Permanent affordability must be engineered into State’s housing system, NESC says

New report outlines a series of bold actions to tackle dysfunctional housing market

The State’s dysfunctional housing system is one where ‘a land-price trap’ overly dominates in the marketplace, according to a NESC report.  File photograph: Andrew Matthews/PA Wire

The State’s dysfunctional housing system is one where ‘a land-price trap’ overly dominates in the marketplace, according to a NESC report. File photograph: Andrew Matthews/PA Wire

 

The State’s dysfunctional housing system is one where “a land-price trap” overly dominates in the marketplace, according to a National Economic and Social Council (NESC) report.

The report has set out a series of bold actions on housing, including more direct interventions by the State to deliver more affordable homes.

“Overall, the council’s advice addresses key questions of ‘what, who and how’ in terms of achieving an affordable, sustainable and socially equitable housing system. Bridging the supply and affordability gaps is what must be done,” the report underlines.

Actions “should be focused on bridging the supply gap by actively managing land and locational value for public good; and bridging the affordability gap by engineering-in permanent affordability”, it recommends.

Commenting on its findings, NESC director Dr Larry O’Connell said: “The dominant business model [for housing] results in a land-price trap. Development is normally close to the margin of viability, and competition is happening at the wrong stage, within the volatile land market rather than in the housing market.”

The research concludes fundamental change is required to move to a permanently affordable, stable and more sustainable system of housing. “Direct public-policy influence is needed now to make affordable development happen,” Dr O’Connell said.

Institutional change

NESC sets out the actions necessary to bridge key gaps in supply and affordability. Institutional change is required, it says, “to ensure key public actors have a strong developmental mandate and executive capacity to drive sustainable urban development”.

This should include putting the Land Development Agency (LDA), which is coming into operation, on a statutory footing as a matter of urgency and with an enhanced mandate, “including to provide land for social housing, and equip it with a planning role and the tools to assemble land and engage in direct development”, it says.

This development of the LDA should cover compulsory land acquisition/compulsory purchase orders (CPO); master planning to guide future growth and development, and land value capture that contributes to the initial cost of infrastructure investment, the report states.

Specialist teams should be created to help local authorities undertake necessary, complex tasks in relation to procurement, site-unblocking, CPO and master planning, it adds.

To ensure more impactful application of existing measures and to spur more affordable near-term development, it says the Government should:

– Establish a national cost rental programme at scale, with access to land on favourable terms, low-cost finance, and with conditions to ensure homes remain subject to public ownership and the rents are affordable;

– Tailor the application of Part V requirements in planning legislation to make them more effective by increasing the proportion of homes which must be “affordable”, albeit tailored on a “county-by-county” basis following housing-need/demand analysis, “allowing 5 or 10 per cent increments” in such home numbers. These requirements should apply to all housing developments, and policy incentives for co-operation should be provided, and

– Introduce separate funding streams focused on high impact, “in terms of the number of affordable houses provided, and clear link to compact growth”.

New solutions

The report calls for new solutions or ways of working in relation to longstanding challenges, notably tackling “the persistent ‘on-off balance sheet’ conundrum” by exploring with the LDA, approved housing bodies and others the potential of a new affordable rental scheme combining State and capital market investment, a scheme which can transition from being initially on the balance sheet, to being off it.

NESC calls for an examination of how the State could be supported to acquire land in designated development areas “at existing use value plus some premium”, as outlined by the All-Party Oireachtas Committee on the Constitution and the Kenny Report.

The council recommends an examination of the potential use of land value capture instruments tailored to specific sites, which could be used by the LDA and other institutions. Barriers to the development and introduction of a site value tax should be identified, it says.

The report recommends “a national programme of flagship projects as an important method of demonstrating how a system-wide approach to change can deliver tangible results, and be a catalyst for innovation in the vital construction sector”.

Prior to the Covid-19 crisis the State faced significant housing challenges, Dr O’Connell noted, including insufficient output; acute affordability pressures in the private rental sector and “high unmet need for social housing”.

“The response to the pandemic, the programme for Government, and the upcoming review of the National Development Plan provide a new context in which to consider urban development, land management, and housing supply and affordability,” he added.

“The willingness to intervene displayed in the pandemic response . . . should embolden policymakers to act on these recommendations,” the report advises.