JOINT COMMITTEE ON THE CONSTITUTION díospóireacht -
Thursday, 17 Jul 2003

Vol. 1 No. 3

Property Rights: Presentations.

Chairman

The first item on the agenda is the presentation by the Institute of Professional Auctioneers and Valuers, represented by Mr. Liam O'Donnell, Mr. Jim Power and Mr. Paul Gartlan. They are welcome to our meeting.

Before we begin I remind the visitors that members of this committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long standing parliamentary practice to the effect that members should not comment on, criticise, or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

I invite the IPAV to make its presentation. We have read and studied its detailed submission so it is not necessary to read through all of that again but we appreciate that the IPAV may want to emphasise certain points. We will be as flexible as possible but ask that the presentation not exceed five or six minutes. After that many of the members will put questions to the witnesses.

Mr. Paul Gartlan

We thank the committee for affording the IPAV the opportunity to make a short presentation on our recent submission on property rights. Afterwards my colleagues and I will be delighted to answer any questions the committee may have.

IPAV was established in 1971 as a representative body for qualified licensed auctioneers, valuers and estate agents throughout the island. Its main aims are to protect, advance and promote professional standards among members and to protect their interests and those of the general public in its dealings with members. IPAV has more than 700 members and 100 full-time students in its main education centres in Dún Laoghaire and Cork. There are a further 300 part-time students in centres in Galway, Limerick, Cork, Waterford, Dublin, Athlone, Derry and Bangor. Full and part-time students may study to diploma and degree levels.

When the committee sought written submissions last April IPAV commissioned economist Jim Power to compile a submission outlining our views on property rights. For mainly historical reasons, property and the ownership of property has always been a central focus of Irish life. Owning one's home has been the first and main aim of the majority of couples starting out in life. While that may have changed somewhat in recent times, it nevertheless continues to be a core objective for most people. The Irish housing market has experienced significant growth over the past decade in terms of housing transactions, completions and prices.

The sharp increase in prices has attracted considerable attention and many would regard the fact that it is now very difficult for young people to get on the housing ladder as a negative legacy of the Celtic tiger era. This is true but it is an unavoidable consequence of the dramatic transformation of the Irish economy. Arguably the evolution of the Irish housing market over the past decade does not represent a deviation from fundamentals. The economy over that period has experienced a fundamental transformation. This was characterised by several factors that created significantly higher demand for housing. These characteristics include strong economic growth, a sharp decline in unemployment, strong net inward migration, strong growth in disposable incomes, a young demographic profile, high household formation, falling household size, sociological factors and strong investor demand. Furthermore, the market received a significant structural boost from a once-off decline in interest rates due to EMU entry.

Supply was initially slow to react to this increase and the result was a sharp adjustment in prices. While there are solid reasons for the rapid increase in house prices and the sharp decrease of mortgage indebtedness on the back of it, the reality is that housing has become extremely expensive and unaffordable for many people.

However, care needs to be taken in any reaction to this situation. Housing is now a very important component of total personal wealth and personal indebtedness in the economy. Consequently, its stability has an important bearing on the overall stability of an economy. A sharp and sudden decline in house prices would have a negative wealth effect and could seriously undermine the economy. This is not desirable. It is, therefore, imperative that all interested parties, particularly Government, work together to pursue policies that will guarantee the overall stability of the housing market. Official interventions in the housing market have had mixed results in the past. The timing of many interventions was cyclically wrong. They have tended to increase volatility of house prices and have generated considerable uncertainty. Market forces generally deliver the most desirable outcome and where possible they should be left to operate as freely as possible.

Imposing a constitutional cap on development land is feasible subject to a referendum, but is not desirable. Article 40.3.2 of the Constitution states:

The State shall, in particular, by its laws protect as best it may from unjust attack and, in the case of injustice done, vindicate the life, person, good name, and property rights of every citizen.

Placing a constitutional cap on land prices would appear to be against the spirit of this constitutional right to private property. In many senses it is now too late to contemplate such a course of action as the major part of the price adjustment has already occurred.

There are now clear signs that the market is reaching a position of equilibrium. The gap between demand and supply has narrowed significantly over the past five years and should narrow further. Housing supply has reacted to strong demand and last year a record number of new units were completed with 57,695 units built. Over the next five years, some of the demand forces will moderate. The key emphasis should be on a further increase of land supply for housing, particularly at the affordable end of the market. Measures to increase land supply should include radical changes to the planning process in order to speed up the building of houses. For affordable housing, the release of the State's land bank for housing construction should be pursued with vigour, particularly the land bank owned by port authorities in many towns and cities.

It is not appropriate to demonise the investor as happened in some quarters in the past couple of years. The investor is a necessary part of a properly functioning housing market and has been instrumental in bringing greater stability to the rental market. It is the investor, at the end of the day, who is taking the risk and at the same time contributing to the supply of rental housing. If the investor were now to pull out of the market for reasons of less favourable tax treatment for example, the overall housing and rental market could become very unstable.

A properly functioning housing and rental market is essential for mobility of labour. Labour mobility is in turn essential for balanced regional economic development. Availability of rental property and greater housing turnover are essential to encourage workers to move around for work, either within or between countries. Research has shown that workers will become more mobile if there is a supply of affordable rental properties and if housing transaction costs are moderate.

The current stamp duty regime is penal and acts as a serious disincentive to turnover of housing. The reduction in capital gains tax from 40% to 20% increased the turnover of capital assets, improved economic efficiency and resulted in a higher tax take under this heading. A reduction in stamp duties on residential property could have a similar effect by leading to older people trading down and freeing up larger properties for families. The increased activity should at least maintain the tax take and, if carefully chosen, a new lower rate could actually result in an increased take. Stamp duties, legal and other transaction costs act as a major disincentive to housing mobility which, in turn, undermines worker mobility.

The removal of the first-time buyer's grant was desirable because there are more effective ways of helping first-time buyers. A further increase in mortgage interest relief would be desirable. The proposal to remove DIRT liability on savings by first-time buyers that will go towards house purchase would represent a positive help to first-time buyers.

Government policy towards rural development needs to focus on creating a vibrant rural economy. This will necessitate heavy investment in physical infrastructure and IT capability. Planning laws need to become less rigid in order to attract people to live in rural Ireland. The decision by some local authorities to prevent people from outside the county building a house is totally unacceptable and should be repealed.

We believe that the financial institutions should play a part in ensuring a more stable and sustainable housing market. We believe, though not legally enforceable, it would be in the best interest of all parties if mortgage providers established a voluntary code of conduct covering areas such as loan to value ratio, the savings record of the borrower and the duration of the loan. It would also be beneficial to agree common standards for stress testing. The encouragement of fixed rate mortgage for a period up to ten years would also provide greater insurance against shocks and reduce risks for borrowers and lenders alike.

We have given a brief outline of the IPAV's views on property rights and how they are related to house prices. I thank the Chairman and the members of the committee for inviting us to make this presentation. We will be willing to answer questions members may have.

Chairman

As the IPAV is aware, we are a committee charged with reviewing the Constitution, particularly Article 40 and Article 43 on private property rights. Is it fair to say the IPAV sees no need for constitutional change?

Mr. Gartlan

That would be a fair comment.

Chairman

To implement the suggestions put forward, the IPAV is saying the Dáil and Seanad should bring in more challenging legislation, such as the example of the Planning and Development Act 2000.

Mr. Jim Power

We are not constitutional experts but reading the two articles, we certainly cannot outline or find any reason at this stage there should be any changes to them. We believe the correct way to address the situation is through a series of micro-policies such as changes to the stamp duty regime, mortgage interest relief for first-time buyers, etc. There is a significant State land bank around our towns and cities that could be brought on stream to build affordable housing. The provision of affordable housing is an issue for Government and the social welfare system rather than any other party in the State. In terms of the planning laws, our overall view would be that the solution to the housing crisis is supply. If enough houses are built, the market will find an equilibrium and eventually the problems that are perceived to be there will be rectified.

Chairman

The IPAVs sister organisation also used that word "equilibrium". Judging by the statistics and reports in the media, we have a huge housing waiting list despite that fact that last year record numbers of units - almost 58,000 - were built. The number of homeless people on record is increasing. In between, a certain category of couples with two incomes - whether they are gardaí, nurses or teachers - find themselves in the trap where they cannot afford to get on the housing ladder in the Dublin area. There is also the statistic that last year 30% of all houses and property units on the Dublin market were bought by investors and speculators. There is no indication at the moment that the property market is either levelling off or in decline.

Mr. Gartlan

I think the equilibrium is a reality; it is coming. The number of houses built in the past number of years has increased year on year and the number of houses required has not really increased; it has been more or less static in that period. Given the natural course of the market it will reach equilibrium; the only question is if it will happen next year or the year after, but it is getting closer.

Mr. Jim Power

The ESRI is releasing its medium term review this afternoon and the figures I cited in the initial submission quoted the figures it produced two years ago in regard to housing demand over the next 15 years or so. I suspect the numbers we get this afternoon will be similar. Within five to ten years the natural demand for housing will be about 35,000 to 40,000 units per year, which the market is currently satisfying. Some 57,000 new units were bought last year. When the supply comes on-stream it obviously takes a while for the market to reach equilibrium. My belief is based on economic fundamentals as well as the fundamentals of the construction industry, that over the next couple of years that supply demand gap will diminish and we will get a levelling off of house prices. The data we have seen for the first quarter of this year show that house prices are still growing strongly but there are a few exceptional reasons for that. The main reason for investors being particularly active is the conditions prevailing in other asset markets, such as equity markets, for example. I suspect that this quarter and subsequent quarters will see a reduction in investor demand because the emergence of the investor in the market in large numbers over the past three or four years is leading to a fall in rental incomes. This was reflected in the last consumer price index and I think it will be reflected more strongly over the next couple of years.

In answering the question about the investor, the fact that 30% of all units were bought by investors or speculators if you want to call them that, but I would not do so is leading to the improvement of the rental market. They are an essential part of the overall equation. In continental European cities, for example, home ownership rates are significantly lower than here. I think there will be an increased emphasis in future on the rental market as distinct from owner-occupied properties.

Chairman

Mr. Power said that the 9% stamp duty was a disincentive. The increase in the past two or three years in the number of investors in the property market, if you want to call them that, does not suggest that the 9% stamp duty acts as a deterrent for investors.

Mr. Power

In my view it does not affect investors because the capital appreciation and the rental growth over the past five years more than compensated for the stamp duty charges. I think, however, that the next four or five years will be different. In an environment where one will not get the same capital appreciation and where rents are being compressed, it is unlikely that investors will be as complacent about the stamp duty charges and it will become a bigger issue. Our key point in regard to stamp duty was that if stamp duty levels are reduced would see an improvement on the existing turnover of housing in the market. The Department of Finance has the model to calculate what would have a neutral revenue impact. More people would move out of bigger houses into smaller units thus freeing them up for families. At the moment the stamp duty regime is quite penal and is acting as a serious disincentive for people to move to smaller properties or to move out of the urban areas.

Deputy Neville

I welcome the IPAV and thank Mr. Gartlan for his presentation. I declare an interest in that I am a member of that organisation.

CORI also made a submission to the committee in which reference was made to the Kenny report in which it was suggested that land could be purchased by local authorities at a cost of 25% on top of the market value for agricultural land. The land could be made available to developers and this would have the effect of bringing more development land on to the market thereby increasing the supply side of the equation. I would welcome the views of the IPAV on that.

I am interested in the comment on rural housing, which is a matter of concern for all rural representatives. We have had a great deal of difficulty with planners on this matter. They put it to us that ribbon development is urbanising rural Ireland and creating a blot on the countryside and that the proliferation of septic tanks is damaging the environment. How can we respond to such arguments from planners?

There is a difficulty with regard to the Constitution in connection with private property under Article 40.3.2° in that bodies corporate, trusts, partnerships, limited companies etc., are not regarded as entities under the those articles. Does Mr. Gartlan have a view on this matter and what has been his experience in that regard?

Mr. Gartlan

We think that the proposed cap on development land would have a negative effect on houses that are currently being built. Buyers would be tempted to wait for land down the road coming on-stream where the property prices would be €20,000 or €30,000 less. It would lead to builders being in trouble straight away and would also lead to a possible decrease in the value of existing housing stock, which in turn could lead to negative equity. There are many other ways of doing it and that is not the road we would suggest going down. As Mr. Power outlined, stamp duty is one approach. Planning is so rigid and slow even after the 2000 Act that if planning were speeded up it would lead to a lot of property coming onstream and that would probably be my first recommendation.

In regard to rural housing, I agree that ribbon development is perhaps not the way. Small developments of houses in rural areas with the provision of sewerage facilities would be a better way of going forward.

Deputy Neville

Is Mr. Gartlan talking about expanding on existing development rather than rural development?

Mr. Gartlan

Even in rural areas.

Deputy Neville

Local authorities encourage village development but it is the one-off houses with which they have a problem.

Mr. Power

In our view, as part of the Government's initiative on a national spatial strategy, if one wants to have balanced regional economic development, which in our view is desirable, some of the planning restrictions on one-off housing in rural areas are not appropriate. For example, there are a couple of local authorities that prevent non-residents of the county from getting planning permission. That sort of planning restriction does not make any sense whatsoever. If you want to encourage rural economic regeneration, and given the outlook for the agricultural economy going forward there has to be huge emphasis on rural economic regeneration, then the planning laws need to be changed and loosened to allow greater development.

Deputy Neville

It is planners' policies rather than the laws that are causing the difficulty. The laws are not restricting it. It is policy.

Mr. Power

All right, then. Planning policies should be changed.

Deputy O’Sullivan

I apologise, but I have to go to the overlapping meeting of the committee on education in a few minutes. I welcome Mr. Power and put it to him that his faith in the market seems to be quite strong. However, from the point of view of the common good, which it is our duty to examine, what the market has done over the years is deliver hugely raised prices for ordinary people trying to buy houses. While the Constitution protects the right to private property, it also balances it with the concept of the common good. As a committee, we are charged with trying to find the right balance between the two. Representatives of the Institute of Professional Auctioneers and Valuers their have a certain perspective. What are views on balancing that right, particularly the need of ordinary people to be able to afford houses, even where there are two incomes in a family? If I have interpreted the representatives correctly, they said that 30% of houses are currently bought by investors.

Mr. Power

That was an approximate figure. It is in that region.

Deputy O’Sullivan

We all accept that investors in apartment blocks and so on provide rented accommodation at what we hope are affordable prices. However, do the representatives not accept that the level of investment in the housing market, in family homes of between two and four bedrooms, by people who are not buying the houses to live in is causing inflationary prices for people who are trying to buy a home? There were suggestions yesterday from some of the groups who came in that there should be levies on people who own zoned building land and do not use it, who are sitting on it to make more profits. What are your views on penalising those who sit on land for years instead of freeing it to be built on?

Mr. O’Donnell

We would obviously love a quick fix but there is none with property. We accept that house prices have increased enormously over the last ten years or so. We feel, however, that the market is beginning to look after itself. With the number of houses built last year, this year and next, supply is meeting demand. When that happens, one will find that prices will decrease in real terms. The ERSI report due out this afternoon will say that, in 15 years, property prices will, in real terms, decrease by 20%. I see that happening in eight to ten years. There is no quick fix.

As for the investor in the three-bedroom semi-detached house or the two-bedroom apartment, some years ago the then Minister discontinued mortgage interest relief for those who bought investment properties. That caused rents to go up almost twofold when people stopped buying. The Minister reintroduced mortgage interest relief in the last budget. People are back in the market, and rents in Dublin are down, perhaps by up to 20%. Where one interferes in the market, one causes a problem somewhere else. The average investor in the three-bedroom semi-detached house or the two-bedroom apartment is not a wealthy person. It could be a taxi driver whose wife's mother has left him a few bob.

Deputy O’Sullivan

It is raising prices for people trying to buy a home.

Mr. O’Donnell

He does not know how to buy stocks and shares. He is also providing a service that no one else will provide. The Government will not provide a service for a tenant who needs short-term accommodation. It is an absolute service.

People may be investing in huge tracts of land and sitting on them, going away to Portugal while they wait for the land values to go up by millions of pounds. One positive thing the Government can do in that area is be proactive, releasing lands in the dockland areas of the major cities. It should release Government land in big blocks that will really put a damper on the appreciation of those land banks that are being sat on.

Deputy O’Sullivan

So you would not be in favour of levying the owners of private lands that are not being released?

Mr. O’Donnell

It can certainly be investigated and it would help. However, a proactive approach to putting those banks of land on the market at a reasonable price and PPP schemes are the way to go. If taxes are introduced in one place, they cause problems elsewhere. The important thing is to be proactive, bringing sufficient land on stream to reduce the value of the banks being held. People will sell fairly quickly then.

Deputy O’Sullivan

If a levy were imposed surely that would free land.

Mr. O’Donnell

It would be a short-term measure. A tax generally in this area is not desirable. It does not work and has not done so. You will find that it will be passed on to the consumer eventually. It will be added on. I know other bodies have said they are in favour of levies. I am in favour of levies on land that is rezoned to cover the cost to local authorities of providing services and so on, but not of a tax for its own sake. I am in favour of a tax to pay for services to be provided. Generally the way forward is for the Government to be proactive. There is plenty of land and if it were zoned with proper planning systems in place, people holding huge banks would get rid of them very quickly because the value of those big tracts would decrease. That is my personal opinion and it may be shared by many of our members.

Mr. Power

Perhaps I might add something regarding changes to the Constitution at this point. If the committee had been sitting here five years ago, with the benefit of hindsight, we would have realised that we were in for a period of uncontrolled economic activity that would inevitably lead to a significant increase in demand for housing and significant house price inflation. At that stage, constitutional changes to try to cap the price of land would have been a desirable objective. Sitting here today, we have come through those five years of rapid economic activity and the market is starting to level off. I confidently believe that it will do so much more over the next few years. Interfering at this stage could be dangerous and destabilising. It would not achieve any worthwhile objective.

Deputy O’Sullivan

Unfortunately I must go to the meeting of the committee on education.

Chairman

The member is excused. You are saying, Mr. Power, that five years ago, with hindsight, we might have made some constitutional changes. However, the reason the committee has been convened to examine this issue is that, after the Kenny report came out in the 1970s, nothing was done. It was left in abeyance. Successive Governments failed to act or move on it. In the early 1980s, an all-party Oireachtas committee examined the whole area again, but nothing happened. Now what you are saying to us is that perhaps we should have done something. If the committee makes proposals or suggestions, be they constitutional changes or otherwise, what is to prevent, in a decade or 15 years, the same sort of roll-over where one has a boom followed by a flat period? Is not now the time to plan for the future rather than to look back?

Mr. O’Donnell

We might be planning for over rather than undersupply if we look forward five years. Austria and Germany are currently oversupplied, and property prices are dropping by 20% per annum. That is not desirable either. Perhaps, as you say, we should be planning for five years from now but we believe we will be reaching a period of oversupply then.

Chairman

The point I make is that when the Kenny report emerged in the 1970s there was a recession. In the past seven or eight years - certainly more than five - we have had a boom. Should we not be planning for ten to 15 years in the future and have some system in place? In my view, Joe Citizen is not at all happy with the state of the property market. Enormous numbers of people throughout the country are on local authority housing lists who, under normal circumstances, would have bought a house. They do not necessarily want to get a council or local authority house but they find themselves trapped. They can see no end in sight.

Mr. Power

I think the period of house price inflation we have come through is unprecedented and that the factors that drove it will not be repeated. The demographic profile is going to change significantly over the next ten years. That means that strong growth and household formation will start to fall off. Second, we will not get the sort of catch-up Celtic tiger-type growth rates again that have characterised the last five or six years. We are moving on to a much lower growth plane. The strong inward migration we have seen will level off. The economy will not continue to grow at the rates we have seen. Much of the demand forces, plus the adjustments to lower interest rates because of EMU membership, etc. will not be repeated over the next ten to 15 years. I do not believe that constitutional changes at this stage would have any real positive impact on the outcome. To alleviate the short-term problems that undoubtedly exist, micro-measures should be examined, such as those we have mentioned in relation to stamp duty, planning and the on-stream provision of a supply of development land. In our view that is the way forward.

Deputy Andrews

I welcome the delegation. As far back as ten years ago, David McWilliams, a fellow economist, Mr. Power, predicted that galloping inflation would occur in relation to house prices. While economists in general find it difficult to agree on anything, I would have to take issue with your contention that five years ago it was not predictable that house prices would continue to rise. I do not feel that is a view that would have been shared by many economists five years ago. Given that 20% price inflation has occurred as recently as that, particularly in the Dublin area, if this is not predictable one wonders what value economic predictions have. That is just a general point. I also must take issue with Mr. Power's diagnosis of the problems. I accept you have no particular view on the Constitution. It makes one wonder what is the point of the whole thing. His diagnosis does not include the conduct of auctioneers. Does he have any views on the conduct of sales by auctioneers including the way of holding sales over the telephone so that there is no transparency whatsoever about the nature of the bids being made or not made by potential housebuyers? There is clearly no transparency there. My question is whether any code of conduct is applied to the IAPVs members in relation to this kind of activity. Anecdotal evidence, which is all we can rely on in this kind of situation, would have one believe that many people have had very bad experiences with estate agents and auctioneers.

Second, does he not think that the practices of the banks in extending credit he is also worthy of analysis in terms of diagnosing the problems that he suggests are limited to planning and stamp duty? Are we not also talking about the conduct of auctioneers and the banks in contributing to the house price inflation that we have had over the last ten years?

Mr. O’Donnell

I will deal with the easy one first, the banks. We have made a suggestion in our submission that lending societies and banks should be encouraged to enter into a voluntary code of conduct which would deal with a percentage of loans and the amount of deposit required, the term of the loan and things like that. We find that money appears to be so easily available and young people who have no savings record whatsoever seem to be able to acquire houses; that is an incredible burden on them. It is inflationary. It does drive the market. The underlying problem is that even if somebody, somehow, has obtained a 95% mortgage - maybe 93% from the building society and 2% from the bank - the house need only drop by 5% in value for it to be in negative equity. It is a very dangerous area and we are strongly suggesting that the banks should be encouraged to look at this and produce a voluntary code of conduct.

As regards the auctioneers, I do not know whether we should address that here. We as a profession - and certainly in the Institute of Auctioneers and Valuers - believe we do our very best, within what is possible, to provide a professional service. If one looks at the front of Mr. Gartlan's submission, it may be seen that we are running courses all over Ireland, in Galway, Limerick, Cork, Waterford, Dublin, Athlone, Derry and Bangor. This is unique and is accessible to almost all areas in Ireland. The objective is to try to promote professional practices and standards and to raise the education level of the general practitioner. Undoubtedly we will find people - as one does in any profession - who may not act as we would like them to, but we have strong and effective disciplinary procedures if members of the public bring such occurrences to our attention. I have been president of the Confederation of European Estate Agents for a number of years and although our system is not perfect, it is the best in Europe and we have the most professional practitioners within this area of any in Europe. However, we keep trying every year, every day, every week to improve on that.

Mr. Andrews

Has any practitioner been struck off as a result of disciplinary procedure?

Mr. O’Donnell

In my time - approximately 20 years - about three people have been expelled from our institute. That would normally be to do with such things as the misappropriation of client funds or moneys held in trust. With irregularities or areas that discommode the public, we have a comprehensive disciplinary procedure. Eventually, practitioners in breach will be warned suspended or expelled, whichever is decided upon. It is an open procedure - we have external people on our disciplinary committee, including a former president of the Incorporated Law Society and a former chief executive of the Eastern Health Board. These people ensure that we have in place a disciplinary procedure that we think is fair and unbiased. In general we seem to keep our house in order.

Mr. Power

May I reply to the question addressed to me by Deputy Andrews on the financial institutions? I would make a couple of observations: one is that most housing booms, which inevitably end in burst, have been caused by excessive credit generation. A prime example was the UK in the late 1980s. I would strongly believe that if the size of the mortgage was capped at, say, 70% of the purchase price, demand would be dampened. As demand is dampened, the market would then adjust in a desirable direction. Unfortunately, it was difficult to get financial institutions to agree to that sort of policy. The other danger, of course, is that if people get 70% for house purchase, they then go to another financial institution where they may get the further 30% as a car loan or some other type of personal loan. They end up, in effect, borrowing 100% of the house price. That is dangerous. Excessive availability of credit is very dangerous for the borrower and the economy but not necessarily for the financial institutions which have strong security for the type of borrowing or lending they are engaged in. It definitely is an area that needs to be looked at but I am not sure if there is a simple solution.

Chairman

In the early 1980s people who wanted to build had to have at least 25% of the cost in savings and have an account with the bank for at least two years. That was self-regulated.

Mr. Power

That has changed. Because of the deregulation of financial——

Chairman

That caused severe hardship to my age group at the time and if it were reintroduced, we would have to be extremely careful.

Deputy Devins

I welcome the delegation. I want to ask two questions. Yesterday we heard a presentation from the IAVA whose representatives argued trenchantly that the cost of land did not have a bearing on the cost of houses. In this delegation's presentation, it is stated categorically that there is a high correlation between land costs and house prices. There appears to be quite a divergence of opinion between the two delegations.

Mr. Power

That view is based on research done in every euro zone member state by the European Central Bank in research released earlier this year.

Deputy Devins

Is Mr. Power stating categorically that what the delegation said yesterday was wrong?

Mr. Power

That is their opinion but based on——

Deputy Devins

Is it Mr. Power's opinion that their opinion is wrong?

Mr. Power

Based on the research undertaken by the European Central Bank that view is wrong.

Deputy Devins

The second point is more a point of information.

Chairman

To be more accurate, Deputy Devins, it was its sister group which strongly made that assertion. Am I correct?

Deputy Devins

That is right, the IAVA. By the way, what is the relationship between the two organisations? Mr. O'Donnell appears to be more in the professional area. Does his organisation have a relationship with the IAVA or is it a separate organisation representing auctioneers?

Mr. O’Donnell

As the Chairman said, it is a sister institute. We have a good working relationship but we would see ourselves competing.

Deputy Devins

The two organisations are auctioneers and valuers.

Mr. O’Donnell

That is right.

Deputy Devins

One group appears to be putting forward a very strongly held view while the other is putting forward a different strongly held view. I find that interesting.

Chairman

I do not think we can inquire about the relationship.

Deputy Devins

Perhaps that is a matter for another day.

Mr. O’Donnell

There are many views.

Deputy Devins

It is an important point from this committee's viewpoint because we are examining the reason the cost of houses is so high. Obviously certain members of the committee would argue strongly that it is related to the cost of land. Other views may be held also but it is interesting that two groups representing auctioneers should have such a divergence of opinion.

Mr. Power

I have no relationship with the auctioneering industry on either side. I was commissioned, as an independent economist, to prepare this submission. The research I delved into at a European level came up with this conclusion.

Deputy Devins

In the handout the point is made that the release of the State's land bank for housing construction should be pursued with vigour, particularly in relation to the amount of land owned by port authorities. Does Mr. Power have any idea how much land is under the control of port authorities?

Mr. Power

I have spoken to an economist who is doing some work for a Government agency on the amount of land available and it is very significant, particularly in Dundalk, Waterford, Galway and Dublin. I could not confirm the exact acreage but the results of that finding will be available in the public arena in the not too distant future. I could put the committee in contact with the economic consultant working on the subject.

Chairman

I recently read a report on port authorities which was presented to the Minister and the Department of Communications, Marine and Natural Resources. Of ten or 12 port authorities, only three were not viable. There is a suggestion that Waterford, Cork and perhaps smaller places like Bantry and Foynes are severely in debt. It is an unusual suggestion that some of them have large land banks because if they are in financial trouble, they should dispose of some of those lands.

Mr. Power

That is exactly——

Chairman

Dublin is probably one of the successful ones.

Deputy Neville

Deputy Devins raised an important point. The delegation from the groups sister organisation said that the market drove the price of the house, not the price of the land; in other words, what people were prepared to pay was driving the price of housing, not the cost of the land. As the market reduced in price, so to speak, the cost of the land reduced but neither the construction costs nor the profit margin were reduced. If the market comes into equilibrium and prices do not increase or decrease, what will be affected is the land price. My interpretation was that if the price of land was reduced, the market will decide the price. It will not reduce the price of the house but will increase the profit margins for the builders. Was that not the essence of what they said?

Chairman

Yes, and Mr. O'Donnell has more or less said that he disagrees with that.

Deputy Neville

Does he disagree with it?

Mr. O’Donnell

It is a viewpoint but there are two different viewpoints. There is a little of the "which came first, the chicken or the egg?" to this——

Deputy Neville

It is very important to us.

Mr. O’Donnell

I understand.

Chairman

We are over time already and there are six speakers remaining. I have to try to be fair to everybody. I call Deputy Morgan.

Deputy Morgan

I welcome the delegation, especially Paul Gartlan, who is located just a few miles over the road from me, between myself and Deputy Rory O'Hanlon.

To support his assertion that equilibrium is close to hand, Mr. Power cites economic indicators but as Deputy Andrews said, economic indicators can be notoriously unreliable. What is reliable, however, are the figures of 48,000 throughout the State on social housing lists and a further 6,000 people who are homeless. Those figures have not decreased and that fact was substantiated as recently as the end of June. The indication that those figures have not decreased show the need for additional support for Mr. Power's assertion that equilibrium is on its way and that we need not be too concerned about the whole issue. Does Mr. Power have some other support for that view?

On the question of land banks at ports, while some ports may have marginally more land than they currently require, much of that land is necessary for the strategic development of the ports to create economic activity. To allocate that land to housing, therefore, would be shooting ourselves in the foot. Would it not be more sensible to allow local authorities to CPO land in other areas to deal with the housing issue? I would like to deal with the aspect of planning but, as the Chairman said, it is not directly related to the agenda today. We will come back to it.

On lending issues, it was stated that if 70% of the price of housing was made available by lending institutions that would soften the market. While that may be true in some cases, would it have any impact on the 48,000 people on the social housing list? I submit that it would not. I want to raise other issues but I will conclude on that aspect as we have gone over time.

Mr. Power

Our view is that the affordable housing issue is different from the general private market and it requires different solutions. As the Deputy correctly said, we will not sort out the affordable housing issue by restricting finance availability.

Deputy Morgan

That is part of our remit now.

Mr. Power

Yes. To address the affordable housing issue we need to bring land on stream to build affordable housing. That is the only solution. I mentioned the port land as one example. There is a good deal of other public land that could be brought on stream. That is an issue that needs to be investigated. A consultant's report which will identify how much land is surplus to requirements is due soon. Bringing that land on stream would result in a supply of affordable housing coming on stream.

Chairman

Is Mr. Power referring also to Church and State lands?

Mr. Power

Yes, all publicly owned land.

Deputy Morgan

In the submission the delegation accepts that the significant numbers on social housing lists will not be affected, that it is a separate issue, and that what it is dealing with is one section of the problem, the private market.

Mr. Gartlan

If planning is freed up and more houses come on stream it follows that those on social waiting lists will be looked after because, under Part 5 of the Planning and Development Act, there is a provision to grant 20% of those lands for social housing. I firmly believe that planning is the way forward in creating more land.

Deputy P. Power

Like my colleagues I welcome the delegation. I wish to continue our focus on the issue of supply and demand and equilibrium in the market and the role of this committee in dealing with that specific issue to deal with the price of houses. I should preface my remarks by saying that some of my best friends are auctioneers in Limerick and I have dealt with them for many years. In my experience the interests of the IAVI and the IPAV are two-fold: achieving buoyancy in the housing market and achieving high prices. That is the ultimate aim of the auctioneering profession. I suggest, with the greatest respect, that interest is completely divergent and is the polar opposite of the interests of the common good. The interest of the common good is to achieve an equilibrium in the market but at affordable and low and reasonable prices. I suggest the interests of the profession are completely different from that.

Concentrating on the issues of supply and demand and equilibrium - referring to the remarks of Mr. Power and Mr. O'Donnell - I accept the view that supply and demand will ultimately deliver equilibrium in the market, albeit with peaks and troughs along the way, but that equilibrium is too high and results in unaffordable prices for the people. That is the precise issue we are trying to deal with. Would the delegation accept it as a legitimate endeavour for this committee to recommend whatever measures are necessary, either legislative or constitutional, to allow the Government take whatever steps would have constitutional protection to lower that equilibrium to provide for lower prices? In that context I put it to Mr. Power, who said market forces generally deliver the most desirable outcome and where possible they should be left to operate as freely as possible. Subsequently, he said affordable housing is completely separate from the general private market and should not interfere with bringing land on stream. I suggest the logical conclusion of that is not based on providing land and houses at affordable prices, which is what the joint committee is all about; it is desirable for this committee to interfere in the property market to reduce that equilibrium. The delegation emphasised the importance of the rental housing market. I submit the reason the rental housing market has increased as a proportion of the overall market is the high prices. That is not in the interests of the common good. The interests of the common good have traditionally been served by private home ownership but that for an increasing number of people is becoming an impossibility.

Chairman

I remind members that we are 20 minutes behind schedule. A group is waiting to come in so we will have to speed up both the questions and the answers. I ask members to put questions rather than make statements and to question the important issues.

Mr. Power

I agree with the assertion that the equilibrium that has been achieved is too high but that is a consequence of what has happened in this economy with uncontrolled economic growth during the past five years. The problem is that if one tries to reverse it and reduce that equilibrium by 30% one will create serious hardship for people who have got in at the other end of the market. That would prove economically destabilising. We need to recognise where we are and go forward from here. In terms of the private sector market, I repeat, real house prices will fall back during the next five years. The ESRI's numbers this afternoon will confirm that medium-term view on the market.

Affordable housing is a different issue and one that needs to be addressed separately. To address it more land will have to be brought on stream. That is the only way——

Deputy P. Power

Mr. Power's focus is on State land. Would he agree it is reasonable to take whatever steps are necessary to release private land also where most of the supply is? It is all owned by private developers.

Mr. Power

Presumably private land can be brought on stream also. I am not sure how feasible the CPO would be. That is a decision the joint committee will have to reach but it applies at present with land for infrastructural purposes. Presumably the same logic could apply.

Deputy Breen

In relation to Deputy Andrew's question about the transparency of buying a house over the phone, Mr. O'Donnell attempted to answer but he did not answer question he was asked. Where is the transparency in buying the piece of land or the house over the phone? The delegation's submission stated that it recommended one-off houses in rural areas. Does this mean there is a need for change in An Bord Pleanála? Does An Bord Pleanála have the necessary expertise? Where a planning application has been refused by a planner for environmental reasons and the planner has no environmental expertise, is the local authority open to litigation? If the application goes to An Bord Pleanála, does it have the necessary environmental expertise to qualify that the application was refused for environmental reasons? In that event, is the local authority open to litigation?

Mr. O’Donnell

This is an area in which we do not profess to have expertise or knowledge.

Deputy McCormack

We have had an interesting and informative discussion but we have strayed from our brief. Deputy Andrews appeared to be more interested in the constitution of the Institute of Professional Auctioneers and Valuers than in dealing with the Irish Constitution. Has the delegation any proposals to amend the Constitution which would improve the present situation?

Mr. O’Donnell

Our answer is no.

Senator Daly

On the basis of the groups presentation it appears to be opposed to any kind of constitutional cap on development land. It has been suggested to the committee that while the Constitution guarantees certain rights, some provision should be made to have duties included which would balance rights that, in the view of a delegation before the committee yesterday, were creating high prices for development land. What is its reaction to that?

What impact does the initial land price have on the price of a house? Your colleagues have strongly argued that while the price of land is factored into the house price, within six months the house could be sold for one and a half times the price when there is no land price involved and that while it may be a factor, it would not be the priority factor. Can you clarify the price of land has a long-term impact on the price of houses?

Mr. Power

I repeat the point that the research conducted by the European Central Bank last March found a strong correlation across Europe, including Ireland, between the land and the final price of the house. It is intuitively clear why that is the case. If the land price is set at a certain level, the house price will be set at an appropriate level to build in the margin for the builder and developer. If demand weakens, for whatever reason, be it economic or legislative change, the land price will eventually fall because if there is no demand, development land will not sustain the same kind of price.

Senator Daly

That may be expected in the first sale, which may occur within the first six months of the construction of the house. Should it not be sold at a lower price if the land has already been factored in?

Mr. Power

It depends on demand conditions.

Senator Daly

The issue then is supply and demand.

Mr. Power

Demand will determine the price of a second-hand house while the land price will determine the price of a new house on the market.

Senator Daly

If the land factor is priced in at the outset, the price of the house should be lower. Should the house not be cheaper if it is sold in, say, a further six months to a year?

Mr. Power

If demand conditions are sufficiently strong that will not be the case.

Senator Daly

Auctioneers would not recommend that.

Senator Tuffy

The representatives rightly say that housing has become very expensive and unaffordable for many people. Does this not show that the price of housing cannot be left to the market and that there must be intervention? The IAPV is against the imposition of a constitutional cap on prices. Is it in favour of a legislative cap?

Mr. Power says affordable housing is a separate issue. I do not understand that. If there is more affordable housing coming on stream it will be more difficult for builders to raise the prices of private housing. It would only be a separate issue if affordable housing was ghettoised and kept physically separate from private housing. He referred to the State's land bank for housing and agreed that perhaps private land could be involved in that. Is he in favour of the integration of affordable housing in private housing estates?

Mr. Gartlan

When Mr. Power referred to affordable housing he meant social housing. If the planning laws were loosened with more zoned land and more land for sale in the market it would address many issues, including the price of land and houses. More houses mean more affordable houses in zoned areas under Part V of the Planning and Development Act. We do not favour the imposition of a cap on land prices for the reasons we have outlined.

Chairman

I thank the delegation.

Sitting suspended at 11.45 a.m. and resumed at 12 noon.

Chairman

The next item on the agenda is the presentation by the Royal Institute of the Architects of Ireland, RIAI, represented by Mr. Toal Ó Muiré and Mr. John Graby who are both very welcome. I apologise for the unavoidable delay. We will try to make sure that it will not affect the time allotted to your presentation. Before we begin I must remind the visitors that members of this committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. We have already received your interesting detailed submission. I ask you to synopsise that, if possible, in between six and eight minutes, and then there will be questions from the members.

Mr. Toal Ó Muiré

Our submission should probably be titled "Property Rights" in accordance with the current work of this committee because it deals with more than just building land. To introduce ourselves, the RIAI is a representative body of 2,300 members and 415 practices. We represent architects in the public and private sectors and roughly half of architects' workload is in each of those sectors. We have consulted the City and County Architects' Association in particular on our submission.

Between the public and private sectors, architects have considerable experience of the impact of building land costs and we have many concerns about how land-related factors limit the effectiveness and public benefit of State and local government intervention in development. Most, but perhaps not all, of these concerns can be addressed without altering the Constitution but that is not the only constitutional issue as we see it. Maybe the Constitution would benefit from wider objectives than rights to deal with problem areas that we see in housing, in sustainability and in social segregation. The World Bank Review to which we have referred in our submission shows how economic productivity demands a view of ownership rights which includes owner occupancy, rented tenure and group rights.

Rising land and property prices threaten people's ability to house themselves, restrict tenure choice for householders, especially first-time buyers, and distort infrastructure construction costs. It is consensus on those three points which led to the three Bacon reports and to Part 5 of the Planning and Development Act 2000. High land prices also eat up finance which should be invested in quality design and planning, and investing in design not only contributes to the quality of building, including housing, delivered to the client, but adds enormously to the built environment of the local community.

The recent Supreme Court judgment on Part 5 of the Planning and Development Act 2000 illustrates that there is wide latitude for legislation to regulate the right to private property in order to balance it with the common good and that in a way ended, in our view, a debate that had been going on since the Kenny report and since the report of the Oireachtas joint committee in 1985.

In addition to considering the constitutional options, we recommend that perhaps an expert group on non-constitutional issues on property should be established to consider a number of issues: a co-ordinated alternative treatment through the taxation system of stamp duty, capital gains tax, possible annual land tax and the carbon taxes which we know are proposed by the Government. It is important that that be done in a way which would prevent any sudden or disruptive changes in property values. Second, there is the issue of how revenue raised by taxes is best used for the common good, particularly in planning and other initiatives for improved local services. Third, there is the role of local authorities in the development land market and the resources available to local authorities to achieve public policy objectives. That includes not just affordable housing built under Part 5 but also affordable and social housing built under public private partnerships. Next there is the analysis of land banks which local authorities hold or have held, and to try to understand how that land has been developed or disposed of because we have seen several changes over recent decades in policy on holding or disposal of land.

I suppose the last issue is really that of social segregation. Our colleagues in the local authorities, as well as those of us in private practice, see that the effectiveness of Part 5 is still very difficult to assess. It is very difficult to get any statistical information on how it is operating, either at Department or local authority level. We suggest, as part of that non-constitutional exercise - if I can call it that - a review of legislation needed to make progress and, indeed, of what could be done in the lifetime of the current Dáil. Much progress can and must be made on all these issues if we are to ensure that our land policy serves all citizens.

Chairman

From my reading of your report, in a nutshell I take it that you would like to see some constitutional change to sway the Constitution a little more towards the common good. In addition, you would also like to see much legislative change, possibly innovative change like the Planning and Development Act 2000. Obviously that legislation is still in its infancy. Often it takes a decade before one knows if legislation works. Would I be correct in saying that RIAI would suggest a combination of both approaches?

Mr. Ó Muiré

Yes, I think so. Many areas like sustainability, in particular, which is a relatively new issue that obviously was not in the minds of the people who drafted Bunreacht na hÉireann and did not exist as an issue then, tie back into that. It seems that land policy has a key part to play in much of what we have to do, for example, in meeting our commitments on Kyoto where we seem to be in extreme difficulty.

Deputy Cuffe

I welcome the delegation. May I touch on site value tax, an issue which has arisen in several submissions ranging from that of the Dublin Transportation Office to some those of the party political groupings, including my own? I think the Feasta group mentioned it yesterday. In essence, a site value tax would be levied on zoned land in order to raise revenue to allow services to be put in prior to, or at the same time as, the commencement of development.

I presume from RIAI's experience of the development process in the greater Dublin area that it can see the problems which have arisen in providing services to land, whether sewage pipes or public transportation. Has RIAI looked at this or does it have a view on this issue of a site value tax, in other words, an annual levy on zoned land which would kick in once that land is zoned? I am familiar with the section 49 agreement which exists in Dún Laoghaire-Rathdown, but that levy only kicks in once the development process commences. I wonder has the institute looked at this issue and considered it. Does it have a view on it?

Mr. Ó Muiré

We see it very much in the context of an overall review of taxation incentives. It is very obvious that the capital gains tax levels were reduced as an incentive to release land for development. It is difficult, as we see it, to reconcile that with the fact that the higher levels of stamp duty were introduced, withdrawn and then reintroduced. The World Bank Review would support the idea that putting taxes on transactions does not help the operation of the market, and especially does not help the operation of the market for poorer people.

As regards land tax itself, the term "land tax" is now used where previously we used the term "rates". We have pointed out that the abolition of rates has happened in a slightly haphazard and ultimately discriminatory way. Whether a development land tax or a generalised system, which possibly could not be called rates for political reasons, would be fairer is something we think should be looked at.

We see the issues of both equity and effectiveness having to be addressed. It is fair to say that the capital gains tax move was mainly in favour of effectiveness in order to release land whereas the stamp duty move is very clearly based on equity and on the idea that people, and particularly investors, entering into certain types of transactions in buying residential buy-to-let properties, should pay and can pay.

Deputy P. Power

Regarding the planning process, in which Mr. Ó Muiré would obviously have an expertise, there is a suggestion that, where a major item of public infrastructure is to be built, such as the metro system in Dublin, it would be unconstitutional for the Government to introduce a system whereby there would be compulsory purchase without compensation, the planning process would be set aside and there would be no environmental impact statements or studies, three matters with which Mr. Ó Muiré would have many dealings. Does Mr. Ó Muiré believe it would be worthwhile and a reasonable proposition to change the Constitution to allow the Government, where it has decided to proceed with a major critical multi-billion euro piece of infrastructure, to dispense with planning requirements, environmental impact statements and so on to avoid the delays and costs associated with such projects?

Mr. Ó Muiré

I understand the question at a hypothetical level. We have suggested examining the issue of expropriation on the one hand and the issue of compensation on the other. Most of the issues to which the Deputy refers relate ultimately to the issue of compensation. As someone who is not an expert on the Constitution, it seems unlikely to me that there would be expropriation without compensation. Much of what concerns people is how the processes are cumbersome and slow. We have already seen moves to redesign the processes in order that the infrastructure may be progressed while the process of assessing compensation takes its course. Perhaps we need to short circuit the system of ministerial inspectors conducting compulsory purchase order inspections and so on.

I am not sure I understand the reason it is necessary to change the Constitution. I am not an expert on infrastructure. Part 5 showed that, if the Government had the ideal of promoting owner occupancy, the Supreme Court was open to the measures the Houses of the Oireachtas would see as appropriate to achieve that objective and did not see it as its function to tell the Oireachtas how to decide them. I am not sure I understand the reason it should be any different for infrastructure provision.

Deputy McCormack

Mr. Ó Muiré said in his presentation that uncontrolled inflation in land costs threatens the country's ability to provide housing and other forms of development. We are trying to decide whether amendments to the Constitution are necessary. Would Mr. Ó Muiré suggest any constitutional amendments that might help eliminate the uncontrolled inflation in land costs?

Mr. Ó Muiré

We do not see that amending the sections on property rights would necessarily achieve that. We see a possibility of other objectives in the Constitution assisting in this regard, but they would have to be taken in conjunction with property rights.

Deputy McCormack

Will Mr. Ó Muiré give an example?

Mr. Ó Muiré

One example would be social integration in housing where we believe matters are deteriorating, not improving. We believe that the objectives of Part 5 of the 2000 Act were not being achieved. Those objectives, which remain unchanged in the 2002 amending legislation, will be made even more difficult to achieve by the amended Act because there are more options for developers and local authorities——

Deputy McCormack

Does the RIAI believe a constitutional amendment is necessary to achieve that objective?

Mr. Ó Muiré

We think it may be desirable. We do not think it will achieve it on its own because there have been many efforts by the Government and local authorities to achieve social integration. A major issue is the expansion of the rented sector. In countries with a large and vibrant rented sector, the distinction between those living in rented houses and owner occupied houses is less visible and less of an issue. The Part 5 definition of affordability only relates to owner occupancy and we think that is wrong. The definition must include affordable rented accommodation. The Private Rented Tenancies Bill is an important move forward towards recognising the need for security in rented accommodation. We believe that would achieve a great deal.

Deputy McCormack

Mr. Ó Muiré also stated in his presentation that the question arises as to how the added value brought to a piece of privately owned land by the actions and efforts of the community - I presume that means rezoning - ought to revert to that community. Would the RIAI be in favour of, as was suggested previously by a deputation, a land tax on undeveloped zoned land after a certain period, for example, two to three years? In other words, there would be a tax per acre on undeveloped zoned land.

Mr. Ó Muiré

We believe that should be examined in the context of the overall structure of taxation. Capital gains tax and stamp duty point in opposite directions, as do rates being applied to commercial property but not to residential or agricultural property. The land tax should be part of the examination of the overall position.

Deputy McCormack

However, the RIAI would not object to it in the overall context of tax on property.

Mr. Ó Muiré

No, we would not.

Deputy Devins

I thank the representatives of the Royal Institute of Architects of Ireland for their submission. I have a question on the conclusions, specifically the request for the establishment of a working party to investigate the role of local authorities in the development land market. Does the RIAI have evidence that there has been abuse, so to speak, by local authorities of their land banks?

Mr. Ó Muiré

No, we do not have evidence of that. What we have in mind is that there have been changes in policy. These are especially evident in the old Dublin County Council area where land banks were built up, for example, during the 1970s, and there was a shift during the 1980s as part of the move to broaden the provision of social housing from local authorities to include housing associations as well.

There was the idea that local authorities should dispose of their land banks to housing associations and private developers to provide housing. In Dublin City Council, for example, one of the objectives of the 1980 development plan was to provide housing. However, the objective in the 1990 plan was to facilitate the provision of housing. There have been shifts in planning policy that have had obvious and immediate consequences in the way local authorities look at and deal with their land banks. For example, Cork City Council has almost no land bank while other local authorities still have substantial land banks.

It appears to us to be a haphazard and arbitrary area. As with Part 5 and many other important aspects of public policy, we find that the way these are dealt with is not transparent and good statistics or good information are not available. It would be helpful in defining public policy, be it through the Constitution or legislation, to have better information on what has happened and what has been learned over the past 30 or 40 years.

Deputy Devins

I find it difficult to decide whether the RIAI is happy that legislation can deal with all the points raised or whether it recommends that we should amend the Constitution. I know it is a difficult question for Mr. Ó Muiré to answer. We need to decide if the Constitution needs to be amended.

Mr. Ó Muiré

We feel that the focus should not necessarily be on the issues that the debate on the Kenny report provoked, that is, compulsory purchase and the level of compensation to be paid for expropriated land. Regarding what is happening in sustainability, our submission mentions changes in the context of policy. I have already mentioned Ireland's difficulties with meeting its obligations under the Kyoto Protocol and something drastic will have to happen if we are to meet those obligations.

Regarding the polluter pays and resource user pays principles, before this we all felt we were entitled free of charge to water, air and drainage but now we must completely change our attitudes. Having stood the other day next to bin tax protestors, I wonder if people need a referendum so these issues are understood and voted on. People could then understand why a waste tax is necessary and that might be socially productive. We might then be able to legislate without people feeling marginalised, as clearly is the case for many. The bin tax protestors I met the other day felt completely marginalised by the way in which that tax operates.

Also under sustainability, we mentioned brownfield sites which is a new topic. When the Kenny report looked at building land issues in 1973 it looked at greenfield sites on the edges of our towns and cities but there is a case to be made that we may be able to meet our housing needs within built-up areas. Many people say we need to densify our suburbs and that we do not need to push into the surrounding countryside. Can we take our non-access distributor roads and get our hands on the pieces of residual land? It would take a huge effort to produce mass housing on those sites but sustainability is driving us in that direction. The issue of building land must be thought of in relation to brownfield sites as much as the greenfield sites of the Kenny report.

We think social integration is going nowhere fast as a legislative objective and it is difficult to know what to do about it. If there were a constitutional imperative to achieve social integration in housing then perhaps that would put all our minds - the professions, the Legislature and the local authorities - towards achieving it.

Chairman

Our Constitution was drafted in 1937 and you mentioned the Kyoto Protocol and waste management. Do you think we may need a clause in the Constitution to protect our environment?

Mr. Ó Muiré

Yes, that might be the form of constitutional amendment that is needed rather than something to do with the two articles to which our attention was drawn in the invitation for submissions we received.

Chairman

That is interesting and may be something to look at.

Senator Daly

I want to follow up on Deputy McCormack's point about taxes. Mr. Ó Muiré has come out strongly in favour of new taxation measures. Would these not make the situation worse as they would be tagged onto the price? It would be worse then than it is at present. If one talks about a site value tax, is this not a reintroduction of the ground rent system we have been campaigning to abolish for 30 years? Without confusing the issue, what about architectural costs for housing developments? What percentage of the cost is made up of such architectural costs and are those costs going up or down?

Mr. Ó Muiré

To take taxation first, as an institute we tend not to have a view on taxation but presumably when capital gains tax was halved from 40% to 20%, if there was not a buoyancy effect sufficient to double the throughput of transactions then presumably the shortfall was made up by some other tax. That is why they should all be looked at together. We are not experts on that and we have not really looked at it.

Senator Daly

That goes into normal Exchequer funding and has no impact on the housing situation we are trying to deal with.

Mr. Ó Muiré

We would like to see local authority revenues strengthened because that lack of finance is part of what has caused difficulty for the local authorities with building land over the years.

Chairman

An interesting point on the revenue is that it is obiter dicta regarding our remit, but according to the Minister for Finance, when the capital gains tax was reduced it freed up land for the market but it also quadrupled Exchequer income, so it has benefits in more ways than one.

Senator Daly

Are fees costs going up or down? Can they be reduced substantially?

Mr. Ó Muiré

For estate housing in the private sector the architect's fee is probably €500 to €2,000 per house in a large estate. On housing generally the fee would typically be of the order of 3% of construction costs.

Senator Daly

The figures on this——

Mr. Ó Muiré

We are forbidden by the Competition Authority from setting fee levels and there are even doubts about our right to gather information on it.

Senator Daly

With 2,500 members the institute would know fairly accurately.

Mr. Ó Muiré

We do.

Senator Daly

Can you reduce the figure substantially to 1%?

Mr. Ó Muiré

I do not believe we could sustain an increase in the quality of design if we reduced our fee levels by two-thirds, no.

Senator Tuffy

I thank Mr. Ó Muiré and Mr. Graby for an excellent presentation. I thank them for raising social integration, as that would be a very important part of any housing policy we adopt. They suggested social integration and the environment be incorporated in the Constitution. Several groups suggested housing should also be inserted as a right, though there are only a couple of socio-economic rights in the Constitution at present. Some groups argued that other socio-economic rights such as the right to housing should be included. What is the delegation's view?

Many professional associations have effectively said there are problems with supply and demand and that increasing the supply of land will solve the problem. What is the delegation's view of that?

Mr. Ó Muiré

On housing rights, the right to housing is fairly well understood in Irish society. I do not have a view as to whether a constitutional right would help that. The view put to us by local authorities and health boards is that our housing system is almost like a series of sieves, with people falling out of the private market into social housing, with the really difficult and marginalised groups falling into the lap of the health boards. It is not really our area of expertise to determine whether at that level a constitutional right to housing would help to achieve any more than is being achieved at present.

Regarding supply and demand, we are aware not just of supply and demand but of the demographic forces driving Irish housing. A big issue driving housing demand is not just growth in population but shrinking household size even more so. It appears that at times of high prices household formation slows willy-nilly so that people who would like to form their own household are not in a position to do so. Over the next ten or 20 years, and as the national development plan clearly recognises, we know where our family size is heading and we must provide for this. What happens in the market as a result, for example, of current uncertainty or volatility is something which should not blind us to the need to look ten years ahead, recognising that our household size will approach European levels irrespective of humps and hollows in that trend along the way.

Chairman

The presentation recommends that a parallel expert group on property law be set up. Would that be a Cabinet sub-committee or an independent group? Given that we had Bacon reports 1, 2 and 3, do we need a Bacon report 4?

Mr. Ó Muiré

The only parallel I can think of was almost 20 years ago when I worked with the Joint Oireachtas Committee on Small Businesses. A number of Deputies, Senators and a few other people worked on proposals relating to building. This seemed a useful model. As it is the only one I have experienced, it is the one that springs to mind.

Chairman

Being parochial, Mr. Ó Muiré mentioned that Cork city as it stands has basically no development land because it is encompassed by its sister authority, the county council. As there is a huge population decline in the north of the city, it is believed a Dáil seat will be lost in the constituency next time round. Could there be some sort of urban renewal or town renewal to rejuvenate the area? The houses are there but some of them have become derelict. How could that part of the city be developed without acquiring extra land to expand outwards?

Mr. Ó Muiré

It is a difficult question because I am not familiar with the area.

Chairman

You said you thought a brownfield——

Mr. Ó Muiré

The sort of thing that springs to mind in the Dublin context is the integrated area plan for Kilmainham-Inchicore, for example. Key sites in this small area of the city have been looked at which might be developed in different ways, including bits of derelict land. A plan is published on which local people are given an opportunity to comment. This is then adopted by the local authority and, in the IAP case, supported with specific site tax incentives and so on. These kinds of proposals appear to be a good way to go forward. The strengthening of local area planning in the Planning and Development Act 2000 is something which is very welcome but, unfortunately, is not being adequately resourced by local authorities.

Chairman

I thank Mr. Ó Muiré.

Sitting suspended at 12.24 p.m. and resumed at 12.26 p.m.

Chairman

I welcome Deputy Rabbitte who will make a presentation on behalf of the Labour Party. There is no need to outline the privilege rules because, as a Deputy, it does not apply to Deputy Rabbitte.

Deputy McCormack

On a point of information, when a Member of the Houses makes a presentation has he or she the same privilege as the members hearing the deputation?

Chairman

Yes. Apparently those are the rules.

Deputy Rabbitte

I thank the Chairman and members of the committee for giving me the opportunity to say a few words in support of the submission on behalf of the Labour Party. Regrettably, my colleague and spokesman on this area, Deputy Gilmore, is unable to attend so I am pleased to have an opportunity to say a few words in elucidation of our submission. I do not propose to take up my eight minutes but I will try to answer any questions members of the committee might have. I am sorry I have not had the opportunity to follow in detail the hearings which have been conducted. It is my personal view that the issue is of such public interest that the Dáil ought to have given consideration to the hearings being heard on the floor of the House. Otherwise the impression is abroad that we are not about our work here. These issues are of such public interest that the Dáil Chamber ought to be made available to whatever is the lead committee of the day. In this case the hearings have been very important.

In a nutshell, the principal question the committee must seek to answer is whether there is an impediment in the Constitution to controlling the price of land. That is the net issue. I have no intention of telling the committee how to do its business. However, as someone appearing as a witness before the committee, I do not think it is my job to talk about policy. That is an area of Government and the Houses of the Oireachtas and some other areas are not pertinent here. The issue is whether in the current Constitution there is an impediment to seeking to legislate, for example, to cap the price of development or building land. It is the Labour Party's submission that there is no such impediment. It is further our submission that, as an Oireachtas, we ought to legislate for that purpose. If it is struck down, it is struck down and then we can seek to amend the Constitution. We do not believe it will be struck down. We draw that conclusion from the body of jurisprudence that has been built up over the years.

The Constitution review group refers to seven different cases that have been decided. On assessing all seven cases, it concluded that there was an element of arbitrariness in each of them. The more celebrated ones included the case of rates on building land where the valuation was more than 100 years going back into the 1840s and early 1850s and that it was, in the words of the Court at the time "ludicrous" to seek to apply that to modern-day conditions. Similarly, in the case of the Rent Restrictions Act, there was an element of the arbitrary that was so apparent that is was not surprising that it was struck down.

The two separate provisions in the Constitution relating to the protection of property rights are Article 40 which protects the property rights of the individual and Article 43 which deals with the institution of property itself. In its 1996 report, the Constitutional Review Group said that there is an element of confusion in the existence of two separate constitutional provisions. Nonetheless, it makes clear that the test under Article 40 ought to be straightforward: whether the individual's rights are being subjected to what it calls unjust attack. JM Kelly in The Irish Constitution similarly draws the conclusion that, as he put it, both articles inform each other and that the right to private property is protected but that there would not be such an unjust attack where the exigencies of the common good require it.

The question of the right to delimit the enjoyment of property where social justice or the exigencies of the common good desire it is the peg on which we in the Labour Party hangs its case.

Our submission states:

In the present context, it is Article 43.2 which is of greatest significance. It attaches a substantial qualification to private rights in favour of the common good. Although reconciling the language of the two Articles has given rise to unnecessary complication, contemporary case law is reasonably clear. The State may regulate and interfere with property rights; but it may not do so in a manner that disproportionately interferes with those rights. Any such disproportionate interference falls to be classed as an "unjust attack" and so unconstitutional. An interference is proportionate, however, if it has due regard to the principles of social justice and the exigencies of the common good.

That is the Labour Party case stated in a paragraph. The submission also notes how similar that is to the European Convention on Human Rights where the jurisprudence is very similar to the jurisprudence in this jurisdiction.

This issue has been around in Irish politics for 30 years. It is fair to say that no Government has addressed it definitively and no Government has taken on board the thrust of the Kenny report. This issue has become especially urgent in the last decade and particularly urgent since 1995 or 1996 and more dramatically since 1997 or 1998.

There is no need to retrace the figures but they are profoundly disturbing. House prices increased by five times the rate of inflation since 1996. If one studies the housing statistics bulletin from the Department of the Environment, Heritage and Local Government which shows a table using a 1991 base of 100 and if one compares the indices of private new house prices, the average earnings of workers, the house building costs and consumer prices, one will see that average earnings were 116 in 1995 and 155 in 2002; building costs were 114 in 1995 and 170 in 2002; house prices were 116 in 1995 and 296 in 2002. The biggest and most outrageous gap has opened up between the price of new houses and the cost of building them, with a whopping 126 points in the difference. The Labour Party believes that, in the main, this is a result of the cost of land.

I do not know whether the committee will be receiving submissions from housing co-operatives. I know that in my constituency, housing co-operatives which have been given additional facility to make a contribution to housing need in recent legislation are not able to do so because they cannot afford to buy land and local authorities are in a similar position. Land is a critical issue and it has become increasingly more urgent in recent years. I saw a banker's economist on the monitor screen earlier today. I do not wish to misquote him because I only saw three minutes of his contribution. He was talking about ten years into the future when housing need will be down to 35,000 and house prices will begin to level off, as he put it. I did not hear what he said before or after that, but I hope he is not suggesting that for the next ten years we must endure what we have endured for the last seven, eight or nine years. That would be unconscionable, given the demand that exists. For the past five weekends, newspapers have run with headlines about the bottom allegedly falling out of the housing market and a 20% or 25% decrease in prices, following on a survey done by The Economist. I do not see any evidence of that in the real marketplace. The demand is as strong as ever. Young people would be in the marketplace if they could afford a mortgage. There is no sign of demand lessening in this economy. That may be good for The Economist magazine to bring to the attention of potential readers in Ireland but I do not believe it is a reality in the Irish marketplace.

Chairman

By way of clarification, what Mr. Power said was also stated by a couple of groups, particularly the two auctioneering groups who appeared before the committee - that there is now an equilibrium, which is the word they used, in the housing market and that there is evidence of a levelling off at the moment. I put it to them that this does not resolve the issue of the 50,000 or 60,000 people on waiting lists. I am somewhat sceptical that there is a levelling off. No tangible evidence has been presented to us showing that is happening.

Deputy Rabbitte

We have been hearing that for a year and a half.

Chairman

I heard it in 1997 when I came up here and was thinking of buying a house. I was advised to wait and am still waiting.

Deputy Rabbitte

It is not happening.

Deputy Neville

I welcome Deputy Rabbitte. We have very little evidence that there is need to change the Constitution because of present circumstances. Surely the Oireachtas has singularly failed in its duty to deal with this issue. I sometimes wonder why we are engaged in this exercise. While one body said it wanted to firm up the rights in the Constitution there was an inhibition because of the way the articles were worded. The drafters are looking over their shoulders at the Constitution and are trying to forecast if the Supreme Court will strike down any proposals. This is acting as an inhibition to introducing legislation. As a former Minister, has DeputyRabbitte come across any examples of this in trying to bring forward legislation to deal with this problem?

Even though other groups do not agree, one group in particular stated that it is the market that drives the price of housing and not the price of land. The example was given of a house built on a site costing €300,000 and beside it was built the same house on a site costing €100,000. If both went on sale, the same price would be realised. It was put to us that if there were a recession in the market, it would be the price of land that would be affected because the cost of construction cannot be reduced and the developers will not reduce their profits, which are the other two factors. If the price of land is reduced the market will still decide the price of the house. My interpretation of that is that it will reduce the contribution to the landholders but increase the profit to the developers. Even the two auctioneering associations disagreed on that.

CORI made proposals on the basis of the Kenny report that land would be purchased by the local authorities at 1.25 times the agricultural value and then made available to the developers. We forgot to ask CORI how it proposed to allocate land to particular developers, which might be tricky. Does Deputy Rabbitte believe it is the market rather than the cost of producing the house that determines its price?

Deputy Rabbitte

To take the Deputy's second point first, it is driven by the market. However, the market as it operates in Ireland is imperfect. Land is hoarded and drip-fed into the marketplace as it suits the owners. If the owners of all the gold deposits in the mines in South Africa dug them out and put them in the marketplace together, this would reduce the price of gold. The same applies with land. The fact is that the slow release and unavailability of land is a major factor in bringing the market into equilibrium.

Apart from those with a vested interest, nobody could seriously argue that the price of development land is not a major factor in the price of houses. The figures I have taken from the Department's own statistical bulletin show it is true that the cost of building has risen and that the pay of the skilled workforce has risen disproportionately to other wages. However this is quite minor compared to the cost of building land. It is an imperfect market at the moment.

In answer to the Deputy's question about the constraints of the Constitution, when dealing with legislation in gestation a Minister often has to resort to the advice of the Attorney General to determine what is feasible within the Constitution. It is clear that the protection of property rights is very strong. The essential points made by experts like Kelly and the Constitutional Review Group is that one can infer from the body of jurisprudence that has been built up is that if no unjust attack is mounted against those property rights and if the purpose is valid in seeking to delimit the property rights, it would be deemed quite permissible. I cannot think any of any common good that ranks higher than the right to shelter with perhaps the exceptions of the right to food and to life. If there is a manifest social purpose, the exigencies of the common good allow the State to intervene to delimit property rights. I am persuaded that can be done within the present Constitution.

As this is an all-party committee with a difficult and somewhat technical job to do, I deliberately avoided any comments about policy, which would go into the area of politics. I believe the reputation the Constitution has acquired for protecting property rights is exaggerated and is used as an excuse to do nothing. Many people have done well out of the kinds of arguments to which the Deputy refers. Much money has been made in the past decade by a small number of people and many people on reasonable incomes find it very difficult to get a mortgage, which is not to the good of society.

Chairman

Would you regard the introduction of a cap on the price of development land as an unjust attack? Would the Supreme Court uphold a constitutional challenge to such a cap?

Deputy Rabbitte

Mr. Justice Kenny was a Supreme Court judge and he gave this a lot of consideration in the boom of the late 1960s and early 1970s. He clearly concluded it would not be an unjust attack. The jurisprudence since then bears this out. A lawyer appeared yesterday and stated with great certainty that the Constitution does not permit a particular provision of the Planning and Development Act 2000. He was so certain that one wonders why the Dublin transport system does not work better. He even adverted to the President as being an eminent lawyer, which she is, stating that if she considered it necessary to refer it, she must have doubts about its constitutionality. The President may refer such a Bill for the avoidance of doubt and to ensure it is not open to challenge subsequently. I believe there is at least as compelling a case to be made that, provided it is not an unjust attack and can be proven to be for a socially just purpose, to cap the price of development land would be permissible under our present Constitution. I believe the Bill introduced by the then Minister, Deputy Noel Dempsey, is the last example of that issue being adjudicated by the Supreme Court.

Deputy McCormack

Deputy Rabbitte stated that, in his opinion, there is no impediment in the Constitution to controlling the cost of land - that we simply need legislation, for which the will does not appear to exist. Perhaps this committee and its expert advisers would have been more productively employed over the past two weeks in processing such legislation. I am posing the question as to whether this committee is actually delaying the introduction of legislation by holding out the possibility that all the problems involved will be solved by amendments to the Constitution. I am putting that question to myself as much as to anybody else. Should we abandon what we are now doing, consult with our respective parties - without prejudging the outcome - and proceed to discuss legislation?

That observation aside, I wish to pose a question to Deputy Rabbitte. All delegations have discussed control of land prices, which may not be as easy as it appears. I refer to page 14 of the document, quoting Kenny:

Central to the working of any legislation along these lines would be the three concepts Connolly used in tax law to assess the value of land - open market value, current use value or development land use . . . The open market value means the amount which land, if sold on the open market by a willing seller, might be expected to realise.

Sometimes the open market value of land is inflated by hope value and other factors. If 20 acres of agriculturally zoned land is offered for sale on the outskirts of Galway city, the price may reach €100,000 or even €200,000 per acre if purchased by somebody who has sold land at €400,000 per acre in or near the city centre. How does Deputy Rabbitte propose to safeguard the cost of land on the basis of the open market or current use value?

Deputy Rabbitte

While I do not wish toconcentrate unduly on questions DeputyMcCormack may ask himself, I will try to assist him in unravelling the answers. As a Member of the Oireachtas, I would like the committee to come to a conclusion quickly on this net point of the Constitution. There are associated matters on which one may require further evidence or further time to deliberate. I have reached the view that, even if there are doubts, the way we should proceed is to legislate. It will be determined within a few months whether the legislation has been struck down, following which we will know where we stand in terms of what we have to do. I believe the members of this committee should come to a conclusion on this net issue and make a report. The normal procedure in these matters, as my colleague, Deputy Gilmore, pointed out in his submission, is that the Government consults the Attorney General. I do not know whether the committee is inviting the Attorney General to give his view - clearly he must have a view on this.

On the question of market value sometimes being the equivalent of development value, Mr. Justice Kenny tussled with that issue back in the early 1970s and gave the definition which we included in our report - "development land" means land the open market value of which exceeds its current use value. However, I am aware that in instances such as that cited by Deputy McCormack where there is an expectation of planning permission, the associated hope value would mean that there is relatively little difference between the two figures. Mr. Justice Kenny dealt with that in his report:

The proposal involves a delimitation of property rights, but one which is no more restrictive than other forms of price control. We believe that this delimitation is not unjust because the land owners in question have done nothing to give the land its enhanced value and the community which has brought about this increased value should get the benefit of it.

In that regard, Mr. Justice Kenny was balancing the right to private property with the community interest and the wider public good. Perhaps, in a sense, the CORI approach is not greatly different from our document. Under the existing Act of 2001, local authorities have significant powers to intervene, acquire land and build up a land bank. The major problem is that they cannot afford to buy land in the marketplace. What Deputy McCormack said about market value of land was right.

As I see it, there is probably not a very great political divide on this issue and we should take our courage in our hands. I, for one, would be very surprised if legislation is struck down following the Attorney General's advice in the normal way. Let us test it.

Chairman

It would not be accurate to say that our deliberations in this committee are still at an early stage - we are probably halfway through the process. We had the Kenny report in the 1970s, to which the Labour Party submission referred extensively; an Oireachtas committee met in the 1980s and the Review Group on the Constitution reported in 1996. Perhaps the contribution of this present committee's deliberations might be to bring greater clarity to the whole issue. The Kenny report was shelved because we hit a recession and the situation changed. If we could at least establish whether we need constitutional change or if legislative change is the way forward, that would clear the air for this and future Governments.

Deputy Rabbitte

Yes, that is a fair point. However, I believe speed is of the essence. On reflection, the Chairman's point is more accurate than mine. For a year and a half, or even longer, we have had reports anticipating a levelling off in house prices but it has not happened. The current unemployment figures are a cause of worry as anybody in Castlebar or Waterford today would agree. However, the number of people in employment is also rising and that is a very material consideration. I do not see any evidence of a fall in demand. It is regrettable that young Irish people wanting to return to this country, having acquired skills abroad, cannot afford to do so. The price of housing is a barrier to the re-entry of such people and the economy is suffering as a consequence. Young people who wish to return to Ireland cannot reasonably expect the same quality of life as they enjoy wherever they are, principally because of the cost of housing in Dublin and othercities.

Senator Daly

I have been in this House for 30 years, since 1973. This debate, which involves submissions from all Oireachtas parties as well as outside parties, is one of the most important debates we have had in that time.

Deputy Rabbitte's articulately presented document is very valuable, but I would like him to clarify something. Does the quotation in the first paragraph of the submission represent the Labour Party's position? The Deputy has mentioned local authorities. Would the cap he suggests in that regard also relate to the private sector? Is he talking about a cap? I fear that this problem would be exacerbated if a cap along the lines suggested by the Labour Party were to relate to private sector developments. It would slow down the acquisition of development land and it would make the problem we are trying to resolve even worse. I assume that any legislation drafted along these lines will include a provision for an appeals mechanism so that those who are dissatisfied with the cap can seek justice by means of an alternative decision in a tribunal or court.

I would like to clarify another matter. Deputy Rabbitte mentioned in his provision that the rates for agricultural land may have to be reduced. This was anticipated, more or less, when the case was taken because the legislation is so antiquated. Does the Labour Party favour the introduction of new legislation to provide for site value tax or the reintroduction of some form of development annuity or levy on agricultural land or development land? How does Deputy Rabbitte react to such a suggestion?

Deputy Rabbitte

I agree with Senator Daly that these matters should be provided for in detail in legislation. It is not intended that the cap will apply to local authority acquisitions only. It is obvious that the provision of social and affordable housing and public housing would be greatly boosted if the 44 local authorities could enter the marketplace and assemble a land bank that they would be free to use for public housing or, more probably, for a mixture of housing types. Partnership arrangements under the affordable housing schemes could make a significant contribution to reducing waiting lists. One would still have to deal with the category of people who do not fit within the thresholds of earning incomes to qualify for social and affordable housing or shared ownership schemes. I agree that appeals mechanisms are needed in the interests of transparency and fairness. The system could be vulnerable in the absence of such mechanisms.

In response to Deputy McCormack, I should mention that a state of parliamentary paralysis may be reached. One might not do anything because of a fear of the Constitution, which intrudes in large areas of Irish life.

My colleague, Deputy Gilmore, is better versed than me in relation to the question of taxes or levies, which I think may represent an alternative. If one increases levies, for example——

Senator Daly

What if one introduces new levies?

Deputy Rabbitte

It seems to me that builders will pass on the cost of increased or newly introduced levies to house buyers. The Exchequer would receive a bigger revenue stream which, in turn, it could dedicate to the provision of public housing. I wonder if one could use the proceeds of a new or more steep levy on a builder for a community purpose. I do not think it would have an impact on the price of houses.

Senator Daly

I am cautious about whether it would have an adverse effect.

Deputy Rabbitte

I think it would have such an effect. In the event of the committee and the Government deciding not to introduce legislation to cap the price of land, I would favour a windfall tax on speculative land.

Deputy Neville

It has been suggested that we should introduce a progressive levy, whereby builders would have to pay a higher levy for each year in which they retain the land.

Chairman

The Deputy refers, obviously, to zoned lands. It has been argued that the progressive levy should apply when a builder hoards or does not release land that has been zoned for development.

Deputy Rabbitte

I think it is an excellent idea, just as I thought it was an excellent idea when the Minister for Finance introduced it in the Finance Act three or four years ago. He excised the provision in a subsequent Finance Act, for reasons best known to himself, just as it was about to bite. It is a good idea and it could act as an incentive to those who own land that could be released into the marketplace. Members of the committee may be familiar with the arguments that were advanced at the time in favour of the reversal of this measure, but I am not familiar with them. I thought it was a good measure, as it dealt with the issues of ease and availability of supply and the rate of release of land, which are certainly important in the areas of Dublin I know best.

Chairman

I will allow three more speakers to contribute before we conclude. We have passed our intended finishing time.

Deputy Neville

We have to be back at 2 o'clock.

Chairman

Deputy Rabbitte made the valid point that we should be in the House and that we are not getting credit for the work we are doing.

Deputy J. Breen

Deputy Rabbitte told us this morning that speed is of the essence in the committee's deliberations. The committee started to prepare for these hearings last January when it placed advertisements in the daily newspapers calling for submissions from interested parties by 30 May. If the Labour Party thought this was such an urgent matter, why did it not make a submission before the eleventh hour? If this committee stuck by its rules, it would not have allowed the Labour Party to contribute this morning. Deputy Rabbitte referred to the Kenny report many times this morning as if he could not have done anything about it, but why did he not ensure when he was a Minister of State that some of its recommendations were implemented? He has come to this committee like someone from the street who is not familiar with the workings of the House. If a new Deputy made such representations, I would laugh at him.

Chairman

I take Deputy Breen's point but I hope that this meeting will not become divided along party political channels. The Constitution states that this committee should be above and beyond politics. The issues relating to the Labour Party's submission were dealt with yesterday, so I will not reopen the debate. Senator Tuffy dealt with the issues successfully on behalf of her party. We can avoid that as it might be unfair to expect Deputy Rabbitte to bring in matters of logistics on which we have decided. Whether he should or should not answer a political charge is a matter for the Deputy.

Deputy Rabbitte

I do not see it as political. It is a personal matter between Deputy Breen and myself the origins of which I do not know. I am very sorry.

Chairman

It would not be appropriate to elaborate on it in this committee.

Deputy Rabbitte

I made the point in my opening remarks that for 30 years no Government has dealt with this issue.

Chairman

I have counted 12 Governments in the period.

Deputy Rabbitte

That point is on the record. My colleague, Deputy Quinn, introduced a Bill in 1980 which would have given effect to the Kenny report. If one looks at my submission, one will read that the Bill was voted down at a time when we did not have the good fortune to have Deputy Breen with us. That is the history.

Deputy Devins

I will be brief. I thank Deputy Rabbitte for taking the time to talk to the committee. In the course of some of the submissions, the question of the hoarding land was raised. On being questioned, all who have come before us have said they were not aware of that happening. Deputy Rabbitte stated categorically that hoarding of land has taken place and we hear rumours that this is the case. Does Deputy Rabbitte have hard evidence and, if so, does he care to share with the committee what land is being hoarded?

Deputy Rabbitte

This has been written about in recent times and any member of a local authority in Dublin will know of it. If the Deputy is asking if there is a ready reckoner I can go to, there is not, but I would be happy to look into the matter. Every member of a local authority in Dublin is aware of the phenomenon, which is carried on to a further stage whereby options are taken in the land of farmers and other landowners by developers in advance of zoning. Prospective development land in Dublin - I am not so confident in talking about other parts of the country - is in a small number of hands and it is released as appropriate, not necessarily in the interests of the public good.

Deputy Devins

Cannot the Deputy put his finger on any specific example?

Deputy Rabbitte

I would be happy to research the matter for Deputy Devins. It has been written about relatively recently. One magazine article in particular gave figures regarding the extent of the phenomenon.

Deputy Devins

We all hear rumours but when we asked the auctioneers and valuers yesterday they stated categorically that they were unaware of the phenomenon through their 1,600 members throughout the country. We like to get our facts straight. If the Deputy has any information, perhaps he will provide it.

Deputy Rabbitte

I am quite sure the Department of Finance and its Minister would not have made a decision to address this in the Finance Bill some three or four years ago unless they had very well researched evidence.

Deputy Devins

The implications are frightening.

Deputy Morgan

I thank Deputy Rabbitte for attending this morning to elaborate on the Labour Party's submission. I direct the Deputy's attention to the last paragraph of page 2 of the party's submission. Will legislation of itself suffice or is constitutional change needed? The Labour Party states that it supports the case for amendment which was made by the Constitutional Review Group while believing it is largely textual. While Deputy Rabbitte has already stated that legislation would probably solve the matter, does he agree the public good is not really enshrined in the Constitution as property rights are dealt with in two separate Articles, Articles 40.3.2 and 43? It is somewhat contradictory albeit resolved to some extent by case law. While legislation may be useful in the immediate future, we must make provision through one Article to ensure clarity and the common good. Some case law has established that it is unconstitutional to make compulsory purchase orders without providing compensation at market value rather than "current use value" in the phrase of Deputy Rabbitte and others who have made submissions.

Deputy Rabbitte

That is the debate and for the purposes we are addressing here there are separate questions to be dealt with separately. When I said speed was of the essence I was speaking in the context of the escalation which has taken place over the last eight years. That escalation is the reason we must address the matter urgently and it is the reason I advocate the recommendation by the committee of the adoption of the legislative route. What the committee decides in its wisdom is a matter for it.

The second question Deputy Morgan raises is something in terms of which the committee should express a view in its own time. The Chairman's predecessor produced a number of reports on the Constitution and through his committee Mr. Whitaker produced a major report on the same subject. The Taoiseach may be minded to consider a new Constitution or he may be minded, as he said in the Dáil in answer to questions, to deal with it chapter by chapter. There is some textual confusion which might well be clarified through a modern redrafting and the Labour Party suggests such a redrafting on page 6 of our submission. The jurisprudence shows that the two Articles in question are mutually informative. Notwithstanding any element of confusion, their thrust and sense are clear. They are not to be used as an excuse for shying away from legislative action due to a fear of the constitutional imperative. On page 6 of its submission is the Labour Party's attempt to draft a clearer version of the provisions. If the committee sets out to rewrite even the two articles in question, a lengthy process will be initiated during which the price of houses will climb even further.

Chairman

I thank Deputy Rabbitte for his interesting report.

Deputy Rabbitte

I thank the Chairman for his courtesy and I take the opportunity to apologise publicly to Deputy Breen for anything I have said in the past which has offended him. I am sorry.

Sitting suspended at 1.20 p.m. and resumed at 2.15 p.m.