Irish Government Urged To Use Emergency Powers To Green Light 80,000 Homes — Or Investors Might Disappear

The Irish government has been urged to use emergency powers to free up the construction of up to 80,000 homes currently stuck in the planning system, to help ease the country’s housing crisis.

Delegates at Bisnow’s Ireland Residential Investment and Development Update heard how tens of thousands of homes that had gained planning consent were currently stuck in a form of planning purgatory as they await the outcome of judicial reviews.

The impact of the Russian invasion of Ukraine had exacerbated the crisis, with thousands of homes needed to house refugees that had arrived in Ireland since the war began in late February.

"Speaking from the perspective of institutional investors, the first thing I call out is the whole planning system, which is completely dysfunctional. There's about 80,000 housing units trapped or semi-trapped by judicial review,” Irish Institutional Property CEO Pat Farrell said.

“The government is trying to provide a response to the humanitarian crisis and the minister has talked about taking radical measures that use emergency powers to try and address that issue. I would suggest that they don’t waste a crisis.”

In September last year the Irish government launched its Housing for All plan, which outlined development goals up to 2030. It estimated that Ireland would need an average of 33,000 new homes per year up to the end of the decade. The new plan acknowledged that Ireland had between 70,000 and 80,000 'non activated' planning permissions across the country, around 40,000 were in Dublin.

Panellists at the Bisnow event however criticised some current planning guidelines that limited what could be built, especially in Dublin, and lamented the impact that the current Judicial Review process was having on the planning system.

An Bord Pleanála Director of Planning Rachel Kenny said that the planning system had "always" been accused of being broken; however, in its current form a small number of people are capable of derailing the planning process.

"The current planning system can be misused or exploited by a small minority, a couple of hundred people, to prevent the progression of over 80,000 units.

"It's not that people shouldn't be allowed to express their views, and we should bring people along and on board, but the extent to which we allow that to delay housing which is at an emergency level, that is what we need to look at."

According to Farrell policy “flip-flopping” by the Irish government has impacted confidence in the investment market. The multiple hurdles that have been placed within the planning system have caused concern that international investment could look for different countries to place its capital. Hines Ireland Managing Director Gary Corrigan said that the amount of capital needed to deliver 33,000 homes per year would be in the region of €11B.

One area of concern is rental caps placed on areas of Dublin that are deemed as rental pressure zones. Since December the annual rent increases in such areas are capped in line with inflation, or 2% per year.

"Developers ask why would they invest in Dublin when you have hyperinflation in construction costs and you [government] have put a cap on the revenue side,” Corrigan said. “It is a big challenge and something I think is seen relatively negatively by a lot of investors. They can just go to another city where they won't have that issue. It is a big challenge.”

Corrigan’s comments were echoed by Bain Capital Managing Director Ireland David Cullen, who warned that institutional investors could pick schemes in the Nordic countries or Spain that would give better returns than Ireland under current investment conditions.

"The planning system is fundamentally broken," Cullen said. "An institutional investor cannot buy land without planning in this country. You have no certainty on your timeline to get planning consent.

"There is an assumption that institutional capital will always be there. Now we're moving to a period where other countries are starting to look more attractive. If it is easier to develop in Spain, why put the money into Ireland and take the risks?"