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The “Land of Ireland for the People of Ireland?”

Posted on April 28, 2017 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

First, there was a bonanza for land-owners in or near cities in the 1960s. Then there was the Kenny Report in 1973 (Kenny was a High Court judge who recommended pegging development land prices at 25% above agricultural land value – the recommendation has been ignored ever since). After that nothing much changed except that land prices went up and up.  After a property bubble there came, eventually a crash in 2008-11.

In the meantime, a large amount of hard earned income was put away in a ‘National Pension Reserve Fund’ (NPRF) during the early noughties and was used to ‘bail out’ the banks in 2009-2013 (i.e. rescue some lenders to the Irish banks who had taken a punt but suffered little or no write-down in monies paid back).  A minor detail is that a weak and belated attempt to implement part of the Kenny Report was introduced and quickly abolished due to lobbying (the super tax on development land appreciation in 2010-2014).  Next came the recovery and the great sale of Irish assets at knock-down prices to large international vulture funds.  And then there will be, very soon, a sale of possibly €2 or €3 billion in AIB bank shares (the NPRF money) to the highest international bidder.  Finally, the next scene is that we will sell/lease/gift large amounts of publicly owned land to private developers under public-private partnership deals. Such is a short history of Irish economic development where Land continues to the dominant factor of production and determining economic interest and where high finance and 3-bedroom semis have replaced cattle as a significant commodity of interest.

An announcement was made last week by the Department of Housing.

Over 700 sites owned by local authorities and other public bodies will be transferred to the private market to help tackle the housing shortage. Expressions of interest from developers are being sought. While no detail has been given, it appears from statements by the Department that land may be sold or subject to long-term lease where land cost is repaid after the units are sold or rented by private developers. In some cases, it would not surpris3 me if the land were simply gifted to private developers (‘after all, they will be building ‘social housing’ and isn’t that a return to the State?’). A number of local authorities have been lined up to enter into agreements with private consortia to finance, build and maintain properties for 25 years.   In return, Government will pay an ‘availability agreement fee’ inclusive of a risk premium estimate borne by the private consortia.  A competitive tendering process is in progress.

Will there be, over the next 25 years, disputes, defaults, bailouts? And how soon will all of this happen and who will really bear the cost and risk in the long-run?  The history of PPPs especially in the area of social housing is not edifying in this regard.

Minister Coveney has stated:

“I want all local authorities to take up the mantle and to bring forward sites as quickly as possible for development in this way,” The Minister said. “Opening up State land for mixed-tenure housing is a major policy intervention: if others control scarcity in terms of land supply, they control the market. I want the State to ensure that does not happen.”

Rebuilding Ireland has committed a €200 million Local Infrastructure Housing Activation Fund (LIHAF) to open up lands for early development, greatly enhancing existing measures in relation to construction growth, with a guarantee to double the completion level of additional homes in the next four years to 25,000 on average per annum. 47,000 social housing units are also to be delivered under Rebuilding Ireland’s plan by 2021.”

(the reference to 47,000 social housing units includes over 30,000 publicly subsidised private rent schemes).

Some questions are in order:

  • Has there been a cost-benefit analysis of the recent announcements?
  • What is the total value of publicly owned land likely to be transferred?
  • Will there be an element of cost-subsidisation by the State and has this been estimated or considered on a case by case basis?
  • Have other options for use of state land been considered?
  • What advice has been sought and from whom?
  • How many new homes will the plan deliver and when?
  • What commercial considerations will be reflected in any transfer of lands as well as the use of PPPs?

Now, the proceeds of the sale of AIB shares from NPRF cannot be used, we are told in a reply to a Dáil Question, for the purposes of productive investment (though EU Commissioner, Phil Hogan, almost pleaded recently with the Irish Government to avail of EU fiscal rule flexibility to be more courageous in general and especially in response to Brexit).  But, a transfer of a value of many billions can be ignored for the purposes of fiscal space? [The bailout cost €64bn. So use the AIB flotation to help rebuild Ireland]

 Like taxes, are fiscal rules mainly for the less powerful and well endowed, only?

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