Consultants made a case for some State intervention in the property market, writes Arthur Beesley.
The Goodbody Economic Consultants report on land ownership appears to dismiss the argument that the extraordinary increase in house prices in the boom years has been fuelled by unscrupulous speculators who have withheld their land from the housing market to control prices.
However, the report makes the case for limited State intervention in a market that has seen house prices in Dublin rise by 220 per cent between 1996 and 2003.
In particular, it cited the case of an unnamed builder in the Dún Laoghaire/Rathdown area of south Dublin. The individual in question was the owner in 2003 of a significant proportion of undeveloped land, but had not brought a housing scheme through the planning process.
Despite that finding, the Government appears to have no intention of taking the decisive step of acquiring development land for anything less than its market value.
The Goodbody report was delivered to the Government in December 2003. At around the same time, the Joint Oireachtas Committee on the Constitution was preparing a report that found that there was no constitutional impediment to a scheme in which land prices would be capped by introducing compulsory State purchase.
When the committee published its report last April, the Government indicated a tentative willingness to adopt the proposals. The then Government chief whip, Ms Mary Hanafin, noted that the vindication of property ownership rights in the Constitution was "not incompatible" with the provision of affordable housing.
While the "use it or lose it" notion was under consideration when Goodbody was commissioned, nothing has happened since then to suggest that the Government wants to go down that road.
Needless to say, powerful property interests expressed strong opposition to compulsory acquisition for less than market price in their submissions on property rights to the Oireachtas Committee on the Constitution.
The committee revealed that major groups such as the private development firm Treasury Holdings, the auctioneering group Hooke & MacDonald and the professional auctioneering institutions argued strongly against what would be an effective cap on land values.
Goodbody was engaged by the Department of Environment, Heritage and Local Government to carry out an exercise in "economic proofing" of a proposal to introduce a "use it or lose it" scheme.
In principle, local authorities would be empowered to compulsorily acquire land from commercial owners who withhold their property from the housing market as a form of control over house prices.
The consultants said there might be case for intervention in the case of the builder in Dún Laoghaire/Rathdown and in other such instances. After citing case studies of the markets in Dún Laoghaire/Rathdown, Fingal in Dublin and Ennis, Co Clare, Goodbody said there was no evidence that hoarding was a "widespread problem".
The consultants found that a widespread scheme of compulsory purchase could result in the price of social housing falling by 10-20 per cent, depending on location. However, they warned that introducing such a scheme on an extensive basis would carry considerable dangers for the operation of the housing and land markets.
Goodbody said that deployment on a selective basis could yield benefits. The consultants said selective use could "add significantly" to the supply of affordable housing.
However, they also pointed out that use of the scheme on a modest scale was unlikely to result in significant house price reductions.
Instead of blaming speculators for house prices, Goodbody cited the lack of serviced land in Dún Laoghaire/Rathdown as the major factor influencing the supply of land. Leaving aside the example of the builder mentioned, the consultants found that the rate of completions on previously inactive land was set to rise rapidly.
Of the market in Fingal, the consultants said "speculative hoarding of land or a lack of capacity in the building industry, or a combination of these factors, could have played a role in restricting output".
While they maintained that it was not possible to be definitive as to the allocation of responsibility among these factors, they said housing output had begun to grow rapidly in 2002-2003.