Joseph: If Local Authorities Are Going to Ramp Up Home Building, Some Changes Must Be Made

The passing of the Affordable Housing Act and the announcement in this month’s Summer Economic Statement that the Government is ramping up core capital spending from €9.8 billion this year to €13.4 billion by 2025, suggests that a return of local-authority house building may be on the cards.

Calls for more public housing have been reverberating around the sector for some time, the detail of the process involved in public delivery less so.

The act’s scheme providing for “local authorities to deliver affordable homes on their lands” is welcome but imperfect. While any increase in outside-market housing supply is encouraging, under the scheme local authorities will remain hemmed in by their cap-in-hand funding arrangements with central government.

The act provides for local authorities to “enter into arrangements with the Land Development Agency (‘LDA’) or the Housing Agency for the supply of houses by the LDA or the Housing Agency”.

Leaving aside the concerns around democratic deficit that councillors have raised in the context of councils’ new relationship with the LDA, under these arrangements local authorities will remain an intermediary rather than a developer. This matters for two reasons.

Firstly, entering into arrangements with central government bodies limits local authorities’ input on the different types of housing built in a development. For instance, the division of housing types delivered in LDA projects is laid out in the Land Development Agency Act and is not subject to significant alteration depending on local circumstances. This means that local housing need, as assessed by the relevant local authority, will not be the deciding factor on the kinds of homes built in LDA developments.

Secondly, having the LDA act as a nationwide developer rather than empowering multiple local authorities to directly deliver housing will act as a brake on the supply of new housing. The LDA is a single agency with limited capacity. As such, it simply cannot be expected to deliver the number of new housing schemes required across the country to meet national housing need. Empowered and resourced local authorities represent the ideal governance structure to do just that.

After decades in the ideological wilderness, there has been a global revival of local-authority house building, with pockets of best practice to learn from. Local authorities that are delivering significant amounts of housing typically use a range of tools, including: in-house development teams; local-authority housing companies; arm’s-length management companies; land-management and estate-agency teams; and compulsory-purchase orders (CPOs).

Several examples capture how these tools work in practice and raise the question of whether they could be replicated in Ireland to deliver the aims of the government’s delayed Housing for All strategy.

A Look Elsewhere

Created from scratch by local-authority action, IJburg is a meticulously planned and executed urban extension of 18,000 homes and apartments to the east of Amsterdam. The city council used its internal land-management team to assemble land at existing land value.

Amsterdam then borrowed money to fund extensive new transport infrastructure, thus making the site more accessible and increasing the land value. The site was then divided up into pockets and sold at the higher value to different housebuilders, who built according to the council’s affordable-housing masterplan, thereby ensuring a diverse tenure mix.

Enfield Council in north London have used their in-house development team to turn unviable land into a major housing opportunity in the form of the Meridian Water development. Enfield used the borrowing capacity afforded them by central Government to borrow from the international bond market, using the funds to de-risk sites and install transport infrastructure.

The council then contracted SME builders to build housing, while the council-maintained ownership and control of the land. The result is 10,000 homes of diverse types and tenures, built to meet Enfield’s social priorities. As a result of the Council’s astute land management, a previously unviable tract of land is now an urban extension valued at over £2.5 billion.

Birmingham City Council’s crack CPO team will be of interest in Dublin, where vast tracts of urban land ripe for development are used inefficiently or stand idle. Birmingham’s CPO team have garnered such a reputation for effective land acquisition that they rarely end up pursuing a full CPO process, as the threat of a successful CPO is enough to bring landowners to the negotiating table. Since 2010 when the CPO team was created, agreement has been reached without recourse to using compulsory purchase in 90 percent of cases.

Frustrated at the slow pace of delivery, the success of the council’s dedicated CPO team is the result of their having clear data on unused and inefficiently used sites, and a cross-party consensus among councillors that the private sector was not delivering quickly enough.

The policy lesson to draw from Birmingham is less to do with reforming the CPO process itself – although that would be welcome – and more to do with the positive impact adequately resourced local authorities that can build proficient teams to deal with specific challenges in the house-building process can have.

Lessons to Learn

While these models cannot be airlifted directly into Ireland, there are policy lessons to learn; particularly now as the Government embarks on a new era of capital expenditure on housing.

The golden thread running through proactive local authorities that deliver significant amounts of housing is access to funding; be it through borrowing capacity, retaining local tax take, or central government grant. In Ireland, local authorities are comparatively underfunded and lack autonomy and legislative power to raise capital themselves.

A reimagining of the funding relationship between the Department of Finance and local authorities could allow borrowing headroom for councils to proactively deliver housing using similar methods to those outlined above. In England, for example, Theresa May’s government removed the borrowing cap on local authorities for house building in 2017, and since then the country has seen a resurgence in local-authority house building.

Another common trait in house-building local authorities is land-management capacity. Where councils have well-resourced land-management teams, the inherent value of their land banks and compulsorily purchased land can be leveraged to front fund infrastructure and build housing.

In Ireland few councils have land-management resources, and this is typically the deciding factor in their deciding to sell council-owned land directly to single private developers to deliver housing. With added land-management capacity, councils could maintain control of their land and decide on the type and tenure of housing delivered on site.

Between the 1930s and the ’50s local authorities accounted for 55 percent of all new housing built in Ireland, so it is a policy rather than a cultural shift that is required. The Affordable Housing Act has laudable aims insofar as it enshrines outside-market housing in legislation.

However, if outside-market housing is to be delivered at the scale required, we need to resuscitate the missing agent of public-housing delivery that has ebbed away over recent decades. There are lessons to be learned from countries that have done just that.