Pathway to increasing new housing supply

1. Increased Land Availability for Residential Development

By 2040 an additional one million people will be living in Ireland. The Government will make public land available for residential housing purposes.  It will increase the sites available to the Land Development Agency (LDA) to build housing and continue to fund Local Authorities to purchase land for social housing. It also intends to make the necessary reforms to the planning system to make the development process as streamlined as possible. 

The Government has issued housing supply targets to each Local Authority to inform their contribution to the average of 33,000 new homes required per annum. These targets also enable more detailed local analysis of housing needs and demand through the New Housing Needs and Demand assessment framework which will inform each Local Authority’s housing strategy and development plan moving forward.  

2. Update Urban Development Powers to Address the Kenny Report.

Land zoning and investment in services and infrastructure add significant value to land and sites. The National Economic and Social Counsel (NESC) is of the view that “Ireland must bring about a fundamental change in its system of urban development, land management and housing provision”. This must include “bridging the supply gap by actively managing land and locational value for public good”. Taking into account the Kenny Report and more recent publications by the NESC and others, the State needs an up-to-date mechanism that can be applied in a fair, equitable and proportional manner to achieve national housing and urban development objectives. This includes securing a share of land value gain arising from public policy decisions and investment for wider public benefit and community gain.  Part V obligations and development contributions do not generate sufficient revenue to address the cost of providing land, infrastructure and housing to meet the needs of sustainable communities particularly for development at scale on an area-wide basis.

2.1 Introducing Land Value Sharing.

A new system of Land Value Sharing (LVS) has been developed based on current/existing land use values. The concept involves securing a proportion of the value uplift of the development site, tracked from a point of zoning or designation to a point of planning permission. These proposals reflect the very significant increase in market value derived from re-zoning and State investment and will ensure that the community benefits as a result.

An LVS measure is intended to apply to all new residential (or mixed-use development that includes residential) zoning. This will be accompanied by a new register of zoned residential development land which will be developed with appropriate regard to GDPR restrictions.

There is also a need to encourage activity in land which is currently zoned and is suitable for residential development by means of a tax to activate vacant lands (see paragraph 4.2 below). Finally, there will ultimately be enhanced complimentary measures to secure the appropriate level of contributions from developed and zoned lands as it comes forward, beyond the levels currently provided for by section 48/49 development contributions. This will be after a period of at least six years and is to ensure an equitable approach that provides both market signaling and sufficient scope for a timely development of currently zoned lands. This is, in effect, a use it or lose it type mechanism for zoned development lands. The LVS measures will operate in addition to any Part V obligations and the current system of section 48/49 development contributions will remain in place until they are gradually replaced by LVS measures.

These measures will hope to address fundamental and systemic issues in the land market by providing more certainty and stability from the outset. They will work to reduce the hope value which currently leads to speculation in the land market at too early a stage in the development process which in turn relates to the cost of housing.  Legislative proposals are being developed to give effect to this concept which will contain appropriate measures to reflect a fair and appropriate approach with a focus on ensuring that measures improve the viability of housing delivery.

2.2 Introduce New Urban Development Zones.

The Urban Development Zones (UDZ) mechanism takes the planning focused Strategic Development Zone concept and expands it to address development and regeneration of urban areas with significant potential for housing. The UDZ designation will be applicable to large scale areas in single or multiple land ownership.

The introduction of UDZ will address situations where speculation by early mover landowners in the planning process leads to an increased price expectation on the part of neighboring landowners. This makes site assembly and the provision of necessary community infrastructure difficult and costly. The UDZ concept will include:

• a development agency role for Local Authorities/and or the LDA;
• an appraisal stage prior to designation to identify the broad development potential of the relevant area and the infrastructure likely to be required to support development;
• oversight of the LVS mechanism applicable in the area;
• a plan-led process that includes a key decision-making role for the local planning authority;
• post designation fast-track planning arrangements where development proposals are submitted in accordance with an approved scheme; and
• prioritisation of UDZs for complementary State investment to ensure housing delivery at scale including up front enabling of strategic infrastructure and services including public transport.

2.3  Introduce New Planning Arrangements for Large Scale Residential Developments (LSRD)

Following stakeholder engagement and aligned with commitments in the programme for Government, new arrangements will replace the current Strategic Housing Development (SHD) arrangements and will comprise three stages:

1. Pre-application consultation stage – planning authorities will be required to complete

the final consultation meeting aspect of the pre-application consultation stage (including the provision of an opinion as to whether the proposal constitutes a reasonable basis for moving to the next stage and submitting a planning application) within 8 weeks of receipt of such meeting requests from the developer/project promoter;

2. Planning application stage – planning authorities will determine LSRD planning application within eight weeks of receipt with limited scope for further information requests in light of the pre-application consultation phase; and

3. Appeal stage - An Bord Pleanala will be required to determine LSRD appeals within a certain time frame (which may be generally 6 weeks from receipt) again with a limited scope for further information requests.

These arrangements will apply to applications for 100 homes or more or student accommodation bed spaces of 200 bed spaces or more. Up to 30% of the gross floor space of the proposed development will be allowed for commercial use acknowledging that these developments are most prevalent in brown field urban areas. These streamlined arrangements have the potential to be almost as time efficient as the SHD arrangements and will also return the primary decision-making function to the local level with the associated gains in terms of public participation.

2.4 Improved Functioning of the Planning Process.

New arrangements will be introduced over the coming years to rejuvenate the current planning process in Ireland. A review of the planning code will be conducted with the Office of the Attorney General which will be completed by December 2022. The key objective over the coming years is to ensure that the planning system is well resourced and is plan led with greater public acceptance of more predictable planning outcomes reflecting the needs of both the existing and new populations and a system which reflects the transformational changes and land use and activation measures outlined above. 

In addition, work is advancing on the reform of the judicial review process pertaining to the planning system primarily to ensure that applicants access the administrative system fully in advance of court process and that only matters of substance are referred to the Courts.

3. Increased Supply through the Land Development Agency.

In broad terms, the LDA has two main functions:

1. Co-ordinating appropriate State lands for re-generation and development and opening key sites which are not being used effectively for housing delivery; and
2. Driving strategic land assembly, working with both public and private sector landowners to smooth out peaks or troughs of land supply, stabilising land values and delivering increased affordability

By assembling land packages ahead of the planning infrastructures stages, the LDA can lower development land costs and tackle upward pressure on house prices. It is hoped the LDA will enable Government to address volatility in land prices as a result of land speculation as well as delays in delivering housing in strategic urban re-developments generally due to disparate land ownership and cost allocation for infrastructure.

The LDA will work with local authorities, state agencies and the private sector to deliver housing and to identify public and private land for development purposes. 

3.1 Make more State Land available to the LDA.

The LDA already has access to an initial tranche of State land and has actively developed these sites but access to a further tranche of lands which are appropriate for housing have been identified across State bodies. There will be a process of due diligence on these lands led by the LDA, in consultation with the relevant state bodies, which will determine the appropriate residential yield and, where appropriate, the lands will transfer to LDA ownership as soon as is practical.

These lands have the potential to deliver up to 15,000 homes and the LDA will advance the project through the normal planning process which will include public participation. The LDA will report regularly to Government on the use of State lands and there will also be a requirement on all state bodies to offer lands that they propose to sell to the LDA in the first instance.

4. Activate Planning Permissions

4.1 Provide a New Croí Cónaithe (Cities) Fund

It is estimated that there are approximately 70,000/80,000 residential units with planning permission granted nationwide that have not yet commenced. The uncommenced figure is around 40,000 in Dublin which is about four years housing supply in the capital.

Lack of viability is constraining the development of apartments for the purpose of sale rather than rent in the built-up areas of cities that are more suited to high density residential development. In order to ensure that new apartments will be developed for sale to individual households at a lower cost, a new fund is being established called the Croí Cónaithe (Cities) Fund. This fund will have the objective of addressing the viability challenge and activate housing supply and density, mainly in cities. It will apply to developments over certain heights/density thresholds and, through a competitive bid process, will ensure that these developments can be built at lower costs for sale to owner occupiers. The level of exchequer investment per home will be a maximum of 20% of the total cost of the eligible unit. Effectively, the home will be delivered to purchasers at a lower cost with a reduction broadly equivalent to the level of VAT at development levies.

4.2 Implement a New Tax to Activate Vacant Land for Residential Purposes.

Where land is zoned for residential purposes and planning permission has been granted, the Government is seeking to ensure that these planning permissions come to fruition as soon as possible to meet housing needs. Accordingly, the government has introduced the Zoned Land Tax to replace the Vacant Site Levy from 2022 onwards.

 5. Increased Labor and Sectoral Capacity.

To deliver an average of 33,000 houses and apartments (and beyond) will require an expansion of the current workforce. The Government is introducing a number of measures in conjunction with the private sector to encourage people to enter into careers in the construction sector. Amongst these are the Action Plan on Apprenticeship 2021/2025 which contains an ambitious commitment to increase apprenticeship registrations to 10,000 per annum, almost double the 2020 intake. The initiatives to address the supply of skills are predicated on employers and the construction industry generally continuing to review the attractiveness of its career offering to current and prospective employees, promoting careers in the construction sector and partnering with education and training providers to provide upskilling and reskilling to professional bodies, Skillnet Ireland, apprenticeships and further and higher education in training providers.

6. Make Capital available for Housing.

The capital requirement to provide an average of 33,000 new homes per annum to 2030 is estimated to be at least €12 billion every year through a mix of public and private investment. Ensuring a sustainable source of financing across the four tenure types requires a unprecedent mobilisation and the coordinated effort across all forms of financing. Non-State sources of funding will be crucial for the long-term success of Housing for All. International capital markets and private investment, both domestic and international, will play a key role. 

6.1 Expand Exchequer Funding for Social and Affordable Housing Delivery Basis.

On a per capita basis, Ireland is one of the largest providers of social housing in the OECD and the Government intends to expand its social housing footprint further to play their part in increasing social housing supply. Ireland social housing sector has traditionally been funded by exchequer funding and this will continue under Housing for All.

6.2 Provide Additional for the Land Development Agency.

The LDA will be capitalised with €1.25 billion in equity from the Ireland Strategic Investment Fund and will have the capacity to borrow a further €1.25 billion. The Government recognises that a further increase in LDA funding will be required in future years in light of increased levels of activity envisaged and this is likely to be in the form of an increased borrowing capacity of approximately €1 billion. This additional funding will allow the LDA to deliver on its pipeline of housing including on additional State lands, deliver accelerated, affordable housing through Project Tosaigh detailed in Pathway 1, and assume responsibility for the National Asset Residential Property Services DAC (NARPS) from NAMA.

6.3. Facilitate Lending for Social and Affordable Housing.

Indirect financing for the purposes of constructing or requiring social and affordable housing is a key enabler with the Housing Finance Agency (HFA) being the primary lender. The Government will bring forward legislation to increase the HFA borrowing capacity from €10 billion to €12 billion with a review in two years to support the local Government sector in land acquisition and delivery of social and affordable homes.

6.4. Expand State Facilitated Development Finance.

Home Building Finance Ireland (HBFI) was established in order to increase the availability of senior debt funding for residential developments in response to the acute shortage of housing supply. HBFI has €730 million of funding available for residential development with an ability to raise a further €750 million if required.

6.5. Secure Non-State Financing.

External sources of finance will be needed to bridge the gap between the overall funding requirement to build an average of 33,000 homes each year and that provided via direct exchequer funding, State borrowing, HBFI and the domestic banking sector. There is an increased recognition of the importance attributed by investors to achieving positive environmental and social impact on a sustainable basis. Housing is well placed to attract sustainable and ethical financing from investors with strong environmental, social and governance standards. Approved housing bodies will also have a key role to play as agent for attracting sustainable investment into affordable housing.     

Summary

Like many other aspects of the Housing for All programme, the pathway to increasing new housing supply is high on aspiration but, as yet, largely low on detail. The introduction of the Land Value Sharing system and the introduction of the New Urban Development Zones may control speculation on land prices and hopefully generate a return to the Government to help fund the Housing for All programme but the detail as to how they will operate remains outstanding. Likewise, the introduction of new planning arrangements for large scale residential developments in principle will speed up the planning process but, like the review of the planning process which is due to be completed by December 2022, details remain light. Until this detail is provided, the jury will remain out as to whether the Governments ambitious plans to increase new housing supply will bear any significant fruit.

Please note this Article is not intended as legal advice. If you have any queries, please contact wither Paul McCutcheon or David Mullins whose contact details are set out below.

AUTHORS

Paul McCutcheon, Partner
E:  pmcutcheon@kanetuohy.ie  
M: 087 632 2591

David Mullins, Senior Associate
E:  dmullins@kanetuohy.ie
M: 087 700 7480