Ireland Housing Crisis

From the substack - The Fitzwilliam written by Robert Tolan on 19 April 2023

Ireland has one of the most acute housing shortages in the world. It has the lowest number of dwellings per head in the OECD, and average house prices are now eight times mean income (compared to three times as much in 2010). The situation is so bad that 70% of young people in Ireland say that they are considering emigrating due to the cost of living, which is mainly driven by housing costs. On Daft, Ireland’s most popular property website, fewer than 1,100 properties are available to rent in Ireland, a country of over 5 million people.1 Homeownership has collapsed: the Economic and Social Research Institute estimates that one in three people will never own a home. Recent polls suggest housing is Ireland’s main political issue: the next election might well be decided on how each party proposes to fix the housing crisis.

There are many reasons for the housing shortage, but one fundamental cause is simple: construction has negative effects on neighbours (such as noise and a strain on local services) so measures to block construction are often locally popular. There is a tension between the need for new homes and local objections to development. But international experience suggests the circle can be squared. By giving locals the power to enable extra construction, and get a share of the resulting economic benefits, other countries have delivered large increases in housing supply with popular support.

For decades, the Irish planning system has not allowed enough homebuilding. The process of getting planning permission is tortuous: First, each new home needs the land to be zoned for housing. Then the homes must get planning permission from the local authority. Currently, almost all significant developments are appealed, which means further approval by An Bord Pleanála (ABP) is necessary for the project to proceed. At this stage, there is a risk of a judicial review, which can be brought by an objector living anywhere in the country. To bring a case to judicial review, applicants must argue before the High Court that a proposed development violates some part of the Planning and Development Act (2000). Judges in the High Court can block the development (or not), but their decision can, if a development is deemed to be of national importance, be appealed further to the Supreme Court. Critically, Ireland is unique in that it is the only country in the developed world with both American-style zoning and British-style local planning. This creates what Francis Fukuyama calls a ‘vetocracy’ – rule by veto.

In Ireland and abroad, development is blocked by those who may want to see building in theory, but not near them. Proposals providing desperately needed housing in Ireland’s urban areas (especially Dublin) are most at risk of these objections.

International solutions

Other countries have faced similar problems, and have had some success in solving them. South Korea pioneered bottom-up planning as a way to increase community involvement in the housing supply. Seoul’s Joint Redevelopment Projects (JRPs) give Koreans the right to redevelop their neighbourhoods at higher levels of density if at least 75% of homeowners agree. Introduced in 1983, every area of Seoul that has been designated for JRPs has opted to use the scheme, and around 50% of the new apartments built in the mid-1990s were delivered through JRPs. Over that time, living space per capita has increased by more than two and a half times.

Though the policy has been a huge success on the housing supply front — showing how communities will often opt for housing if given a choice — there has been some popular opposition. One major reason for opposition is that since only homeowners got the vote, tenants are evicted to allow homeowners to develop. The scheme also permits very tall developments that have substantial impacts on nearby areas whose residents haven’t had the chance to vote.

Similarly, the Squamish First Nation of Canada voted in 2019 to build Sen̓áḵw, a 6,000-home development on its sovereign tribal lands near Vancouver. The aim was to help address Vancouver’s housing shortage in a way that allowed the Squamish to reap the economic benefit of economic development. It is estimated that this project will generate billions of dollars for members of the tribe. Once again, this was able to go ahead where other large projects in Vancouver failed, because the Squamish residents have the power to permit development where they stand to benefit from it.

Another example is Israel’s approach to urban densification. Israel increased apartment supply in Tel Aviv by around half through a rule known as ‘TAMA 38’. Under this rule, if 80% of a given apartment block’s residents agree, they can vote for redevelopment, demolish the block, and build a larger one. A 66% threshold must be reached to enable extensions of the existing structure without demolition. The latter is the most common application of the rule. From 2018-20 in Tel Aviv, TAMA 38 was responsible for an average of 31% of the new homes built.2 Like JRPs, it works because the residents are given both the power and good reason to vote for more homes. It has many lessons: an Irish scheme should take considerably more care of neighbours, and ensure that more value is captured for local government to improve local services and infrastructure. As the current density of housing is lower in Dublin than in Tel Aviv, gentle infill, building on underutilised land, would be much easier while protecting the neighbours.

Not all community-led schemes have been about local agreement or votes, as recent developments in California illustrate. Even small-scale infill development in California tends to be controversial, and localities enforce some of the strictest zoning rules in the world. This has led to California having some of the world’s highest house prices, especially in Silicon Valley suburbs and cities like San Francisco. Since 2016, however, Californians have been allowed to build Accessory Dwelling Units (ADUs): small homes added by householders in their back gardens. This has had a striking impact: by 2021, ADUs made up 22% of new homes built in Los Angeles. ADUs have succeeded where other ideas have failed for two reasons: first, they are small-scale and visually unintrusive, so by their nature, most of the negative effects are borne by the homeowner. That homeowner has a strong reason to keep harm to a minimum. Second, ADUs are seen as benefiting local residents by improving property values, rather than delivering profits to a large developer or outsiders.

Houston has also followed a decentralised approach to planning, but this time based on opt-outs, rather than opt-ins. Like essentially all American cities, Houston has long required each new home to have its own minimum area of land to prevent developers from subdividing sites.3 This ‘minimum plot size’ was 5,000 square feet until the 1990s. In 1998 the city sought to reduce the minimum plot size to 1,400 square feet, to allow more homes per acre, but it faced opposition from homeowners who feared change. To assuage concerns, Houston provided that streets or blocks could choose to opt out of these reforms. If at least 51% of residents opted out, the city granted a ‘Special Minimum Lot Size’ application, exempting the area from the new rules. As it turns out, many areas have not opted out, and Houston has seen many attractive new homes built as a result.

Applying these lessons in Ireland
Not all of these schemes should transfer naturally to Ireland without adaptation. Korea’s scheme, for example, had no height limit, meaning that one-storey shantytowns were often replaced with high-rise towers. This would probably be politically unacceptable in any society without a tradition of high-rise urbanism, and may be aesthetically unattractive. But all these schemes demonstrate that giving locals more power to permit development can result in much more of it, and some of them show how development can be popular and uncontroversial.

The challenge in learning from these examples is coming up with a scheme that works with our special historical, geographic, and cultural circumstances. Such an approach would need to respect traditional Irish development patterns, generating development that was generally low or mid-rise, made up of detached, semi-detached and terraced houses, and clothed in vernacular materials such as stucco, brick, and stone, such as on Merrion Square.

The Georgian Merrion Square is significantly denser than most of Dublin’s more modern housing stock. Source. I believe that one such idea, called street votes, checks all of these boxes, and that it could be successful here. I have been working with the help of many experts to adapt it for Ireland. Street votes have attracted considerable interest internationally, winning support from the American Planning Association and the UK’s Royal Town Planning Institute. To date, the policy has been endorsed by John Fingleton, former chair of the Competition Authority, and Andrew Montague, former Lord Mayor of Dublin. Indeed, street votes will likely become law in England and given the similarity between the Irish and English housing markets, street votes would be the simplest way of trying bottom-up planning here. The idea is simple: following the example of the international precedents, Ireland should give small local areas the power to develop more, if they wish to. In the Irish context, the most appropriate geographical unit for such decisions is the street. But, learning from the international experiments, we should restrict those powers to allow only development that is consistent with Irish history and tradition, and which imposes minimal spillover costs on neighbours on other streets. This would still add the capacity for many more homes – but in a popular way, meaning that the policy will survive over time.
This means requiring streets to achieve something like a two-thirds majority to use these powers, to ensure that there is a broad consensus for change. And it means rediscovering traditional planning tools like ‘light planes’, which rule out development that risks blocking out too much light for neighbours. Such rules were a feature of the development systems under which Georgian Dublin and Limerick were built, as well as many of the most treasured international cities, like Belle Epoque Paris and early 20th century Boston. It means having strict rules on parking and driving, ensuring congestion doesn’t increase. And, crucially, it means having a strong land value capture system so that local government, and the wider community, benefit.
If you think these contributions and restrictions would remove the scheme’s benefits, think again. The constraints on housing supply are so tight in Ireland right now that many small developments can still deliver huge financial uplift; the median price to purchase a dwelling is at a record €310,000. The constraints on construction are not primarily economic, but regulatory: local people do not capture enough of the benefits of development to win their support, and even if they did, they would have no method to create a mandate for it. It is these constraints that street votes address by providing a less bureaucratic way to gain planning permission. Additionally, Ireland’s architectural heritage will be preserved, as listed buildings will be exempt from street votes, and potentially emulated. Georgian Dublin has as much as four times more housing space per hectare than the mid-century semi-detached housing street votes are best placed to replace.

Consider an average South Dublin street consisting of two-storey detached and semi-detached houses. Street votes would allow residents to choose a street plan that allows each home to add three more storeys, adding tens of additional units. Homeowners could sell or rent out the additional units thereby realising significant returns at current property levels.
In my research, I have built a detailed model of exactly how much street votes could lower the cost of housing in Ireland. Taking a random sample of different areas, I applied building regulations, included the additional floor area required to create separate entrances for the new homes, and estimated the floor area street votes would allow Irish homeowners to add. I then used the average dwelling size in Ireland to estimate the number of additional homes that would be created. With a height limit of four storeys for urban areas and two storeys for rural areas, and assuming residents will not pass a street vote unless the benefits are large enough to make it worth the build cost of redevelopment several times over, I find that the policy would permit an additional 25,000 homes per year on top of the 30,000 delivered through the rest of the system in 2022.

To be politically workable, these proposals must be refined carefully: we need to work out precise proposals around parking, energy efficiency, biodiversity and ensuring local infrastructure can cope with higher density. I will be spending the next several months working on developing the details of the policy, working with an array of young people and experts who want better housing and planning in Ireland. Our hope is that by the end of summer, we will have the details of a scheme that is ready to be implemented.

It’s possible that I’m wrong: maybe residents won’t be interested in passing a street vote, and the policy will have little uptake. Of course, street votes should not be our only tool for tackling Ireland’s terrible and growing housing troubles. But it could hardly make things worse, and if residents grasp the enormous opportunities street votes would offer them, it could make things significantly better. Experiments from around the world have shown us that giving locals the power to say yes to extra housing can deliver more and better homes in a popular way. Let’s try street votes in Ireland too.