I thank the joint committee for the invitation to attend. I will briefly go through the main points of the submission, but before doing so I will introduce my colleagues. Ms Orla Hegarty is a lecturer in UCD on architecture. Her expertise is in the construction industry and its regulatory environment. Mr. Mel Reynolds is an architect. He is self-employed and works in private practice. His expertise is in property development, building regulations and standards, all of which are pertinent to the issue we are here to discuss.
I will outline briefly why this issue is very important. I will also outline the obstacles in resolving the difficulties, as we perceive them, and some possible solutions, which is probably the most important aspect.
To put the matter in context, out of over 198,000 houses, there are probably 98,000 vacant, which is too many in a total housing stock of 2.022 million units. Contrary to popular belief, not all of these units are in what we might call the wrong places, in other words, places where people do not want to live or where there is no employment. There is a lot of vacant land, as well as many underused spaces and vacant houses, in areas in which there is a high demand for housing and places in which there are employment opportunities. It will be interesting to see the vacant sites register. It is our understanding a lot of vacant land in Dublin city is owned by Dublin City Council. To me, it is an issue if the State is one of the main owners of underused land and property. We need more productive use to be made of existing housing stock and land, or what we call "low hanging fruit". That is one of the things we could do immediately to break the current impasse in housing supply.
Why is resolving the issue of vacant derelict sites and underused spaces so important? First, the numbers are very high. One would expect the rate of vacant housing to be between 4% and 5% of the housing stock every year owing to the number houses of being sold, subject to probate or the fact that people are just not living in them. In Ireland there is a vacancy rate of nearly 10%, a surprisingly high percentage.
Dublin City Council has identified more than 60 ha of derelict land in its bailiwick. Last December the Dublin Inquirer newspaper carried out a survey of vacant sites, lands and buildings. It was only able to identify the owners of 179 properties, a high proportion of which, 88, were in the ownership of Dublin City Council. I was surprised by the result.
Good planning and sustainability are other good reasons to resolve the issue. We must use resources in a sustainable fashion. Therefore, the use of underused spaces, derelict sites and vacant housing should be maximised. The stock of vacant housing holds great potential as a tool to be used in regeneration, not just in urban areas but also in rural towns. This issue is on the agenda of the Government and politicians. For us, it is a no-brainer.
It is important to note that we are not building as many houses as we think we are.
Many of the houses built will be three-bedroomed, semi-detached units and these will only meet a small proportion of housing demand. Changing demographics mean that there is a greater need for much smaller units and our existing stock can help plug that gap. Without actually having to build something, there are a lot of ways to use our existing underused spaces and houses to provide housing that is suitable for the broader spectrum of housing need we have compared to 30 or 40 years ago.
Another reason that this is so important is that we are not building half as many houses as we think. The Department of Housing, Planning, Community and Local Government is being a little economical with the actualité as about half of what it calls "housing completions" involves existing stock being counted as new housing. We did not build 12,666 new houses in 2015, we probably built approximately 7,000. Last year, we did not build 15,000 houses. It was probably just over 8,000. Existing stock that has come back on the market is being included. It is vacant properties owned by NAMA and ghost estates. If they are vacant for more than two years, they will require a new ESB connection, which is a measure the Department uses to measure new builds. That artificially inflates the house completion numbers. The problem is that Government policy and private sector investment decisions can be made on the basis of these artificially inflated figures. Due to the fact that we are not building as many houses as we think, it is important to use what we have.
When the construction sector starts to take off, we will have a skills issue to confront. A lot of people have emigrated. In the Dublin Institute of Technology, we have closed down apprenticeship courses. We are not the only one and there will be a shortage of apprentices and skilled people in the industry when it gets back up and running. This will take years to address. House-building can stop in a matter of weeks, but it takes years for it to get back up and running again and involves a great deal of strategy and planning. In the meantime, what does one do? Not everybody can park in the rental sector.
Obstacles to reusing and maximising the use of vacant housing, derelict sites and underused spaces include identifying owners. It is a particular issue in the context of land. The CSO has this problem also. It is very difficult to manage properties when we cannot even find out who owns them. Raising finance is a bit of an issue for those who own land and we have to acknowledge that. Not everyone who is sitting on land is doing so out of avarice or a desire to see the value inflate. Sometimes, they just cannot get finance to develop it.
There is a lack of any meaningful incentive to develop and to move land onto the market. John McCartney, the director of research in Savills, has shown that if house prices rise by 10%, the value of the underlying land rises by 35%. Where is the incentive there to shift one's land onto the market or to develop it? Land hoarding could also be an issue, as such. Conscious that I am in Leinster House saying this, I perceive a lack of political will to do something about this matter. The first-time buyers' grant and things like that put everything onto building rather than reusing our own stock. If one talks to the market, the expectation is that the way to make a profit is to flip land. It is land transactions as the value of land increases. Why would one bother to develop anything when one can make good money by simply selling the land on, with the planning permission attached, at a higher price? All the change in standards to reduce apartment sizes did was increase the value of land without any meaningful increase in new apartments.
There is a huge issue with the regulatory costs associated with converting underused spaces into productive use. We use the example of a 35 sq. m. upper floor of a commercial unit in outer Dublin where it would cost €10,000 to €12,000 in regulatory fees and costs alone to start to convert it. That is prohibitive for anybody. One thinks of a small newsagent with potential to develop upstairs. To find €10,000 to €12,000 to start doing that without any guarantee of securing permission is prohibitive. Then one has the regulatory process. We highlight in our written submission the three approvals from planning, fire and disability access, four statutory appointments, all on different timescales, submission requirements and fees. If one fails one, one fails them all. It is a convoluted and cumbersome process which could easily be streamlined to help those who have underused spaces get back into the game and maximise use. The most important thing is identifying solutions to the problems. We are probably very well aware of some of the problems but the regulatory one has probably gone under the radar. I hear very few people talking about the problems of regulation.
I will not go through the whole table on vacant housing. We have outlined it there. We have a huge problem with collecting accurate data in the same way that we have a huge problem outlining the number of houses we are building every year. We are not the only country with that problem. The CSO methodology is what we call "horizontal". It looks at the ground floor of every unit but not vertically where there is a great deal of available space which does not get counted in the census. That is not a criticism of the CSO, it is simply a methodological issue. Discovering ownership of properties is a problem as is accuracy and transparency in the data. Dublin City Council estimates its vacancy rates at less than 1%, but if one uses a different methodology, the vacancy rate rises to nearly 7%. We have issues around that. The fair deal scheme currently offers no incentive to rent out properties. We see a rent-a-room allowance of up to €14,000 tax-free for people in the fair deal scheme. There are also taxation solutions of a carrot-and-stick nature that could be used, in particular around annually incrementing property tax. Also, the commercial rates rebate it is possible to get from local authorities does not actually act as an incentive to redevelop properties.
We suggest reform of the regulatory process to make it easier and more cost-efficient for those who own commercial property to convert it to residential use alongside a full rates rebate for a couple of years increasing incrementally as we go along. There are huge issues with the vacant sites levy. Below half a hectare, there is no tax. Half a hectare would accommodate 14 or 15 houses. That should be brought down to 0.05 of a hectare. Most of the sites one sees if one walks along the Luas line in Dublin are far smaller than half a hectare and are therefore exempt. One would fit a lot of housing on them, however. The 3% tax, as we call it, is derisory. It is not going to impact on anybody who owns land. There are a lot of exemptions in the vacant site levy that should be removed and it should be applied until the building is occupied. If a refund is required thereafter, that is fine but it would prevent people getting planning permission in order to obtain an exemption from the levy.
Bank financing is an obvious issue. Mezzanine finance is very expensive. There is potential in the structural investment fund to consider establishing a State-backed fund aimed at vacant building refurbishments. That would not be that hard to do. There are also issues around construction costs and viability. One can pick up property very cheaply in places like Longford and regional towns that could well be used for this, but the construction costs make it prohibitive. On underused spaces and the rates rebate, perhaps there could be a zero rate for a couple of years and then annual increments until it becomes perhaps not punitive but in the owner's interest to better use upper floors in commercial buildings.
The regulatory burden needs to be examined. It is the Achilles heel in all of this. The amount of money people who own property and land have to expend just to get permission and the time it takes are significant problems. There is no guidance and information for owners on how to do any of this, which is a serious impact. One cannot expect a grocer or a butcher to understand this. It is difficult enough for professionals in the industry to understand how this works never mind having an ordinary businessman trying to get his head around building regulations, costs, fees, disability certificates, fire and planning. The Building Control (Amendment) Regulations 2014 require absolute compliance before a building can be occupied. That precludes people from doing what has traditionally been done, which is that people move into a building and, as they get more money, they finish it out. They can improve the building incrementally as they go along, which is important. There are many flaws in the regulation system, but that is a considerable barrier to what we call "staggered usage".
The final problem is one about which I have been banging on for quite a while. We now have what the Minister called "mandatory guidelines". Instead of a ministerial guideline, mandatory guidelines were issued. There is a centralisation of planning functions towards the Department and away from local authorities. That means planners in local authorities do not have the flexibility needed to negotiate properly with people coming in with ideas to convert their upper floors or use their spaces better. It was a very backward step to start to centralise a lot of planning functions within the Department and to take the power away from those who know the situation on the ground in the local authorities regarding the maximum use of space.