A Closer Look at the Costs of the O’Devaney Gardens Deal

Some Dublin city councillors have called this week for a vote to rescind the council’s approval of a plan for private developer Bartra to build hundreds of homes – some social, some private but “affordable”, and some private and “market-price” – on the O’Devaney Gardens site in Stoneybatter.

A motion proposed by independent and People Before Profit councillors for consideration at a meeting of the full council scheduled for next Monday evening says the vote to approve the plan was flawed in several ways.

The motion calls on councillors to rescind their vote due to “misinformation”, “unanswered questions”, and “subsequent doubts raised about the legality of not only the vote itself, but of the so-called ‘deal’ with the developer and the intervention in the process by the Minister for Housing”.

Weeks after Dublin city councillors voted in favour of the plan, debate continues over whether it was a good deal for the state, which is looking at paying Bartra millions of euro, and giving the developer control over a prime bit of land – and for people living in Dublin, who need more homes they can afford to live in.

For the Land

“The big story here is the land,” says Sinn Féin TD Eoin Ó Broin, party housing spokesman.

A Dublin City Council spokesperson said the council “is not selling the land or any part of it” to Bartra. But the council report on the deal with Bartra discusses the “need for Councillors to approve the Transfer of Land Title procedure … to the Developer”.

In any case, the council’s giving the land over to Bartra, and that is its biggest bargaining chip in negotiations over what it can get back from the private developer in exchange – in terms of infrastructure, and prices on homes it wants to buy from Bartra for use as social or affordable homes.

But Ó Broin and others say the council has seriously undervalued this key bargaining chip.

A council report said the value of the land at O’Devaney Gardens in 2017 was €15 million to €20 million.

A council spokesperson said last Monday that that figure remains the same today. “The indicative land value range (€15M to €20M) as outlined in the O’Devaney Gardens Feasibility Study has not changed,” they said.

Other vacant sites in the wider area have significantly higher values.

In Fairview, a similar distance from the city centre, a site with scope for 32 apartments was for sale in May for €3 million.That valuation suggests a site value of €94,000 per apartment.

Back in 2018, a site in Cabra was valued at €32 million, which suggests a site value per apartment of €76,000. That was over a year ago and land values have gone up since.

What if the site value on the O’Devaney Gardens land was midway between these, say €85,000 per apartment? Barta is building 411 homes for private sale, so an approximate commercial value for half of the land being transferred to Bartra would in that case be in the region of €35 million.

Usually, when a developer builds social housing they make around a 5 percent profit, says Ó Broin, the Sinn Féin TD. “That is grand,” he says.

A developer of private housing would expect to make an average profit of 11 percent to 15 percent, which is also fine, Ó Broin says.

The problem with the O’Devaney Gardens deal is that “Bartra is making a major windfall out of the land, on top of those profits,” he says.

Architect and housing expert Mel Reynolds said he was chatting to a developer recently and he put a challenge to him.

“I said to him – ‘Do you think if we sat down together, we would we be able to figure out a way to make a 12 acre site, worth €65m, disappear?” said Reynolds.

“Dublin City Council have managed to do just that,” he says. “The unbelievable thing is that they start off with an asset but then they just give it away for free.”

Why is the value of the site apparently quite low? It was not based “on a potential price that could be achieved on an unhindered site”, a council spokesperson said.

The council needed the developer to include the social and affordable homes, so the valuation was different, she said. “There were several restrictions that would not apply if the site had been simply sold on the open market.”

Labour Councillor Alison Gilliland, who chairs the council’s housing committee, said she was told that the value of the O’Devaney Gardens site was lower than might have been expected because of the social housing in the development.

“Apparently land decreases in value if it is to incorporate social housing,” she said, by email.

But that is questionable. According to the councilreport, Bartra plans to sell one- and two-bed apartments in the development for an average of €450,000 each.

According to theResidential Property Price Register, a one-bed apartment elsewhere in Dublin 7, at the upmarket Smithfield Square development, sold last year for €261,000. Two-beds have gone this year for roughly €360,000 to €400,000. Penthouses sold for more than €400,000.

In other words, apartments at O’Devaney Gardens, where values would supposedly be brought down by nearby social housing, are to be sold at around €100,000 above the recent sales prices in Smithfield Square.

A council spokesperson said: “O’Devaney Gardens is not Smithfield now but we expect the new development to be better than anything currently in Smithfield. If the prices are too high then we presume that Bartra will not be able to sell them and will have to reduce such prices.”

The land value has been fully taken into account in the overall public procurement process, they said. “Financial and valuation advisors were an integral part of the Governance structure which oversaw the process from the beginning.”

Metered off the Market

So, in exchange for the O’Devaney Gardens site, what will the council get from Bartra?

According to the report presented to councillors by the housing manager Brendan Kenny, the social homes and affordable homes are being provided at a discount on a fixed “market price”.

“Discount on both the social and affordable units from the market price – [has an] equivalent cash value in the region of €32m,” the report says.

That raises questions, though, around who decides the market price.

Orla Hegarty, a lecturer and architect at University College Dublin, says that, “Linking development to future market prices is high risk and expensive.”

A council spokesperson said it’s not just price discounts worth that €32 million “cash value” that the council gets in the deal approved by councillors earlier this month.

They’d also get €7 million in actual cash, “which will be used to clear costs already incurred such as demolition etc and to provide additional community facilities”, said the spokesperson.

“Under a direct-build situation such expenditure would also have to be added into the overall construction cost,” they said – referring to a situation in which the council would hire a contractor to build the homes directly for them.

Under the deal, Bartra is also to carry out €10 million worth of infrastructure works for the site, says the Dublin City Council report. This would include, “roads, footpaths, street lighting, drainage, landscaping, new public park, crèche, etc”, it says.

Would it be fairer, as Bartra are selling half the homes privately, to consider those infrastructure works a €5m contribution to Dublin City Council?

And the total contribution from Bartra to be €12 million? (In addition to the profit on selling social and affordable homes to the council and to homeowners.)

A Dublin City Council spokesperson said this evaluation does not take into account the full complexity of the development and the work being done by Barta.

Most councillors say that they have always thought they were getting bad value for the land.

“It struck me as being very low and I questioned this a number of times,” says Fianna Fáil Councillor Mary Fitzpatrick, of the valuation.

But the only way to confirm the commercial land value would be to put the site up for sale – which she would oppose, she says.

The best way to use the value of the land is for the council to develop it itself, Fitzpatrick says. But because the government ruled that out, the taxpayer was bound to take a hit, she said.

Thereafter “the state was destined to never fully realise the value of the state’s most valuable asset … land zoned and serviced for housing”, she says.

Not all agree, though. Dublin City Council isn’t selling the site or giving it away, said Fine Gael Councillor Paddy McCartan, at a council meeting on 25 November.

“The land has been fully leveraged to fund the development of social and affordable homes,” he said.

How Much?

Many councillors have been in the dark as to the finer details of the deal with Bartra, having been told that much information was commercially sensitive. Some signed non-disclosure agreements in order to see more.

How much exactly Dublin City Council has said it will pay Bartra for the social housing on the site, is therefore not public.

Housing Minister Eoghan Murphy of Fine Gael gave some indication when he said in the Dáil on 19 November that his department is providing almost €100 million “between social housing and affordable housing” at O’Devaney Gardens.

“The €100 Million figure refers to the construction cost of the 56 units currently on site, the purchase of the 192 social units as part of the agreement with Bartra and the provision of the Serviced Site Fund for the affordable purchase units,” the council spokesperson said.

Brendan Kenny, the council’s head of housing, told councillors at the meeting on 25 November that it would not be any cheaper to directly build the homes. The council spends €350,000 to €370,000 per home, when they employ builders directly, he says.

Given, though, that some of the homes will be one-beds, that the council already owns the land, some say that price is hard to swallow too.

Architect Mel Reynolds says the council’s build costs are sometimes high when they’re trying to put homes on small sites in the city centre. That can throw up cost increases because of traffic, deliveries, and other issues, he said.

But O’Devaney Gardens is more like a greenfield site, he said. It shouldn’t, therefore, have any of those issues.

Architect and UCD lecturer Orla Hegarty said similar: “This is an open site with good access and plenty of working room, without the difficult conditions that might be experienced in other parts of the city.”

Hugh Brennan, the chief executive of Ó Cualann Cohousing Alliance – which has built affordable homes on council lands in Ballymun – said it is able to keep its average construction costs to around €235,000.

“We are currently building and selling a 100m2, three-bedroom terraced house, A2 rated with off-street parking, for €219,000 including VAT in Ballymun,” said Brennan.

Construction prices have gone up by about 10 percent since he secured this deal last year, Brennan said. If he was tendering now he would expect to pay a builder around €240,000 for that three-bed home.

A two-bed terraced house, of similar specifications, should cost €203,000 this year, said Brennan.

Apartments are more expensive to build than houses though, says Brennan. He is currently also tendering for a scheme of 250 apartments in Ballymun.

For those, Brennan says he is confident of securing a builder to construct the two-beds for €285,000 and one-beds for €185,000, he says.

Those apartments will be liable for developers’ levies, which Dublin City Council direct builds are not. So they should be more expensive than what the council could build itself.

Across the mix of one and two-bed apartments and two- and three-bed homes, Brennan gets an average construction cost of around €235,000 per unit.

It’s costing Dublin City Council between €350,000 and €370,000 to build social units on city sites at O’Devaney Gardens, Donore Avenue and Dominick Street, a council spokesperson said.

The much lower figures that can be found elsewhere are for “fairly straightforward schemes that do not involve any significant ancillary facilities such as is required in the main O Devaney Gardens site”, the spokesperson said.

At the special meeting of the council on 25 November, some councillors also queried the high construction costs.

Independent Councillor Nial Ring asked to see the figures broken down by the square metre. “It would occur to me that if you own the land you should be able to build a house for under €300,000,” he said.

Independents 4 Change Councillor Pat Dunne also wants to see a full breakdown of the council’s construction costs.

“The economies of scale in the O’Devaney Gardens development should bring down the costs too,” he said.

Alternative Visions

Housing Minister Murphy’s response that the social and affordable homes at O’Devaney will cost the state €100 million has left some questioning whether that money could have been spent on a different model, in a more cost-effective way.

Architect Reynolds says he wonders why the council didn’t just sell half the land, for, say, €35 million, and use that to pay to build 148 social homes.

At a build cost of €235,000, the taxpayer could then have covered the cost of the other 99 homes – putting the total bill for social housing at around €23 million in that scenario. (Affordable homes could be built on the Ó Cualann model.)

Even if the design work and developing the infrastructure, roads, creche, community centre, playgrounds and so on came to €20 million. That would add up to a total cost to the taxpayer of €43 million instead of €100 million.

The Dublin City Council spokesperson disputed this scenario, saying the cost of building homes on O’Devaney is substantially higher.

And, “Selling half the site and directly constructing social and affordable housing on the remainder of the site was not an option and there is no evidence whatsoever to show that such an option would achieve better value for money or a better deal for taxpayers,” they said.

But others believe that the council could have got far better value for money – and land – on the O’Devaney site.

“This is the greatest single destruction of taxpayers assets that I’ve ever seen,” says Reynolds, the architect and housing commentator.

This is not Monopoly money, he says. If the social housing is costing twice as much as it should, that will reduce the number of houses that the government can afford to build, he says.

Says Hegarty, the UCD lecturer: “When resources are limited and the demands are great, the imperative should be to build the most possible homes and to achieve the best value for money, not to acquire housing at up to twice the price of traditional methods of procurement.”

Ó Broin says that Sinn Féin only backed the deal on the understanding that the council would get value for the land. (Sinn Féin led Dublin City Council during its previous five-year term, when the outline for what would go on the O’Devaney site was agreed, and the party backed the plan then.)

When South Dublin County Council sold off land at Kilcarbery, Sinn Féin opposed the deal because there was no affordable housing included, said Ó Broin. But “at least in that instance the manager said, ‘If I’m disposing of land I’m getting market value for it,’” he said.

A Dublin City Council spokesperson says Barta’s was the winning tender because it was the best deal.

The prices in the final tender were scrutinised by the council’s chief quantity survey and chief valuer, they said.

The prices were also looked over by the National Treasury Management Agency – who are the council’s financial advisors – and their tax advisors KPMG, they said.

“All of which were ad idem in stating that the prices as submitted were in line with the expected prices pertaining to Apartment Developments in inner city Dublin,” said the spokesperson.

Boxed In

Most councillors – apart from Fine Gael councillors – say that they think the deal with Bartra is bad for the taxpayer.

Some saidit was so bad they couldn’t back it, calling it a giveaway. Those who backed it anyway in a vote on 4 November say they were presented with no other options if they want to see homes built on the O’Devaney Gardens site anytime soon.

“I think it’s terrible deal,” says Labour Party Councillor Alison Gilliland, who heads the council’s housing committee. “But it has taken us six years to get this far.”

If the council were to go back to the drawing board now it would take at least three years to get back to this stage, she says.

“If we broke it up and tried to build it out ourselves we would have to go back to the beginning of the four-stage process, and that will take a minimum of two years,” she said. “Then, we will still have to tender out for a builder.”

Homeless families won’t be served by further delays and nor will the taxpayer, she says. You also have to balance it against the costs of emergency accommodation.

Social Democrats Councillor Gary Gannon, who is also part of the ruling Dublin Agreement group, says it is a bad deal for the taxpayer but he is more preoccupied with the plight of homeless people and especially children.

“How many years of children’s lives are we willing to gamble on this?” he asks.

The council and the Department of Housing have totally different ideologies, he says, so it is unlikely they will ever reach a different agreement.

Meanwhile, “there is a site lying idle there that people aren’t living in”, says Gannon. “So the question is how can we get cranes in the sky and get keys into people’s hands? Unfortunately, the quickest way of doing that is this shit deal with Barta.”

Bartra’s “was the winning tender, THE MOST ECONOMICALLY ADVANTAGEOUS TENDER, the best tender submitted”, the council spokesperson said.

“If the current project model was abandoned it would take 3 to 5 years to get to the stage where we are at now, and 10 years before it would be completed and any alternative model of development would likely be subject to even higher construction costs than at present,” they said.

Author:

Laoise Neylon: Laoise Neylon is a city reporter for Dublin Inquirer. You can reach her at laoiseneylon@gmail.com.

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