This meeting involves a presentation by the National Economic and Social Council on its report entitled, Housing in Ireland: Performance and Policy. I welcome its director, Dr. Rory O'Donnell, to the meeting. Before the presentation commences, I draw his attention to the fact that while members of the joint committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I ask Dr. O'Donnell to make his presentation.
NESC Housing Report: Presentation.
It is an honour to present the council's work to committee members. As they will be aware, the National Economic and Social Council is a body in which the social partners — the trade unions, employers, agricultural interests, the community and voluntary sector and senior civil servants — deliberate on strategic issues of economic and social policy, and advise the Government, through the Taoiseach, on various matters.
A year and a half ago the council was anxious to look at the question of housing and housing policy in Ireland. The joint committee will not be surprised to learn that initially there were divergent views on a question as important as housing in a body as diverse as that representing trade unions, employers — within employers, builders and non-builders — farm organisations and community and voluntary groups. Despite the divergent perspectives and interests between the different bodies on the council, an important aspect of the final report is that the council has managed to reach a significant measure of consensus on the key challenges and ways they might be addressed.
The report is in three parts. Part 1 is short and deals with issues and anxieties in Irish policy. We identify the sets of issues which we all discuss with each other on the bus, at work and everywhere else and which worry us about the housing system. They are clustered in three groups, the first of which concerns stability and includes such issues as why house prices have risen so high, especially in Dublin, and so quickly that they are in danger of collapsing. The second set concerns inequality, raising such questions as whether there is a general problem of affordability and why some people seem to gain from the housing boom while others find it has increased their difficulties. The third set concerns sustainability, raising the question of whether the housing we are developing in Ireland at a dramatic scale is sustainable economically, socially and environmentally. The subsequent analysis provides the council's answer to the validity of those anxieties. We look at the factors that have driven the demand for and supply of housing.
Our policy recommendations concern three main areas. First, on the sustainability of housing, there is a strong argument to be made about the central importance of developing sustainable neighbourhoods and integrating housing and transport developments. We see this as a major challenge. Second, there is a set of recommendations relating to social and affordable housing. Third, there is a discussion, analysis and recommendations regarding the tricky issue of land, land management and taxation. If the committee allows, I will comment on our recommendations in those three areas.
I will skip briefly over our understanding of the Irish housing boom. Given the dramatic increase in demand for housing in Ireland in the past decade and a half, driven by economic growth, demographic growth, income growth and low interest rates, a significant increase in house prices was inevitable. Some spread of housing beyond the existing urban areas was also inevitable. We can debate whether prices needed to rise as high as they did and whether development needed to sprawl as much as it did. However, certain developments were inevitable.
The report argues strongly that supply response in Dublin was significantly less, giving rise to particularly high house prices in Dublin and dormitory settlements, spilling the county's demand into the other counties of Leinster. That pattern was the result of an overall set of planning, land use and infrastructural policies which did not allow a sufficient supply response in and near the main cities such that, in a sense, Dublin exported much of its housing demand to the inner counties of Leinster and increasingly to the outer counties of the province. The report argues that a minority face significant affordability problems and that the majority are insulated from house price increases to a significant degree. It provides a more detailed discussion of why that should be the case and outlines those who comprise the majority and minority and the reasons for their inclusion in either group. We can return to that matter if members wish.
We also point out that the reduction in social housing in the 1980s was a significant factor in what unfolded in the 1990s. When Ireland's housing demand was reaching its strongest ever level in the 1990s, we were coming from a situation of sharply reduced social housing provision. The reason was much more about the overall fiscal crisis in the economy in the 1980s but it turned out to be a factor that fed right through the 1990s.
Our conclusion is that we have a dynamic but unbalanced system. It is dynamic in two important respects. Ireland eventually produced a significant housing supply response in the past decade, stronger than in any other country in Europe. It is also dynamic in the policy sense. There have been an enormous number of policy initiatives from the early 1990s focusing on the quality of social housing, on public private partnerships, on SDZs — strategic development zones — Part V, the serviced land initiative, affordable housing schemes in more recent years, the national spatial strategy and so on.
This dynamic system has, however, been unbalanced in a number of important respects. It has been unbalanced in terms of demand and supply, particularly in Dublin. It has been unbalanced in terms of the distribution of opportunities for some and pressures for others. There is an imbalance between the distribution of private housing construction and social housing provision. There is also imbalance in terms of an excess supply of low density suburbs overly dispersed from main cities and towns. Some, but not all, on our council would say there is imbalance in terms of the distribution of gains between landowners and the rest of society.
On the basis of that analysis, the council agrees that there are four key policy challenges: first, we need to achieve a high quality of sustainable development in both urban and rural areas; second, we need to provide an effective range of supports for those who fall below an affordability threshold; third, policy must assist the market — the housing industry — to continue to provide a high level of supply; and, fourth, we must ensure a tax and subsidy regime that supports the goals stated above.
Before I turn to our recommendations for addressing those challenges, I will outlined the two general findings that inform the council's recommendations. The first of these is that the key instruments for addressing those four challenges, and effectively the three substantive challenges, are found more in the areas of planning, urban design, infrastructural investment and land management and public service delivery than they are in tax changes to alter the supply and demand for land or housing. That would reflect the experience of successive Governments and economic commentators in trying to address pressures and imbalances in the housing system, primarily through manipulating various tax instruments and finding that sometimes the system responses are producing the opposite effect to what was desired. What the council is pointing to is that we should first look in a different toolbox, that of planning, urban design, infrastructural investment, integrated housing and land management. Only then should we resort to the toolbox of tax instruments in order to achieve what we want. There are, of course, very important tax issues and they must be got right.
The second point is that the council argues that increased housing quantity and better quality neighbourhoods can be complementary and mutually reinforcing. This is worth saying because casual observation of Irish experience in the past ten years might suggest the opposite. It might suggest that such is the urgency of getting housing quantity up, and it was urgent given the population and economic demands, that we had to sacrifice quality for quantity and get the houses built and it did not matter where they were or what kinds of neighbourhoods developed or what connections to transport and other services were in place. In a short-term sense, there is a truth in that. However, the report argues strongly that quantity and quality are only in contention with each other in the rather unsatisfactory context in which we were, where the combination of our land use, our housing and our infrastructure policies were not working well. In the context that is emerging of a more integrated set of policies on those fronts, quality and quantity can be mutually reinforcing. This requires a clear vision of the kind of high quality, integrated and sustainable neighbourhood it is worth building.
The council discusses what that is in its section on sustainable housing and integrated development. It argues that we now have a new hierarchy of strategies, from the spatial strategy down to regional planning guidelines and down again to the county and city development plans. These embrace principles of sustainable development, which are: first, sustainable urban density; second, consolidated urban areas rather than spilling urban areas; third, compact urban satellites — when we need new settlements separate from existing towns they should be compact urban entities; fourth, rapid communications networks which connect housing to the economy, and so on; and fifth, sustainable rural settlement.
The principles one would want are now strongly reflected in the hierarchy of policies, strategies and documents we possess. The council addresses the question of sustainable neighbourhoods and the advantages thereof. It discusses in some detail the differences between sustainable neighbourhoods with walkable distances to commercial retail facilities, churches, sports facilities and so on, as opposed to the highly car-dependent suburbs we have traditionally developed. It also asks some important questions such as whether this kind of sustainable neighbourhood means high-rise development. It is an understandable view but a mistaken one. It does not require high-rise development.
The report is in some ways very affirmative of the principles that have emerged in the set of documents from the spatial strategy downwards. Those documents have gradually built a consensus around sustainable neighbourhoods properly integrated with commercial retail facilities and with transport. There is a risk, however — this is the other side of the coin — that proceeding in a slow consensus-building way will result in those strategies, from the spatial strategy downwards, not having an adequate impact in terms of ensuring that the developments reflect the new principles of sustainable development which are strongly stated.
The report makes recommendations which seek to ensure that developments and plans at county level reflect the principles which appear to be strongly embraced at national level and throughout the system, including a significant increase in long-range planning for urban development. It is necessary that public planning operate in the same timeframe as the best companies in the building industry which work to a ten, 15 or 20-year time horizon. Traditionally, the public system has worked on a shorter time horizon and that is a significant imbalance.
The second set of recommendations relate to social and affordable housing. The council strongly agrees — this is important, given the diverse business, employer, farmer and community interests involved — that a high level of ambition is needed in terms of our social and affordable housing policy. It recommends an expanded stock of social housing to 200,000 by 2012, which will require a significant increase in the energy and resources invested in social and affordable housing. The council also makes recommendations on modification of tenant purchase, an issue with which I will deal later.
The council has identified a significant issue in terms of what might be called intermediate households, namely, those in receipt of incomes above the level of qualifying for local authority housing but which struggle in the private ownership or rental market. In this respect, it recommends continuance of affordable housing schemes and exploration of ways of developing affordable rental as opposed to affordable purchase accommodation. Traditionally, Ireland has used subsidies in the regeneration of particular areas. The question now arises as to whether we should collectively explore the possibility of using such subsidies not alone in particular areas but in return for agreed approaches to allocations of houses and the types of rents to be charged. A number of development agencies are currently examining that possibility.
The report also identifies a number of areas in social and affordable housing in respect of which the council does not have enough expertise or has not reached agreement to make recommendations but on which further debate is required. One such issue is whether the long-term trend of public rents yielding returns which do not cover costs is good for social housing provision in the long run. The issue of stock ownership or stock transfer also needs to be debated, as does achieving an overall balance of individual housing benefits or subsidies and tenant purchase.
I will conclude with some remarks on the council's discussion on land, land management and betterment, an issue much debated in Ireland and by an Oireachtas joint committee. The council's approach begins from an analysis which is gaining ground in the international economics of housing and land marketing. Land supply is variable and uncertain because of the motives of landowners — which can vary between wanting to continue farming and other aspects — speculation and, because the workings of land markets are unlike other markets, contain information gaps and inefficiencies. There is also a great deal of uncertainty among developers about what is available and the price thereof in land markets. These issues can have important consequences for the way in which land and housing markets work. One such consequence is that housing development tends to sprawl because, depending on the willingness of landowners to release it, land becomes available in random pockets. If planning policy is uncertain, it then becomes a factor in making variable and uncertain the land supply.
One of the responses for the variability and uncertainty of land supply is the development by business of landbanks which, in turn, becomes a factor in the overall picture. The NESC strongly believes that, in considering this issue, it is necessary to go beyond the conventional zoning versus withholding debate. The issue of land and housing supply would not exist if enough land was zoned by local authorities. However, problems arise in this area as a result of wilful withholding of land in order to manipulate the market. The report argues that neither of those polar views is adequate to capture what is a complex process involving many actors other than local authorities and developers. It has the net effect of producing a system of land supply that is variable and uncertain.
The report also argues that this view of the land supply issue explains much in terms of our past experience and highlights a range of problems. It further argues that this perspective poses a number of questions for the most commonly advanced recommendations in this area. One often hears four positions advanced as the solution to the land supply issue, namely: the zoning of more land will solve the problem; given the price of land increases when the economy develops — a well known fact — landowners' betterment should be taxed through capital gains tax, levies or a new planning levy; extensive public land management through compulsory purchase is what is necessary, a recommendation advanced in the 1973 Kenny report; and the introduction of a general property or site value tax which would have an effect on supply and demand in housing markets. The latter is the option preferred by economists.
The report argues that the perspective advanced regarding land supply being variable and uncertain does not dismiss completely the comprehensive propositions but posts difficult questions in respect of each. The advocate of the view that more land should be zoned must explain how that would be consistent with desirable urban development in light of the need for access to schools, hospitals and transport. The advocate of taxing back the betterment would have to face the fact that, as land supply is variable and uncertain, a risk exists that a punitive withdrawal of tax could prompt landowners to withdraw land from supply and thereby increase the scarcity of land and housing, a situation experienced by the UK following the Second World War when the authorities introduced a 100% betterment tax. The advocate of the public land management view, which reflects the variability and uncertainty of the land supply, must answer the question of what public entity would be capable of acquiring and managing the enormous portfolio of land in a smooth and effective enough manner as to make available to the building industry land at the right price and in the right quantities. The asset management challenge must be considered in that regard.
The advocate of the site value tax view must address the question of how it would work in instances where people are asset rich but cash poor. This relates to people in receipt of low incomes but in ownership of assets that would come within the remit of property or site value tax. In that context, a debate often arises in Britain in terms of older people with property in receipt of low incomes. The council does not wish to dismiss any of the four views because a type of logic underlies each of them. However, elements of the approaches are already in existence in Irish policy. What is needed is a combination of approaches tailored to context. We need long-range land use strategies. This involves public land use planning adopting the same horizon of ten, 15 or 20 years which is adopted by the most efficient developers. That measure would be an element in the stabilisation of land supply. It is also necessary to focus consistently on the availability of land for social and affordable housing. The council argues for sufficient active land management to ensure a supply of land. It points out that land management is active in the Irish system but is not recognised as such because it falls under different headings, for example, the serviced land initiative. This very important initiative reflects on land supply. SDZs constitute a complex new approach to managing land supply. Affordable housing measures, although primarily motivated by affordability of house purchase, involve an active search for land and its management. Part 5 comprises an element of land management. Entities such as the Dublin Docklands Development Authority and others are significant active land managers. The report states we should recognise the relevance of the important elements of active land management, given the variability and uncertainty of land supply and enhance them, where necessary, in order to address the issues involved.
On the issue of sharing the increased value of land, the report argues for a pragmatic use of betterment sharing instruments in a selective way rather than a sweeping new national tax. Joint public private developments, that is, a mixed housing development, are a key feature of local authority housing initiatives. Implicit in that package of striking a price for land and housing is a sharing of land betterment instruments. There is anargument that it is perfectly valid for public bodies to seek in a pragmatic way a share of the increased land value. Given the underlying variability of the land market, sweeping measures could, in fact, damage land supply and housing. That is the main drift of the argument. Let me emphasise the degree to which the diverse interests on the council were able to reach agreement after extensive and vigorous argument on the main direction Irish policy might take.
I congratulate Dr. O'Donnell on his comprehensive report which gives us, as policymakers, food for thought.
I welcome Dr. O'Donnell and publication of this report. I was disappointed when the NESC report was published earlier in the year that it did not get the media and public attention it deserved. I also express my disappointment that, in spite of the fact that I have been seeking on a weekly basis since the publication of the report a debate in the Dáil on this and other related reports, it has not yet happened, although I welcome the initiative of the Chairman in having the report discussed at this meeting. I am disappointed that on the day the NESC is presenting a general report to this committee the Minister should have chosen to upstage it by his announcement on rural housing. I know public relations consultants are hired to manage news and upstage events and so on but it is a pity that on the day we are having a discussion on the broader housing issue public relations management should have been such as to seek to upstage it.
The report offers an excellent historical analysis of what has happened in housing in Ireland. I wish to focus on the housing challenge referred to a number of times in the report.
In regard to housing and the related issue of sustainable development and all that goes with it, the report states:
The magnitude and significance of the challenge needs to be recognised. It bears comparison with two other great challenges that Ireland faced and met in the past half century, the opening of the economy in the early 1960s and the creation of a new economy through partnership in the mid-1980s.
The significance of this conclusion by the council is that society must deal with the issues of housing, development and associated building of a community and the provision of transport because of their impact on the qualify of life. Matters are now at such a point that they require the national response the economy received on two occasions in the past 50 years. This is a significant challenge to the Government and policymakers and I am not sure it has yet been recognised.
In spite of the quality of the analysis in the report, I must confess I was disappointed at the lack of specific recommendations. There are specific recommendations which I welcome in regard to social housing and I very much welcome the fact that the council has figures for what is necessary but the report is short on specific measures. Perhaps the council felt it was a matter for policymakers to arrive at the conclusions based on its analysis.
I would like Dr. O'Donnell to expand further on the following matters. The recommendation that 73,000 additional social housing units should be provided between now and 2012 represents a doubling of current annual output but the increase in the estimated cost in the Exchequer provision is only 20%. How does one double the number of units with only a 20% increase in the financial provision?
Among those most seriously affected are young working families whose income is too high for them to be placed on a local authority housing list and to qualify for a rent allowance, yet too low to enable them to buy a house from their own resources. They could afford mortgage repayments at current interest levels but the problem is that they cannot afford to save a deposit. I acknowledge the recommendations and suggestions in the report on this issue but something needs to be done soon to put together an enabling package for young working families.
One of the ideas the NESC has floated in this context is a second loan; in order words, that the State would, in some form, put up the 8%, 10% or whatever for the deposit as a charge on the property at a later stage. I met a family yesterday, the net monthly income of which is €1,800 and which pays €1,100 — approximately 60% of its income — a month to rent a house privately. The family does not quality for rent allowance under the current scheme. The level of shared ownership for which the family would be approved would not enable it to buy and it is caught in this trap where it has considerable outgoings. The family explained that it could afford a mortgage because the repayments would be less than what it is paying in rent.
The final point to which I wish to refer is what NESC describes in the report as affordability black spots. I represent one of these in Dún Laoghaire. If some of my constituents could buy houses at the prices charged in other parts of the country, they would be extremely happy. The problem is that in order to buy within their community or environment, they must pay twice or sometimes three times what they would have to pay in other parts of the country for a house of the same size. What proposals or ideas has NESC to address specific affordability black spots?
I welcome Dr. O'Donnell to the meeting for the discussion on the report. I assure the members of the committee that the Minister's publication of the planning guidelines was not intended to disrupt or undermine this debate. In fact, we would have been delighted if the Minister had taken such note of the committee that he wished to upstage it. That, however, is certainly not the case.
The report outlines five characteristics of sustainable settlement. On sustainable urban densities, it states that significantly increased urban densities are required to make best use of the available land, ensure effective service provision, create quality neighbourhoods and reduce car dependence. On consolidated urban areas, it further states that cities and towns must be consolidated within a well-defined urban footprint. Dr. O'Donnell made reference to high-rise developments for which there is no necessity. Where is the compatibility in suggesting that there must be high density urban developments?
The report refers to compact urban satellites and states that, where they are necessary, satellite settlements should be compact and well-defined and should seek to include not only residential development but also commercial and employment opportunities. The report further outlines that areas within cities and their commuter belts should be connected through a transport infrastructure that facilitates rapid transit and the provision of effective transport services. In the NESC's research, did it find that there was no need for high-rise developments or was the view in its discussions merely that it was not socially acceptable or amenable to proper family life?
What were the conclusions to which the NESC came that would suggest high-rise developments are negative? I say this in view of the fact that all modern European cities sprawled outwards for a considerable period and then decided on the need for high-density development in inner city areas to provide economies of scale, rejuvenation of populations and demographics. Did any of this come forward in the NESC report? For example, we all speak of Dublin's commuter green belt. If that did not exist, where would the people live in view of the fact that we have not opted, to the same extent as other European cities, for high density high-rises in urban areas? If we wanted to contain cities and satellite areas within the imprint already outlined by the planners over many years, where would we have found space for people?
With the change in demographics, in particular, family sizes and the formation of families, apartments are not a bad solution if they are properly organised. In many European cities people live quite successful normal lives and rear children in apartments. Is this not compatible with the Irish psyche? Is it that we do not seem to accept high-rises? What if they are built, planned and designed well, with different sized units and access to transport, education, child care, etc.? From where did this view that high-rises are definitely negative come?
Although a number of members are offering, we will give Dr. O'Donnell the opportunity to answer those questions.
Specific recommendations are always a difficulty for the council, which has a diverse membership. Being a general council, rather than a specific technical council on housing, industrial development or rural development, it is difficult to make specific recommendations. Since the mid-1980s, when it played an important role in addressing the wider national crisis, the council has tended to see its role as advising Government on, and seeking a shared understanding of, strategic directions. I accept that this leaves the reader thirsting for more specific recommendations.
I understand the increase would be from approximately 6,300 to 9,000 social units per year, rather than there being a necessity to double output. It is on this basis that the calculation of the cost was made. However, I stand open to correction in this regard.
The issue of intermediate measures is difficult. There was considerable debate in the council about assistance measures. Deputy Gilmore referred to the important fact that falling interest rates greatly reduce the burden of monthly repayments but do nothing to reduce the hurdle relating to deposits. If anything, it increases the height of this hurdle because deposits, at 10% or whatever, are a reflection of the price. It is an important point.
There are a number of ways to proceed. One is a possible tax instrument involving tax relief for people saving a deposit, particularly for that purpose. There are tax supports for savings for pensions and other instances. The second was this idea of an equity stake or second loan. The third is a measure some of the banks are developing, which is a different financial product that makes it easier to achieve entry.
The council did not make a firm recommendation on this matter. The motivation, particularly in respect of the second loan, was partly with an eye to the already heated level of the housing market. At the macro-economic level, caution is needed in respect of further stoking the demand and increasing the level of borrowing in the Irish economy. It is important to consider it but a factor of which account must be taken is not wanting to further increase the overall level of private borrowing of the population. A number of banks have taken steps to address that issue to some extent.
Deputy Gilmore's third question was about affordability black spots. The report does not have any magic bullet to address that, although the general argument that it is important to achieve significant extra housing supply in and near existing urban areas addresses the concern to some degree. Part of the cause of that problem is where an urban area sees itself as not being capable of providing extra housing supply, either through the private housing industry or through the decision to provide social housing. In such cases, there are two outcomes: first, the housing demand spills out somewhere else; or, second, the price in the original area spirals upwards. This reflects the question posed by the Deputy. A significant commitment to increasing housing supply in existing urban areas does mean higher densities. With respect to the Deputy's constituency, it is important to note that a set of four local authorities determine housing matters in Dublin. The report is clear that there has been a deficit of co-ordination across the four areas and discusses how it might be addressed. One possibility is to have a land use authority for the Dublin area, as previously advocated. There are arguments for and against this. The council is absolutely clear that there is a need for much more co-ordination. This implies that the supplies of private and social housing must be adequately met by each authority in a co-ordinated way.
That brings me to the question of the density of developments. The position of the report is that Irish densities have been too low. In the long term this has created significant costs. These include the public finance costs of providing adequate schooling, policing, social and health services in excessively low density suburban developments. The private costs are significant in the long term. As individuals age or become no longer able to use cars, they will face some difficult problems accessing health and retail services.
From both Irish and international experience, we now have a clear description of what constitutes various sustainable neighbourhoods. This involves having a much more criss-cross arrangement of streets, with fewer culs-de-sac or long fingers. High amenity spaces are required, rather than huge tracts of urban parkland. This means locating retail and social services much closer to housing than has been the normal pattern. In a way, we know exactly what constitutes sustainable development.
One objection that often arises in the Irish context is that we have tended to refer to high rise developments and, for various reasons, people do not want such developments. In response I say sustainable densities of housing do not require high rise developments. There is a diagram on page 130 of the report that shows three housing formats with the same density. One is like the Ballymun towers but is not in fact high density housing. There is a lot of open space around the towers, with the result that the density per hectare is not high. The second format is Victorian back-to-back parallel streets while the third is the mixed use urban development emerging in Ireland and elsewhere which is considered more desirable with regard to density and mixture, with apartments, houses, duplexes and other units. It is important for social sustainability that housing areas do not accommodate just one age group but allow older people, for example, to live in the neighbourhoods where families are being reared.
Those arguments do not rule out high rise development absolutely. The case may be made that, in certain contexts, for certain groups, high rise development is perfectly desirable, as long as it fits in with the urban planning perspective. The report addresses the argument that the levels of density we are discussing necessarily imply high rise housing.
I thank Dr. O'Donnell for his contribution and the council for producing its report which is comprehensive. My queries relate to the social housing aspect, in particular to how tenant purchase schemes operate. The last time Dublin Corporation, as it was then known, had a tenant purchase scheme was in the millennium year, 1988. To my knowledge, it was extremely successful, particularly in areas such as Cabra. In some of the older, more established areas, it proved to be a turning point. The report suggests that, if a point of over-supply was reached and there was a subsequent increase in local authority housing, this could lead to problems. Dublin City Council is seriously considering selling flats to its tenants in some complexes. Does Dr. O'Donnell view this as a positive step, or does he think it might cause problems further down the line?
My next point relates to co-operative housing. In the inner city we have a number of co-operative developments, most of which are successful. Despite being an expensive method of providing houses and accommodation, there are problems in some of the more settled, long-term developments with rent increases, service charges, maintenance costs and so on. Does Dr. O'Donnell see a future for co-operative housing? Does he see it making any contribution towards resolving some of the current problems?
I thank Dr. O'Donnell for coming and making his presentation. He was very much like a good builder: he covered an awful lot of ground in a short time. Perhaps we can expect the snag list now.
Dr. O'Donnell's report states that up to one third of all new households formed in the period 2001-06 — that is, almost 14,000 households annually — will fall below the affordability threshold. The level is as high as 42% in urban areas. Dr. O'Donnell was measured in what he said about this in his report. Would he describe the situation as a crisis, particularly as the Minister has shown no inclination to rush forward or demonstrate any concern about the issue?
There seems to remain a significant gap between the projected provision of social and affordable housing and the number of households that will be unable to achieve ownership on the open market and that will face affordability problems in the private rental sector. With regard to what Senator Brady said and the whole issue of local authorities either selling off their housing stock or, in some cases, handing it over to housing associations, does Dr. O'Donnell think the diminution in State ownership of the housing stock will add to the problem?
I have one final question. The Kenny report of 1973 and the ninth progress report of the All-Party Committee on the Constitution recommended that local authorities make land at existing value for housing subject to compulsory purchase orders. Dr. O'Donnell said this could form part of a block of solutions, none of which could probably address the issue on its own. Would Dr. O'Donnell view this recommendation as one of the major pillars of any solution on the affordability of land?
I will throw in a couple of questions. I hope we are not over-burdening Dr. O'Donnell. Did the council consider the question of holding a constitutional referendum on the right to private property? What was the thinking on that proposal during the discussions the council held in preparing its report?
The joint committee has been considering the building regulations. Dr. O'Donnell mentioned the dilemma between the quantity and quality of housing, and the fact that there need not be such a dilemma. Is there scope for reviewing the building regulations to ensure better quality housing? Did the council give consideration to this issue?
Regarding affordable housing — I do not know whether the council would go into this level of detail — Dublin City Council has three affordable housing schemes, Part V, council sourced properties and the new initiative under Sustaining Progress. This does not seem very efficient. Would the council go as far as recommending the streamlining of these schemes or coming up with a better affordable housing scheme which could be applied throughout the country?
In the report and presentation there is great emphasis on sustainability. Having regard to the sustainability issues raised, would it be fair to say the thrust of the report is against one-off rural houses?
I, too, welcome the presentation. I have a question regarding public private partnership and the land issue. Many of the recommendations seem to be aimed at assisting developers to provide more houses. I agree with previous speakers that currently excluded are young married couples who cannot afford to purchase a house in certain areas, although the number of houses has doubled in the past ten years. Taxation on second houses was also mentioned.
What are the views of the council on the role of local authorities within the housing system, particularly regarding the acquisition of land banks? Does it envisage the Government giving them the power to acquire land and enter into public private partnerships in which they could dictate the type of housing in a development and control the overall cost of houses? Most of the recommendations are aimed at assisting builders who have done very well in recent years. Does the council see the role of local authorities changing to enable them to solve the problem people have in buying affordable houses in their own area?
I will try to answer the questions as best I can. Senator Brady's question regarding tenant purchase is an important one. In the context of the need to further enhance social and affordable housing provision, the report recommends that policy should review the degree of windfall gain which can accrue through tenant purchase. The anxiety that underpinned that recommendation was historical in that in the late 1980s we saw a very large sell-off of local authority housing which brought the stock very low. A weak stock and a weak provision of new stock throughout the late 1980s was a factor in the pressures that built up in the 1990s. I admit, however, that is a backward looking view.
The other issue was one of equity or fairness. It relates to the situation where those who receive significantly subsidised housing on a rental basis can then receive a significant discount for purchase in a context where others are still struggling to have their primary housing needs met.
Senator Brady raised the question of the position in Dublin city. The discussion of that issue might be laid out a little differently. I see three positions. There is the traditional Irish approach to tenant purchase which we agree has played an important role in social development, although perhaps it involved an excessive sell-off at a certain period. Its critique which comes through in the report is that there was an inequity. There is a third, more radical position and it would have been better if we had put it down on paper. It involves extending tenant purchase from houses to flats in a more radical tenant purchase approach.
There is a case for putting all three positions down on paper and arguing and assessing their merits and demerits. I would not claim that what the council says about this is the last word. What comes through in the Dublin debate is the interesting suggestion of vigorously extending tenant purchase schemes. What the analysis shows and what we know from common sense is that this approach is only feasible if we have some security of ongoing supply for new people coming on stream who face affordability problems. A chariness about it reflects a history of stop-start, uncertainty and public finance problems. If we were in a position where in effect we committed ourselves, knowing that in each generation we would have to meet on an ongoing basis the needs of people not able to afford to buy on the basis of their incomes, the possibilities for discussing tenant purchase would widen. I will be blunt about this; perhaps there is more to be said than we state in our report.
I note Dr. O'Donnell's comments on inequity. If the point of providing subsidised housing is to give people an opportunity to get into a position to move on, the question of inequity should not arise. If a tenant purchase scheme is introduced and the tenant gets a windfall benefit, surely the point was to give them an opportunity to move on and the argument of inequity does not stand up.
There is an issue in that at the same time another family is in a queue and struggling to get a much smaller level of public support. There is a wider debate to be had and I wish we had put all the positions down in the paper in order that we could debate them. There is an issue regarding the differential treatment of different families. That is not an anti-tenant purchase point.
The Senator also raised the issue of co-operative housing. The council believes strongly that co-operative and voluntary housing is an integral and increasing part of social housing provision. There is wide agreement on this. It is the capacity of the sector to take up that role that is a constraint. It is a difficult one to develop. There is strong agreement that it requires an element of current as well as capital support, given the high quality services that go with different types of voluntary and co-operative housing, whether it involves care for the elderly or others. The report recommends the creation of a current revenue stream and is strongly supportive of voluntary and co-operative housing.
Deputy Morgan stated approximately one third of households struggled in terms of affordability. He asked whether I would describe this as a crisis. What the report tries to nail down strongly is that in Ireland and other liberal democracies we should expect a significant and ongoing public role in housing support. In some senses our history, of people leaving the country in the 1980s, leaving local authority houses empty and private houses selling at very low prices, and then a very big pick-up in private housing demand and supply, could have led us to believe that now we have got the economy back on track the provision of social housing and the previous level of involvement are things of the past.
Permanent features such as the nature of income distribution in our economy, the nature of our social disadvantages across lone parents or the disabled, specific housing needs or wider social economic developments and the prevalence of low income employment means there is a permanent active role for social support in terms of housing. That is, perhaps, all I should say on that issue. It is the key argument of the report and is strongly supported by all members of the council, the employers' unions, farm organisations and community and voluntary pillar.
The issue of local authority stock and diminution was also raised. I refer members to our earlier discussion. The report does not take a stand on the issue of stock transfer but puts down a marker in terms of it being an issue we need to debate. There are positive points in both arguments. It might be better for tenants if housing quality provision and management were provided by an authority other than a local authority.
I agree with Dr. O'Donnell on that point, which is set out in the report. Would he agree that the proposal which is being operated by many local authorities should not proceed prior to the debate to which he refers taking place? It is certainly not helping to resolve the current crisis. Would Dr. O'Donnell agree that the proposal, which is not addressing the crisis, should not be proceeded with until a debate has been held on the matter?
The council has not made a judgment on whether the proposal should proceed. However, it has named it as one of the important issues on which an open debate should take place.
A question was also asked about the Kenny report. The somewhat nuanced and pragmatic conclusion which the council reached on the land question views compulsory purchase in certain contexts — before zoning — as an element of the solution in conjunction with other elements of active land management that have emerged in recent years. Members can make their own judgment, having read the Oireachtas report and the NESC's report, on where the analysis overlaps and differs.
The Chairman also asked some important questions. The council did not discuss the issue of a constitutional referendum on private property because if the analysis pointed to a particular instrument, such as, for example, a particular form of compulsory purchase and so on, a question would then arise as to its legality or constitutionality. The council did not point as much in that direction as did the joint Oireachtas committee.
I do not have a view on building regulations. The drift of the council's argument probably relates more to how houses are constructed than to construction regulations. The council has focused more on urban and integrated planning. There is a suggestion that affordable housing schemes might be streamlined. That is an issue for discussion by Government and local authorities if enhancement of affordable, social and voluntary housing provision is adopted.
On sustainability and one-off housing, the report is clear that there are significant costs associated with one-off rural housing including connection costs and the cost to the environment. There are also benefits in terms of rural community development in the form of family support and so on. The council struggled with many difficult issues in this report and members will recognise, from the short piece in the report on this issue, that it has not added significant new commentary on the matter. It would be false to suggest it has done so. However, the council advocates a tax on second homes which is designed to bring the costs of building second homes closer to the true cost involved, whether they be costs of connection, the cost to the environment or, significantly — and this is not mentioned in the report — the costs in terms of housing pressure for rural residents created by strong rural demand. I will not comment beyond what I have said as the report does not add new analysis or recommendations other than the recommendation relating to second homes.
Senator Brennan asked about local authority land banks. The thrust of the argument on the land issue is that public actors at national and local level must consider themselves active managers of land supply. Members may be more expert than me in teasing out the full implications of that argument.
My question relates to rezoning and land ownership. There appears to be a perception among members of the general public and, to an extent, politicians that if land is rezoned, farmers automatically become excited and try to sell the land the following day. However, that is often not the case. When undertaking assessments of their land banks, councils often assume that because land is zoned it is available for housing. In my experience, farmers continue to farm their land for many years as a result perhaps of family circumstances and so on.
Did the NESC undertake analysis of the amount of land it believes is available and what is actually available? Has anybody undertaken analysis in that regard? The perception exists that hoarding is taking place and that developers are purchasing land and hoarding it. I am of the opinion that there is a great deal of unintentional hoarding and that people are simply choosing to continue with their farming practice or whatever pursuit in which they were involved before the land was rezoned.
Dr. O'Donnell and others have expressed the view that many of the financial instruments in place for many years have not brought land to the fore for residential development. Dr. O'Donnell stated that land supply is variable and uncertain but increasing taxes could stymie the availability of land. In my experience, landowners or developers selling land put a price on what they expect to achieve for it regardless of taxation. If land is scarce and the supply is variable and one increases taxes, then all one is doing is forcing the person wishing to buy the land to provide for that increase in the original purchase price. This further inflates the price of the land. Perhaps Dr. O'Donnell will tell the committee if that is an issue which arose in his deliberations. In other words, increasing capital gains tax will force a developer or builder to factor that increase into the purchase price in light of the fact that the landowner wishes to achieve a particular amount regardless of taxes. Has the council or anybody else considered that issue in detail?
Dr. O'Donnell stated that basic tinkering with the taxation codes has not resulted in the bringing forth of land banks for development. We will have to devise some instrument to encourage people to make available land for development if we are to proceed with the number of houses we intend to build. We can talk forever about our social policies but if we cannot acquire zoned land for housing, problems will arise from the outset.
The people who come to my constituency clinic because of a difficulty with purchasing a house would be able to purchase a house comfortably if they were living somewhere else or if they were fortunate enough to have a parent who owned land and could build on it, now that it will be easier to get planning permission.
Given that the NESC has a wider remit and represents all the economic and social interests, has it looked at the wider implications for society that a nurse would not be able to buy a home in Dublin from his or her own resources? The issue of affordability is increasingly concentrated in the large urban areas. This has implications not only for the individuals who cannot afford to buy a house but also for the economy, social life and demography of cities. Would it be possible for the NESC to explore ways of dealing with this issue?
The Labour Party in Dún Laoghaire proposed that the social housing provision in new developments should not be limited to 20% because it was manifestly clear that new affordable houses were needed. Do we need to raise the 20% limit in areas that are black spots for affordable housing? In areas where affordability is a problem do we need to focus zoning almost exclusively on the provision of affordable housing? A nurse is paid the same salary whether she works in Carrick-on-Shannon or at St. Vincent's Hospital in Dublin but what she will pay for housing is dramatically different. The support from the State in mortgage interest relief or tax relief on rent does not differ. Is there a case for graduated support depending on the location and cost of housing? In some of the areas where affordability is the problem, land may not be available.
I apologise for not being here earlier. Does Dr. O'Donnell believe we need greater inducement for State and semi-State agencies to make better use of their land banks? I can certainly think of a fine site in the middle of Dún Laoghaire, at the back of the hospital, which is being used as a surface car park. It may be owned by a religious order or possibly the State but this fine site is lying idle and a higher intensity of use would contribute to the town. I can also think of Army lands. I know the Minister stated such lands would be released for development but the wheels seem to grind relatively slowly in releasing it. Perhaps inducements are required to ensure it becomes available for use in a shorter timeframe.
Is Dr. O'Donnell concerned at the slow pace of progress on the report of the all-party Oireachtas committee on the Constitution on property rights? Some of its recommendations were very good, yet over one year later we are still waiting for progress.
On the question of zoning, the analysis of the report is very much in line with what Deputies are saying. One of the factors which gives rise to overall variability and uncertainty of land supply is that local authorities can zone land but cannot ensure it is then developed. In previous rounds of the debate on zoning versus the withholding of land in Ireland and elsewhere, people cited the thousands of acres of zoned and serviced land as evidence that there was no shortage. The argument made in the report is that the figures for zoned and serviced land do not resolve the issue. The drift of members' comments is in tune with ours that the debate is badly put.
One of the points that is clear from this and earlier analyses, although it did not receive much attention, is that local authorities not only zone and service land but their ability to grant planning permission at an appropriate density is then dependent on the availability of wider infrastructure, for example, transport infrastructure to feed the increasing population in and out. There are numerous factors at play in the overall picture, for example, private developers having a longer time horizon than public actors, public actors not having an integrated approach to housing and other social infrastructure such as transport.
On the issue of tax, the report takes a view that if we take as fact that land supply is variable and uncertain — there are numerous factors causing this, one of which is the willingness of landowners to make it available and, counter to the older view, that land supply is fixed — it raises the fear which cannot be dismissed that if tax is raised excessively to claw back betterment — one can make a strong argument that it is a windfall gain — this could prompt the withdrawal of land and make the situation even worse. I disagree with the proposition that if one imposes a betterment tax, landowners could just add it to their price and charge it to developers. I think it is more likely that some margin of landowners might decide not to sell which would have an effect on price. That is a small difference at the margin of this argument but the drift of the comments seems consistent with the report. However, it does not rule out that there is an ethical case for a sharing of the social dividend of benefit and that opportunities should be taken pragmatically to achieve this.
I was not supporting that approach; I was merely making the argument.
Deputy Gilmore raised some important issues. A range of things have to be done to address the very real problem he described. One of them, which we have gone over a number of times, is the willingness to achieve a significant housing supply response even in urban areas. There is often more land available than people might think and land does recycle. Old industrial complexes close down and become available, and land moves around. That, as the Deputy hinted, is a slow process. We, therefore, need the social housing programme to be enhanced, although that will not quite address what the Deputy has been discussing. The affordable housing programmes will address the problem to an extent and the report has argued strongly for their enhancement.
The issue then arises of what else might be done. There are two broad approaches. One would be to seek to achieve some sort of cost rental arrangement, whereby people pay a rent that covers the costs of construction but without necessarily covering the ever increasing asset price or land value. In some systems on the Continent, a huge proportion of housing stock exists in that form. I will return to that in a moment.
The other approach would be more along the lines of the housing benefit system that exists in the UK. The worry is that, in a context of imbalance — we have not yet reached balance — a means-tested housing benefit based on the cost of rental versus income, which is widespread in Britain, would stoke the demand side of the housing market without doing anything to increase supply. That can raise the heat in the rental market.
The report indicates a need to explore such a cost-rental possibility. There are two prongs to that. On the general policy, there is the possibility of converting section 23 instruments from urban regeneration instruments to cost-rental instruments. That means establishing whether it is possible to divide subsidies on the supply side, perhaps with a mixture of public and private developers and elements of tax support in return for an agreed rental in the long term or an agreed allocation policy to decide who gets the available apartments to rent. That approach is quite widespread in the United States, where it works fairly well.
The report hints at a second possibility, which could also be worth exploring. It is very close to what I have just described — it is a first cousin. Might it be possible for institutions such as hospitals, health boards, universities and other not-for-profit entities, which are aware that housing is a problem for them when it comes to attracting and retaining the staff they want, to devise arrangements under which they will, in a sense, be part of the solution to their own problems? In other words, they could become cost renters. Those institutions will have no interest in building properties and then recouping the rising asset price but they will have an interest in providing or being helped to provide properties that would be available at a guaranteed level of rent for the staff whom they need to attract. The report suggests that this possibility be explored, together with the legal, financial and other arrangements that could underpin it. That might not be a solution from our current viewpoint but it focuses on the problem that the committee has identified.
The report does not identify specific inducements to make better use of land in regulatory or financial terms but the strong conclusion of the chapter on land and land management is that we should recognise those land management instruments that exist, even if they are under other guises, such as Part V or the Dublin Docklands Development Authority, and enhance those instruments where necessary. There is a strong focus on the enduring role of public land management in the supply of land, which the report's analysis and other people have identified.
I cannot really comment on the progress of the all-party Oireachtas committee's report.
That concludes our deliberations on the Housing in Ireland report. We will be giving the issue further consideration in the context of the report of the All-Party Committee on the Constitution and of the Minister's formulation of his policy responses to the issues.
I thank Dr. O'Donnell for his attendance.
I thank the Senators and Deputies for inviting me to address the committee and for listening to my views.
The joint committee went into private session at 12.36 p.m. and adjourned at 12.42 p.m. until 2.30 p.m. on Wednesday, 27 April 2005.