The Land Development Agency is not a free-for-all for private developers
It will be an important mechanism for the State in countering any housing crash
If the Land Development Agency had existed in 2008 our current housing supply shortfall would not have been as severe as it is now. Photograph: David Sleator
The 10th anniversary of the global financial meltdown has particular resonance for Ireland, not least for its housing market. 2008 represented the beginning of a decade-long black hole in Ireland’s housing delivery cycle, from which we are only beginning to climb out.
This void occurred because of the almost overnight elimination of the availability of land to build on, and money to build with. The land generally became tied up in financial resolution processes. Ireland did not have a State-led land and housing supply option to fill the gap left by private sector difficulties.
As a result, no planning, design or construction work was performed for many years on swathes of land. This caused the current supply-demand mismatch that we are experiencing today, driving strong land value inflation. This boom-bust land cycle has blighted housing supply, and is the root of the housing crisis today. The core function of the newly created Land Development Agency (LDA) is to help put an end to this.
Think back to the commencement of the crisis in 2008. What if, at that time, the State had available to it a body that, over many years, had assembled and prepared large reserves of State and private lands so that they could be opened up for development in a counter-cyclical way?
What if that body had significant capital, so that new homes could be built on that land, even through a period of fiscal distress? And what if that body could have engaged construction firms and their thousands of workers who were left reeling from an almost total cessation of work?
The Government has created such a body. The LDA has two interrelated objectives: one, to drive the delivery of new homes on underutilised State lands; and two, to assemble large-scale strategic land banks, involving public and private land, to ensure co-ordination and speedier delivery of land and homes in the future. If the LDA existed in 2008, it could have helped fill that void in the delivery cycle and our current housing supply shortfall would not have been as severe as it is now.
The Government has committed €1.25 billion of funding that will be deployed in the assembly of land and the building of homes
The opening up of prepared sites should not be misinterpreted as a free-for-all for private developers. The extraction of value from land does not solely happen through construction. It happens through site assembly, planning processes, risk reduction and making land construction ready. These are activities – which are traditionally developer-led – that the LDA will perform, positioning it to capture significant value while not taking excessive risks.
While the construction industry will obviously play a role in the agency achieving its goals, it is incorrect to say that the upside will simply be given away to developers. This misunderstands one of the fundamental objectives of creating the agency, which is to maximise the State’s financial return while ensuring expedited housing delivery, including significant levels of affordable homes.
To suggest otherwise pre-supposes the transactional methods that the LDA may choose.
The LDA has got off to a good start. The Government has committed €1.25 billion of funding that will be deployed in the assembly of land and the building of homes. The impact of this funding can be magnified by retaining partners to share some of the risk and put their money to work too.
State bodies have made available land that can yield 3,000 homes starting from 2020 (which is only 15 months away), with a strong pipeline of additional land to follow. The LDA will quickly increase its activities on these sites to help address the near term housing need across all tenures. Social, affordable and private homes will be provided in a sustainable way.
However, we must also not take our eye off the fundamental reason for setting up the LDA. When the next downturn arrives, as it inevitably will at some point, the agency will be an important mechanism for the State in countering any housing crash. It will be able to release shovel-ready land for the delivery of homes, where and when they are needed.
We do not want future generations to endure what has been experienced since 2008. The LDA can play a major role in ensuring they do not have to
It will impose time-bound covenants on the delivery of those homes. It is also open to the LDA to build directly. The best choice will be made in the public interest on a site by site basis, focussing on value for money, speed of delivery and minimising risk for the State.
By having a long-term outlook, we can increase our ambition for the agency. That is why we have been able to target the delivery of 150,000 homes over a 20-year period. This goal is ambitious but realistic and grounded in precedent. Similar scales of delivery have been achieved by our European neighbours using methods such as land-pooling (where multiple sites are joined together to form larger co-ordinated delivery opportunities), which will be utilised by the LDA. There is no reason why Ireland cannot emulate their successes.
The agency can deliver as early as 2020 from its initial portfolio, notwithstanding that significant planning and preparatory work on sites must be completed in this timeframe. However, it is the long-term vision of the agency that is paramount, as it will help prevent a worsening of our current situation, and a repeat of future housing crashes.
We do not want future generations to endure what has been experienced since 2008. The LDA can play a major role in ensuring they do not have to.
John Coleman is the CEO of the Land Development Agency