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Is our environmental planning system the difference between Ireland’s financial mess and the lesser messes of countries with more typical worldwide recessions?
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Evidence that the multitude of elaborate planning policies introduced in this country in the past fifteen years had any beneficial effect on the quality of Tiger era development is hard to produce. These policies sure were elaborate and their outcomes sure were disappointing: normal democratic procedures were suspended to secure the efficient urbanisation of Dublin’s Docklands – the result is a featureless Mediterranean-resort-grid-iron of low rise streets lacking life or character. The acclaimed Adamstown experiment – the first of our Special Development Zones – feels unnatural and contrived. And hundreds of pages of planning policies couldn’t save Sandyford and Belmayne from becoming the vortices of woe they were to become.
Housing developments and retail centres all over the country, the approvals for which took months and even years of deliberating over, second guessing and objecting to are, at their very best, unremarkable. At their worst, they’ve left big scars on cities like Galway and hollowed chunks out of towns like Carlow. If the development which took place in this country since the end of the 90s had happened without the benefit of a planning system, it wouldn’t have made a whole lot of difference.
But while the planning system has had no noticeable effect on the quality of our built environment, it certainly has had a very noticeable effect on our financial situation. There are many ways in which the Irish economy has been weighed down by an unthought-through planning system, but let me suggest just three:
- In this country, the process of deciding whether or not a development proposal should be allowed to go ahead is indescribably long and unnaturally drawn out. Even when it seems like a decision has suffered a lifetime of delays, there may be another lifetime more to come. During the peak of the economic boom, when demand for new housing was particularly high, the slow rate at which planning applications for housing developments were being approved meant that supply was only a fraction of demand. As a result, house (and other property) prices went up. The inflated prices we were forced to pay due to planning delays might have been forgivable had the process led to better environments for people to live in. It didn’t so it wasn’t.
- In recent years, the Government has tried, through the National Spatial Strategy and other instruments, to regulate sites for single family houses out of existence. The result has been to drive prices for sites suitable for ‘one off’ development into the stratosphere. After the turn of the century, common-or-garden half acre sites in edge of town locations which, in the mid 1990s, fetched modest amounts were suddenly worth upwards of £50K. At the height of the boom, the same sites – even those in the more economically fragile parts of the country – were selling for €250K and more. So, while the physical effect of the Government’s policy to end rural development was negligible (an orderly planning system would have allowed families to live in the houses they wanted to without destroying the countryside), the effect that the same policy had on land prices was outrageous. If the Government had had the slightest understanding of what was happening they would have intervened. They didn’t, so they didn’t. (The dramatic arc of this strand of Ireland’s economic collapse is yet to play itself out: when the thousands of middle income earners living on half acre sites around the country start defaulting on their mortgage repayments, banks will be left with properties worth only a fraction of their book value.)
- After 2000, there was a general sense that if we wanted more ‘sustainable’ cities we needed higher densities and taller buildings. How dense or how tall? Well, this was never fully teased out, which encouraged developers to pay (in hope rather than expectation) ever more staggering amounts for underdeveloped urban sites. This is how it started: at the beginning of the boom, folks in the building game were sometimes surprised to hear that €10m had been paid for a site reckoned to be only worth €5m. Months later, there’d be more surprise when it was discovered that the subsequent planning approval had permitted an extra story of accommodation which nobody else had thought possible. When word started to get around that this kind of gamble was paying off, every horse racing syndicate in the land was coming together to fling money at zoned sites. Soon, people stopped caring whether or not the thousand units they’d hoped to develop (and upon which assumption the value of the site had been set) was later halved by the planners: so long as the banks kept shovelling out money, developers simply raised prices to whatever degree necessary to cover the increased land costs.
Three negative effects on the economy caused by the Irish planning system and, because planning systems in other countries wouldn’t allow these situations to develop, specific to Ireland.
Which leads me to my question: if X is the degree to which the average western economy is in the hole as a result of the economic recession and Y is the larger degree to which the Irish economy is in the hole, does Y – X = the real cost the Irish planning system?
One thing I wonder is. Irish banks do not seem to be exposed as much to the credit Crisis as the other countries. By that I mean the greatest problems for them seem to the Irish domestic market, while Northern Rocks problem seem to have more to do with the international money markets more then anything (correct me if I am wrong)
Now banks threw money at the Irish market, was that the reason that our banks have not gone quiet the same way as Northern Rock? (although reached the same location).
I think you do ask a valid Question. What effect did the planning process have on the rise of house prices and what effect the banks generally firing money at housing had on house prices. Demand had a bearing on the house price rises but also the money the banks gave had a huge effect.
So with a functioning planning system damping the market would Irish banks have gone the way of Northern Rock and still be in the same trouble? Or would they be ok.
I am probably talking rubbish
Economist Frank Barry has been making related arguments.
I still don’t understand why Ireland needs to create their own solutions to problems that have been solved in many other countries before.
Planning in Ireland is a mess, all those residential states, surrounded by walls, isolated from the states around, with no real streets and no services at all and without a decent public transport system due to the lack of population density…
Indeed, this problem is not big as it will be when private cars using petrol become unsustainable. That day, this “spread the houses” policy will make most of the country houses unusable.
Just for the record, I have lived in several places in the greater Dublin area, and so far, Adamstown looks like the very best place I have ever been in Ireland, but is amazing how a so simple way of planning already used all over Europe could take so long to be used in Ireland.
Simon,
Far from talking rubbish, you have hit the nail on the head!
As Colm McCarthy put it, in Ireland we created our very own version of a sub-prime crisis through profligate lending policies by banks, simultaneously dishing out vast sums of money without restraint to both developers and private mortgage purchasers. Our banks, luckily enough, had minimal exposure to the sub-prime derivatives that have played havoc with financial markets elsewhere, but they didn’t need any of that to dance their way into a fine old pickle of their own making.
We would have hit a financial and banking ‘crisis’ anyway arising from the rapidly dissipating fair weather tax revenues, oversupply of housing infrastructure and a housing price collapse, courtesy of our own real estate bubble, sooner or later, irrespective of the international financial meltdown. All that has done has compound our homegrown difficulties.
Veronica, I think the banks here assisted in creating a set of circumstances whereby people who weren’t candidates for sub-prime lending in the sense of not being able to repay their mortgages became sub-prime because prices increased so much that they could only marginally afford the new prices that houses were being sold for. In effect the bar was raised to make ten of thousands of people who were not no income, no job types as was the case in the US into sub prime borrowers.
Dan,
I’m in complete agreement with you. There are a lot of people out there – bankers, mortgage providers, media pundits, property developers, politicians and get-rich-quick merchants generally – who should be taking a long hard look at themselves.