Last week I walked around Vienna, a city that doesn’t have a housing crisis. One thing that struck me was the care with which the old buildings are maintained. I didn’t see any dereliction. Contrast that with Dublin. It’s time the State declared war on dereliction. Dereliction is antisocial behaviour, a blight on our cities and towns. Dereliction is nothing short of urban vandalism and the owners of derelict buildings are engaged in delinquent behaviour. It should not be tolerated.
Significant parts of Irish cities are falling down around us because these buildings are owned by inappropriate owners. The owner of a building is the custodian of the building and has a responsibility to the building and, in turn, the street and urban ecosystem. Dereliction imposes a cost on neighbouring property owners. In fact, property owners should be at the vanguard of any renovation movements, because dereliction drags down an area, leading to further decrepitude and a loss of income and a destruction of wealth.
The Government has gradually brought in various measures aimed at penalising these urban vandals but these are not working quickly enough. These incentive-based approaches are intended to nudge the market by changing the behaviour of delinquents and encouraging in new owners. Obviously, given the fact that large swathes of our cities are still vacant and falling derelict, the market needs help to execute its duties as quickly as possible. We need a Department of Dereliction along the lines of the National Treasury Management Agency (NTMA).
The NTMA was set up to deal with one of the most pressing issues of the day for the Irish economy: the national debt. Staffed by professionals who know their business, with no other remit, it was focused on managing the national debt. A similarly focused semi-governmental body is required with its own budget and exclusive remit to remove dereliction in Irish towns and cities within, say, five years. The war on dereliction should have precise quarterly targets, and be backed by the ability to both penalise bad behaviour and incentivise good behaviour. Apart from derelict properties, Ireland also has over 160,000 empty dwellings. These properties could be homes and should also come under the remit of the new department.
For a country with a housing crisis, the figures for both dereliction and its first cousin, vacancy, are shocking
Taxes, levies and a public campaign of “name and shame” could be deployed to punish owners of derelict buildings, while a suite of tax-based incentives – not unlike the urban renewal grants and tax breaks of the 1990s – could reward builders, developers and private individuals who undertake to build and care for old buildings. Indeed, given that the State owns AIB, discounted finance could also be deployed as the costs of renovations are significant. We know that in economics positive incentives work, and extreme positive incentives work even better. By using the tax and State-owned banking system, the authorities could make it impossible for owners not to renovate their derelict buildings.
For a country with a housing crisis, the figures for both dereliction and its first cousin, vacancy, are shocking. In the 2022 Census, the Profile of Housing in Ireland shows that there were 230,056 vacant homes in 2011; this has fallen since then but still stands high at 163,433 in 2022. There are around 2.1 million homes in Ireland, meaning 7.7 per cent of our housing stock is lying vacant. At a more granular level, the Census shows over 20 per cent (33,653) of vacant homes were unoccupied rental properties. About 17 per cent or 27,213 houses were vacant due to former residents being deceased. Fourteen per cent (23,205) are empty due to renovations and 11 per cent (17,472) are vacant because they are classified as “For Sale”. In terms of how long these homes have been empty, around 48,000 homes have been vacant in two consecutive Census years (ie at least 6 years) and 23,072 dwellings have remained vacant over the past three censuses, going back to 2011.
There is no official list of derelict homes. The first job of the new department should be compiling a complete and accurate list of derelict buildings. There are a few independent sources, such as emptyhomes.ie (set up by Padraic Grennan), which calls on the public to report an empty home, providing as many details as possible. The site then contacts owners and urges them to sell in order to get the properties back in use. However, another way of finding out precisely how many buildings are derelict has been championed by the government in Wallonia, Belgium. It uses water and electricity consumption metrics to pinpoint derelict properties, levying a fine of €500 to €12,500 on applicable dwellings. In Ireland, a new department could use existing ESB connections, which seems like a no-brainer.
Site value tax
Once identified, the most basic remedy must be a site value tax (SVT) that ensures owners are incentivised to make a more efficient use of these valuable sites in a desperately tight housing market. A site value tax is one that taxes the value of the site, not the building. It therefore encourages renovations and penalises those owners who leave a site undeveloped or buildings derelict. Let’s consider an example. A detached three-bedroom house in the Dublin suburbs is worth €450,000. The build-cost of the house is estimated at around €300,000, leaving the land value at €150,000. Under a 1 per cent SVT, you’d be looking at paying SVT of €1,500 annually. Play around with the tax rates and you would soon get a response from owners. Add into that tax breaks for the cost of materials and building and very quickly, we would see activity on the previously undeveloped sites and derelict buildings.
It starts with understanding that land is a precious resource and letting buildings or land fall into disrepair is antisocial behaviour. Precisely because property is valuable, only the truly wealthy can afford to let it descend into dereliction
The State could learn from Singapore – when land is rezoned to residential from commercial, industrial, leisure or agricultural, 70 per cent of the uplift in the value is taken in a tax so that the original landowner doesn’t get a windfall gain from profits that were engineered by the State’s rezoning. These revenues are used to pay for infrastructure in the new rezoned area. This is the way Hong Kong paid for its new Metro. What Singapore and Hong Kong prove is that a country or region can be an innovative capitalist economy without genuflecting constantly to the interests of the land lobby.
It starts with understanding that land is a precious resource and letting buildings or land fall into disrepair is antisocial behaviour. Precisely because property is valuable, only the truly wealthy can afford to let it descend into dereliction and therefore they should pay for the vandalism. If, indeed, they are too poor to renovate, a site tax will encourage them to sell to avoid the tax and sell to someone who wants to improve the building or the site.
The State needs to set up an NTMA-style quasi-public body, with a fixed mandate and timetable, otherwise Dublin and other Irish cities risk becoming Detroit where the centre was ceded to dereliction, vandalism and decay.
That’s our urban future if we are not careful.