the real danger of the LDA, which is not the sell-off of public land, but the purchase of private lands.

The last time public bodies became involved in land acquisition for housing it was a disaster. It plunged local authorities into enormous debt, requiring the State to establish a €600 million bailout scheme, which ultimately had to be scrapped because central government couldn’t sustain the debt either.

This wasn’t all that long ago. About 20 years ago local authorities were encouraged by the Department of the Environment to buy land for social and affordable housing. They were in fact “required” as part of their planning remit to consider land in the area that might be suitable to buy for housing.

Diligently they set to it, buying up land banks with loans from the State’s Housing Finance Agency. The loans, including rolled up interest, could be redeemed when the land was used for housing.

Age of innocence

In the spending spree the price of land bought ranged from €38,000 per hectare to €2.8 million per hectare – the latter was spent by Dún Laoghaire-Rathdown County Council on a 2.8 hectare site on the Enniskerry Road.

The year of greatest expenditure on land was 2007 when local authorities shelled out more than €80 million, in that age of innocence before the economic collapse.

By 2010 the local authorities, already stripped of funding, were suffocating under the weight of the debt they could not service for land they had no money to build on.

That Dún Laoghaire purchase, originally for €7.8 million, had with interest become €10.2 million, but it was far from unique. Cork City Council had a loan of some €21 million on an 11.7 hectare site. Fingal County Council owed €19.2 million on about 24 hectares in Balbriggan, and another of €7 million on seven hectares in Skerries. Naas Town Council was struggling under a debt of €10.2 million paid for a 4.8 hectare site.

In total, local authorities had racked up debts of about €650 million, separate to the debts they incurred in relation to affordable housing that was built, but never sold.

Mounting debts

In 2010 the government decided it needed to stop these mounting debts and it came up with the land aggregation scheme. Under this the unused land would transfer to the new Housing and Sustainable Communities Agency for €1 with the local authority’s debt then forgiven.

The agency would then consult the National Asset Management Agency (Nama) on the best use of all land banks controlled or owned by the State. It was thought Nama might advise on lands originally bought by private developers that could be combined with adjacent lands bought by local authorities for better returns when the market recovered. Other land banks would be used for social housing when budgets allowed.

The scheme lasted three years, before the government decided it could not sustain the burden and pulled down the shutters. At this stage the department has approved loans totalling €162 million in relation to 73 sites across 19 local authorities for inclusion in the scheme. The councils had received €111 million, and were to be allowed recoup the remaining €51 million, but any pending applications were binned and no new applications accepted.

Highest prices

Only loans that had fallen due for repayment were eligible for the scheme. It had been due to run for 10 years and many councils would have expected to make submissions towards the end of that period. These local authorities that had bought at the highest prices in the latter years of the boom, whose loans had not yet matured, were the big losers.

Fast forward and the Housing and Sustainable Communities Agency is now the Housing Agency. No homes have yet been completed on any of the lands transferred to it from local authorities.

Now into the fray steps the latest quango the LDA.

It has identified eight State-owned sites on which it will build the first 3,000 of its 150,000 homes. John Coleman, its interim chief executive, says the first of these will be built from next year.

But, three of these sites, which would be the first to yield homes, are the aforementioned sites in Skerries, Balbriggan and Naas, where housing has already been planned for more than a decade. The site most likely to yield homes by 2020 is the Balbriggan one, which was under construction before the LDA was established.

Planning regulator

The architect of the LDA – chief planner at the Department of Housing Niall Cussen, who has recently been appointed as the State’s first planning regulator – sees the upside of the past financial disaster.

“A significant number of sites are coming over from the land aggregation scheme. The Fingal ones, for example, were good purchases at the time and if we didn’t have them today the LDA would not be in such a strong position,” he says, describing many of the sites as “good long-term investments”.

“There were of course purchases that were very, very, long term, but they will also be available to the LDA down the road.”

Local authorities were buying land without much central oversight, Cussen says, while the LDA will have a better planned approach.

“The land agency is going to be doing this within the oversight and scrutiny and accountability arrangements that all State companies would have to comply with, so this is a much more organised, much more strategic approach.”

The LDA may make a better job of developing council-bought land but that still doesn’t make the case for it to get the cheque book out.

Coleman says acquiring or assembling private land, doesn’t have to mean buying.

‘Fuel on the fire’

“We want to avoid throwing fuel on the fire of an already hot land market, and we don’t necessarily have to buy the land to make sure development happens,” he says. “We could offer a service with it still in the landowner’s ownership, some sort of power-of-attorney in relation to the land where you take the keys off them step into their shoes but the ownership doesn’t change.”

It’s an arrangement that could work well with the OPW or the HSE, he says, to avoid money going from “one hand into the other”. It would, however, be a trickier prospect with a private developer, cases where Coleman says buying land could come into play.

“Buying wouldn’t necessarily be the first option, but it might make sense when no one else can buy.”

This would be at the bottom of the market, he says – the exact opposite of what the local authorities did. “Look at the wily old developers who assembled land over long periods of time. What’s wrong with the State doing a bit of that?”

Coleman says co-ordination and strategic planning for the future were missing from previous attempts by the State to build housing.

Downturn

“We are playing the long game here,” he says. “There is inevitably going to be a downturn – it’s going to come at us at some point in the future. Are we going to make the same mistake again where we don’t have this long-term thinking, that’s advancing and making available land, when it needs to be made available?”

Much of what Coleman says sounds sensible, but he may not always be the man in charge. There’s also the political aspect to consider with the anxiety to be seen to be doing “something” to solve the housing crisis resulting in pressure to acquire sites.

There is plenty of vacant land on the Housing Agency and local authority books that should now be under construction, enough in fact for more than 110,000 homes. But asking people to clear what’s on their plates before looking for more is seldom palatable politically.

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