Last week’s column discussed some recent history, in particular the regulatory backlash to the building boom that took place between 2000 and 2007. Its main point was that many believe that the volume and quality of building was a result of the lack of regulation, rather than the wrong regulations (in particular tax incentives).
If you believe this, you are more likely to believe that the answer lies in lots more regulations, rather than simply enforcing the regulations that were there all along (and removing the tax incentives that distorted the market).
This is what most local authorities believe and we have seen the implications in a raft of new requirements for building, especially when it comes to apartments. Almost all of these new regulations come from good intentions, like the requirement in Dun Laoghaire Rathdown that all new homes are passive (i.e. they produce at least as much energy as they consume) or the requirement for all apartments to be fully accessible to those with limited mobility.
Who could argue with these regulations, you might ask? Take the analogy of a car. Suppose one of Ireland’s local authorities decided that any new car sold in its area had to be battery powered, rather than petrol-powered and, on top of this, all new cars had to fully wheelchair accessible.
A moment’s thought would reveal that these new regulations, while probably well meant, would clearly discriminate against those on lower incomes – and probably against everyone except those on highest incomes. The very same principle holds true in housing.
All the new regulations, specifications and minimum requirements that have been brought in in the last ten years are all things that would improve the quality of accommodation. However, they also increase the cost of new housing, putting it further out of the reach of ordinary households.
For example, a newly built two-bedroom apartment in central Dublin would cost at least €1,700 a month to rent – and that’s without any site costs. Allowing for reasonable city-centre site costs, the breakeven monthly rent is between €2,000 and €2,200.
To put that in perspective, suppose a couple with one child wanted to live in a newly built two-bedroom apartment. What income would they need to earn so that their rent accounted for no more than one third of their spending, as is recommended? With a rent of €2,000, their take-home pay would need to be €6,000 and thus their gross income would need to be over €100,000… just to afford a minimum-spec two-bedroom apartment!
When seen in this light, it is clear that local authorities have got things backwards with minimum standards. You don’t start with your list of desirables and make them the minimum allowable, regardless of the cost implications. You start with the spread of incomes in society and figure out what a reasonable breakeven rent is – and then what standards match that.
This is bad enough – but it gets worse if the regulations are forcing things to be built that aren’t needed anyway. One example relates to fire doors and corridors, which are typically mandatory in new Irish apartment buildings. These are expensive and more dangerous than sprinkler systems – and they also preclude the open-plan style of apartments that modern urbanites prefer. Why do we have these requirements?
Another example – and perhaps more responsible than any other factor for delaying the apartment boom that Dublin and Ireland’s other cities need – is basement car-parks. It is mandatory, with some exceptions, that any new apartment have an underground car-parking space. These cost €30,000 to build – digging deep is expensive – and thus add an extra €150 to the breakeven monthly rent.
There are two problems here. The first is the cost: such a regulation prices out poorer households. The second is the questionable benefit. If you go to a recently built apartment block – granted, there are few enough of them – you’ll see lots of empty spaces semi-permanently.
Who would want to own a car, if you live close to town or the Luas or DART? With groceries delivered, car-clubs like Go Car and on-demand taxis if the need arises, car ownership is increasingly viewed by younger generations as a burden.
So they are foregoing car ownership – but as they move into the 21st century, our local authorities are still stuck in the 20th. The same holds for the cookie-cutter approach to the layout of apartments. Increasingly, apartments are going to be built with shared facilities – similar to the new generation of student homes.
And yet our planners have introduced a byzantine set of requirements for the relative and absolute size of particular rooms in an apartment, as if the rooms we lived in forty years ago are sacrosanct. Have local authorities thought about how those requirements will change for every ancillary facility, from swimming pool and gym to office and cinema facilities, included in the development?
The country’s biggest housing need is not family homes. It is the need for roughly 250,000 apartments in Dublin and all other major urban centres. The current set of regulations for apartments are costly, making the small number of newly built ones the preserve of the wealthy. But they are also outdated, designed to fix the policy-driven deficiencies of a building boom that ended over a decade ago.
An edited version of this post was originally published in my column in the Sunday Independent.