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State bureaucracy is helping drive up rents, and it needs to stop

It takes a project an average of 79 weeks from the date of planning application till the first builders start clearing the first square foot of the site for construction.

Aaron McKenna

A MISMATCH BETWEEN supply and demand is driving the massive and unsustainable increases in rent. The ESRI reckons we need to be building them at a pace of 12,500 a year to have any hope of keeping up with demand. We’re not managing to deliver close to the pace required.

We know the magnitude of the problem, for it has been well studied. We know how markets work when supply is low and demand is high. We know the knock-on effects that high rents have on people’s earnings, their quality of life and ability to access things like education. Rents and housing supply are the defining post-recession obsession that will be on our minds the way bondholders were in 2009-2010.

You’d think then, with a massive available market of potential punters that builders and banks and NAMA and the likes would be piling in and delivering shiny new housing at a tremendous clip. At the very least, building sites should be opening up at an incredible pace and filling our skylines with substantially more cranes than the already noticeable uptick.

An average of 79 weeks

But no. The value of new projects getting underway at the start of this year actually fell by 20% on last year, according to a report by the consultancy group Building Information Ireland. There’s good news in the future, in that the value of construction projects in the planning has increased by 40%. Unfortunately, it takes a project an average of 79 weeks from the date of planning application till the first builders start clearing the first square foot of the site for construction.

Some residential projects can take up to 80% longer than the average to get approval. In a country where we’re operating about four times slower than we need to be in housing construction, some projects are taking over two-and-a-half years to get approval to get going. This glacial speed of progress isn’t over-cautious planning authorities trying to make sure we don’t throw up a rake of Priory Halls. It’s sheer inefficient, under-resourced, over-complicated bureaucracy.

We have a myriad web of agencies and offices within councils and government departments that work on planning applications, as well as various routes for objection and hold up to projects. It is right and proper that we ensure that the projects we undertake are sustainable, put in context of the wider development plan for a particular area, and more than anything that projects are built to the highest standards of safety. All of this can be accomplished without 80 plus week waits for approval.

We need a well-connected government agency with defined targets

Government can move mountains when it wants to. Just ask any client of the IDA. I remember setting up an office of a sponsored company here in 2008, and the local council telling me it would take 12 weeks to connect us to the water supply. No water, no office; and staff were due to start in three weeks. Rang the IDA account manager, and council water service staff were around to perform the job that very afternoon.

Now, building houses is a bit more complicated. But the point is that when you have a well-connected government agency with defined targets – in the case of the IDA, net jobs delivered – on which people’s careers hang, bureaucratic guff can be set aside fairly quickly.

The web of different planning bodies and delays in the process of getting builds going needs to be dealt with, and government needs to pin the tail on a donkey that will be beaten with sticks if set targets for planning approval times and new builds are not met. An IDA or an Enterprise Ireland for helping deliver new homes and offices in a timely fashion, clearing planning roadblocks and helping connect financiers, builders and land owners. Considering the state owns most of the land for development and the banks, and has either employed or chased most of the developers for money, they have the numbers of the relevant people.

Accountability for reducing the time taken in the planning process

The government has been taking good steps to try and encourage investment in the area, and more might be done in the budget to reduce the tax cost on building affordable homes. Between Part V levies and VAT, tens of thousands of euro can be added to the cost of a home by government. It would be worthwhile loosening the belt a bit for a defined period of time, two to five years, to get more projects going and more affordable housing on the market.

Financial measures can only help so much, though, when there’s a year or two of delay in the process of getting going on construction. The state needs to figure out how to lower this massive barrier in time, not through communist-style planning of the entire industry; but with an agency that is tasked with and held accountable for reducing the time taken in the planning process.

Aaron McKenna is a businessman on columnist for TheJournal.ie. You can follow him on Twitter here.

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