Cork can reach its potential to compete with Dublin and other European cities but we must tackle the planning strategy that is failing this generation. There is no place for slogans and partisan politics, argues Michael O’Flynn
The population of Cork is projected to grow by a massive 50% under plans set out in Project Ireland 2040, the overarching policy and planning framework for the social, economic and cultural development of our country.
To support this growth in population, the policy contains commitments to progress infrastructure projects such as the long-awaited M20 and the upgrading of the Dunkettle interchange, as well as the development of Cork’s Docklands.
These projects are vitally important if Cork is to achieve its potential to have a bright and prosperous future as a modern city with a large population living in and around the metropolitan centre.
Cork’s expansion will also act as a pivotal counter to the over-concentration of activity in the Dublin region, which threatens to imbalance the country in the same way that London has in the UK.
While I am a great believer in setting out long-term goals, we need to be careful about assuming that this enormous expansion of Cork will be delivered on schedule and that it will be plain sailing along the way for all the infrastructure projects that are required.
Consistency of policy, the availability of significant financial capital, and the continued growth of the Irish economy are factors, which over the lifetime of Project Ireland 2040 cannot be taken for granted.
Further, Project Ireland sets out a plan for how the next generation will live. In the meantime, however, a whole generation of people must be housed, employed and otherwise taken care of.
I regret to say that current strategy is failing this generation. It is frustrating to see this happen when I can see obvious solutions that would deliver housing far more quickly than many of the policies currently being pursued.
The continuing rise in homelessness is entirely unacceptable in a first world country such as ours. Recent economic difficulties do not excuse this state of affairs which results from failure to plan.
It is heartening to see that some sense of purpose and urgency has developed around the need for the Government to deliver social housing and some effective partnerships between local authorities and housing agencies are now starting to deliver social housing, albeit the pace needs to quicken.
However, I am deeply concerned that this generation, and in particular, the middle-income cohort, is being overlooked by our planning and housing policies, which are causing them to suffer both socially and economically.
Planning policy and Vat on housing are two key factors in preventing the delivery of the housing traditionally available to the middle-income cohort.
Currently, the policy is to build compact housing and apartments and offices on brownfield sites in Cork city centre. I fully subscribe to transitioning towards this model for our cities and larger urban areas.
However, this type of development is generally not currently viable for a number of reasons including the cost of relocating existing users, the delay in assembling land blocks, contamination issues, and cost of construction on confined sites.
But if brownfield is the only type of development that will be permitted, the effect is what is currently evident, ie, lack of delivery. No policy can compel people to undertake development that is not viable but policies can and do prevent delivery.
Although acknowledging the additional challenges of brownfield development, Ireland 2040 requires that 50% of units in Cork and other cities must be delivered within the footprint of the city.
As long as policies continue to ignore the issue of viability on brownfield sites, up to 50% of the required units in Cork and other cities will not be delivered.
Failure to deliver large-scale residential units quickly is causing and will continue to cause job losses in Cork as FDI moves to other places where their employees can get affordable housing. It is unforgivable that this is being allowed to happen when there are solutions which will work in the short term without compromising the long-term transition to preferred brownfield development.
Viability is a simple mathematical equation. The sale price must be greater than the cost of delivery including a reasonable profit. The current lack of delivery results from lack of viability which in turn is caused by, on one side of the equation, a cap on the sale price arising from the Irish Central Bank’s macro prudential rules and, on the other side, costs which are too high including land costs and Vat at 13.5%.
Land is a commodity and its price is determined by the law of supply and demand. The price paid by developers is, of necessity, passed on to purchasers. That price is currently at a level which is unsustainable.
The reason is simple. There is more demand than there is available zoned land. A proper analysis of land use zoning would require a paper in itself. Suffice to say that the current model is not working. Owners of the zoned land determine when and if and at what price the land will be released to the market. There are better alternatives.
I believe that the use of strategic land reserves (SLRs) would be a game changer for housing delivery. SLRs are lands which have been designated by certain local authorities as having potential for residential development. They are not formally zoned but are assessed under strict criteria including sequential approach, the ability to leverage maximum returns from infrastructural development and the potential for multi-modal transport opportunities for accessing existing public transport facilities and employment areas.
SLRs can only be considered in the context of a partnership or concerted approach between a landowner and a developer who is in a position to propose a plan to bring forward residential development on the lands in the lifetime of the relevant development plan.
Accordingly, unless the land price facilitates delivery of affordable housing within the short term, planning permission will not be granted.
At present, planning laws do not facilitate strategic housing applications to be made on SLRs, even though they are the type of lands that are ideally suited to such applications.
A small amendment to the legislation could result in a number of large-scale residential developments being brought forward at more affordable prices and could potentially shake up the market for zoned land. For significant results in housing delivery, the currently inflexible brownfield development targets also need to be relaxed in the short term.
In the UK, the Vat rate on residential development is 0%. In Ireland it is 13.5%. The average house price in Cork in Q4 of 2018 was €276,000. The Vat element of that is €32,830. The paranoia regarding developers profiting from Vat reduction is unfounded.
It could well render viable and deliverable development that is currently not viable or deliverable. Further competition from those who pass on the Vat saving will keep order on those who might be tempted not to. In my earlier years of development, the Vat rate on housing was 3%.
I personally support Vat reduction and SLR designation being linked to delivery of a large percentage of affordable housing within each development. I have no difficulty in opening my books to verify cost. I have advocated a return to the certificate of reasonable value that, at one time was required in connection with first time purchaser grants.
A further solution would be a return to the shared ownership model, which offers prospective homeowners the chance to buy a percentage of their home first before eventually outright purchase.
Such a scheme could be facilitated by a local authority or government structured loan. What we can’t keep doing is increasing Housing Assistance Payments (HAP), which just fudges the problem of not building enough social, affordable and private homes.
The demand for large scale rental developments in the city is clear. However, home ownership still forms a significant element of our economic model and provides financial security in retirement.
How many could afford to pay rent in retirement years if policies prevent them buying in their earning years? The Irish Central Bank’s loan to income ratio at 3.5 times is significantly lower than the international norm. This is squeezing middle Ireland out of home ownership and is creating a potential minefield when this generation reaches retirement age.
The land is there as are the ideas to address affordability, but we need is courage, common sense and leadership from the Government to make it happen, otherwise we’re not going to get the homes that Cork requires, it’s that simple.
The Land Development Agency (LDA) has been heralded as the “cure-all” for housing delivery. The establishment order was passed six months ago but no primary legislation has yet been published.
There are contradictory messages from Government and the LDA as to what it will be. Government sources suggest that it is to have a major role in alleviating the current housing crisis while its chairman, John Moran has publicly stated that this is not its role.
I believe its role has to be that of a facilitator/enabler of housing development especially on publicly owned lands.
At best the LDA will deliver 15%-20% of Ireland’s housing needs over the next 20 years. The rest must be delivered by the private sector. Policies which would seek to eliminate profit for private sector developers are therefore very short-sighted.
The powers, functions and, importantly, the ethos of the LDA will dictate whether it makes a positive contribution to the alleviation of the housing crisis or exacerbates it.
It is unfortunate that the major opportunities for Cork are coinciding with the boundary changes between city and county. Never has there been a greater need for cohesion and planning certainty and never has there been less of either, but it is going to take time for the new city area to bed down.
In the meantime, before either local authority can go forward strategically, one must give up the land and the other must take it on. The city’s existing immediate strategy must be then radically altered to take account of the much bigger scale and wider picture within its remit.
With local elections fast approaching, incumbents and those vying to become political representatives must show leadership, action and support for workable ideas. What we don’t need are slogans and partisan politics that solve little.
There’s a big challenge ahead, but ultimately the key to the future success of Cork is balance between policies that support our long-term transport plans, infrastructure and settlement objectives, and immediate action that recognises the entitlement of the current generation to housing and backs efforts to facilitate viable development of housing and apartments in the short and medium term.
If this time of change for Cork is managed by strong political leaders who have the courage to listen and to change and adapt, Cork has the potential to become a powerhouse, capable of competing not just with Dublin, but also many European cities.
Michael O’Flynn is chairman and CEO of the O’Flynn Group
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