This Act has surely been pushed through so that NAMA can hang on to its property portfolio for as long as it likes.

I have realised in thinking about it, there are two edges to the sword. On the one hand, if planning permission periods are extended beyond five years, it encourages people to hoard land with planning permission attached, and use that as collateral against which to support loans. On the other hand, if you understand Ms. Harney’s comment in 2004 referred on in Michael Hennigan’s post above - the hoarding of development land, was part of the inflation spiral that occured in Irish property. So it is quite complex. Given that NAMA is the only game in town nowadays, the hoarding of development land doesn’t seem to be a problem for anyone. At least, not in the way it created such political fears in Ms. Harney in 2004. The attitude nowadays seems to be, go ahead NAMA and hoard as much as you want to. As long it keeps land values from falling further down the cliff face. A planning inquiry should really investigate what position many of the borrowers were in prior to the act of half building a ghost estate in county Leitrim. To understand, to what extent the same builders understood there was no market for the same houses. But they were merely trying to prevent their LTV’s becoming un-manageable. To what extent can we ascertain, that lending institutions demanded of the same builders that they half build ghost estates, in an attempt to preserve some of the value of their assets. By the end of the Celtic Tiger, that many of the loan portfolios would have to undergo stress testing. And land where the planning permission had expired, might be re-valued to agricultural values. There is a very interesting movie from 1984, I recorded yesterday evening and am looking forward to watching called Country. It starred Jessica Lange and Sam Shepard as Jewell and Gil Ivy, who worked a small family farm. They were offered loans of $100k in 1980, based on a net worth of $450k. Out of which they made a living of $9k per annum. But when the land values fell, the grain cooperative fore-closed on many of the same families. I am sure the movie will share a lot of parallels with the ghost estate saga. BOH.

This Act has surely been pushed through so that NAMA can hang on to its property portfolio for as long as it likes.

There is something else, for you to consider - and ather than burden this thread with another long block of text - I decided to carry forth my explanation in an investigative blog entry linked below. Enjoy. BOH.

http://designcomment.blogspot.com/2010/08/beer-game.html

Thanks for the input. Also, thanks for taking the time to wade through the large block of text I left above. I know I stretched some points above, for the sake of making an argument. I am glad to hear about the 2010 ammendment to the act. I tried to express my fears by means of the beer bottle example I explained earlier in the thread. Ms. Harney was talking about landowners who hoarded land. But there were also landowners who obtained planning permission, who hoarded the same until the permission had expired and the land values had risen. Which left the builder in the unenviable position, of having to execute construction before the expiry date came. I also explained how expiry dates on planning permissions may have incentivised the construction of houses. Because, the housing estate is a relatively standardised construction solution, and finance for it can be arranged in the shortest amount of time. Because the lenders and builders are familiar with it. What I mean is, the wholesaler could release the beer bottles to the corner store on Friday, and the corner store could have cleared its stock over a summer’s weekend. As compared to a bottle of expensive brandy for instance, where the corner store might only sell two at Christmas time. Paddy Kelly maintains that hotels were unlikely to be built, because they often competed with things like office buildings for the same land. Therefore, in order to adjust the market to make hotels competitive, a tax incentive was added. We all know how badly that ended. Both for new hotels and existing ones, which had operated for decades. Anyhow, my point is, that wholesalers could hold onto land with permission for housing for as long as possible, and still obtain a good price. As I said, the fact the housing planning permission was four years old, meant it was desireable also, if the older building codes applied. BOH.

You mention the relationship between transport and development. That is, commuting long distance and that pattern of behaviour increasing alarmingly as the 1990s and 2000s wore on. I don’t know if the Haunted Landscape document has touched up this or not. Jeff Colley of Construct Ireland magazine, was one of the contributors to the recent RTE Prime Time piece on ghost estates in Ireland. But when I look at Jeff’s magazine, I can read about a physicist who built a home which is a net energy producer, and used minimum energy in its construction materials. What I cannot read about in Jeff’ magazine, is the ghost estate a few miles down the road, due for demolition. Which makes the single house with the low embodied energy seem almost insignificant. Much of the construction industry is organised around an odd kind of supply chain mechanism. Any viable Green Building industry will have to integrate into the supply chain structure of the industry. A book I would like to have time to read currently, is Ray Anderson’s, Adventures of a Radical Industrialist. Anderson’s ambition was to reduce waste in his volume carpet making business. Because cheap fossil fuels are so easily accessible to Irish society during the 1990s and 2000s, it led to a situation, where no one did the energy consumption calculations of what it would cost to leave a housing estate half-built and un-occupied. That is in addition to the energy consumption to drive from an estate that is occupied to where the employment is located. As I said earlier, the land value would reduce radically, if the builder did not half build the houses, as the planning permission would have lapsed. That was the rule - half build the houses and the planning permission is locked in. If the planning permission expired, and the value of the land plummeted as a result, suddenly the loan-to-value ratio, would shoot through the roof. That would put increased pressure on the borrower. It is that sort of crazy accounting practice, which is so environmentally un-friendly. It is better financially for the borrower to half build the development and leave it sitting there, than not build at all! Does it mention that in the NIRSA document? It is the same with NAMA. Nama will be under extraordinary pressure to build a lot of projects, to stop more loans going bad, unless the accounting rules (and planning rules) are changed to be more environmentally friendly. Maybe that needs to be addressed in future planning acts? BOH.

There was also a lot of ongoing debate about the planning system and issues such as urban sprawl, long distance commuting [-break-] Indeed the Planning and Development Act 2000 does not get a mention.

I agree. I suppose, what is required from someone with the time and resources is a further document, which refers to the Haunted Landscape document, but can rectify the problem of omission of the references you rightly pointed to. On John McHale’s thread on the NDP, I referred to an article by Locan Sirr and Conor Skehan in the Irish Times newspaper. I attended a few of seminar events, on the subject of ‘tall buildings’, where Dublin city council planner was present, and Conor Skehan with some others were throwing around ideas. It wasn’t so much the discussion of ‘tall buildings’, but the question: What is a sustainable density of development? Which proved very interesting. The conclusion many came to, was that huge building heights with many floors were not necessary at all for quite high densities to be achieved. Not long after those seminars, I happened to be standing on the roof of a shopping centre in Newbridge town in county Kildare. I looked out over the trees and rooftops which surrounded the town and it struck me, how low the density was in the town. I wondered if high densities may be possible in the future. There is also the question of course, about densification of suburban areas in the large cities. Obviously, there are many economies to be gained in that way. But as many of the bust building contractors on Pat Kenny’s RTE TV show, The Frontline, were eager to point out - the Irish planners persauded them to build many housing units in large midland towns. But the problem is, the planners also allowed many once-off housing units in the hinterland. With the result that developments at edges of the large towns found little or no demand, and we ended up with un-sold residential units. There are an incredible amount of facets to the discussion, and I could type on for at least another few thousand words. But it is worth bearing in mind, it wasn’t Irish tenants or occupiers which made high density residential work in Dublin. But the influx of people from other countries, where they were used to higher densities. We can argue at length about the low quality of high density residential development in Dublin city. In the past, my former boss Mr. Carroll asserted he was building units that low paid public servants could afford. That was in the early 1990s, and that was the case he argued. But it could also be argued, that in the 2000s, the low paid public servants moved out, and rented the same units to the influx of urban migrants from abroad. Many of whom had been used to higher standards of residential development at home. That is where some of Michael Hennigan’s points above are well made I believe. I visited one of Mick Wallace’s most recent developments a couple of weeks ago, and I was impressed as usual. Though Mr. Wallace has only developed a couple of sites, I believe what he was doing, was appropriate and sustainable for Dublin city. Thumbs up. We did begin to learn towards the end of the bubble. The trouble is, by then a whole plethora of the financiers had gone bust. With the consequence, that our talent pool of designers and professionals has been disbanded and made redundant. BOH.

I didn’t mean the number of references attributed to NIRSA. I meant the number of references at the end of the Haunted Landscape document which aren’t attributed to the NIRSA. Rob and his colleagues, had to look at research from a multitude of different sources and compile it together into a meaningful NIRSA document.

That to me was impressive - because the NIRSA have taken on board so many diverse references in their study. From private sector, public sector and at many different levels within both. I can understand how that was difficult to do. The intention of the authors, in gathering such a diverse range of references, I submit, was to demonstrate that planning policy can exist in such a complex matrix of different influences. I think the Haunted Landscape document is one of the few, which seriously tries to tackle that issue of the diversity of influences. BOH.

You state that “It has critiqued government policy all through the boom period in articles, books and reports, as well as working with and advising government depts, local authorities and state agencies to try and suggest changes to policy.” yet the the haunted landscapes paper states “To date, the role of the planning system in creating the property bubble has been little considered.” - you can’t have it both ways. I stick to my comment.

@ Brian O’Hanlon “One has only to examine the list of references at the end of your Haunted Landscape paper to realise the amount of work and research that went into the paper. It is trully impressive” - as far as I can see there are just 4 references written by NIRSA members. Just as interesting as the references that are in are the ones that are not.

I’m sure the rest of the contributors understand the impact of the international credit boom and in Ireland the direct link between the property bubble and the banking crash.

I agree, and I am sure most of the inhabitants of the island of Ireland, at this stage, have a good overall picture of the planning problems, the banking problems and the fiscal deficit problems. However, what many people do not realise, in relation to supply chains of any kind, is how messed up they can become, without anyone on purpose attempting to ‘game the system’. This has been proven time after time, in controlled conditions, using participant who are economics students and so on, and understand how the game works. I was led into this area of study at first, because authors such as Peter M. Senge have written texts on the new green-er economy. It appears as though, a lot of unnecessary embodied energy and Co2 emissions can be eliminated through better understanding of how supply chains work, and their associated problems. Think of all the ghost estates featured in the NIRSA reports. All of the energy it required to build ghost estates in the beginning, all of the energy it will require to devise a plan, and the energy it will consume to demolish many of them again. In a world of decreasing energy resources, it seems a bit strange to be doing that. So there is an environmental responsibility upon all of us, to study this supply chain issue and ask the question, how is our world going to cope, if we continue to operate as usual? BOH.

I’m sure the rest of the contributors understand the impact of the international credit boom and in Ireland the direct link between the property bubble and the banking crash.

It was only in the US and a small number of European countries e.g Ireland, Iceland, Spain and Greece where factors such as misgovernance and specific problems in these economies, which resulted in the impact of the Great Recession having a huge economic and human toll compared with other countries.

The property bubble and bust isn’t the whole story but it’s the main one.

It is worthwhile to state again that Irish development planning-zoning corruption and mismanagement only partly explains the recent property boom-bust cycle in Ireland. At least equally as important, probably more important, was the enormous credit inflow into Ireland and the related bank industry regulation and risk control mismanagement. The NIRSA report focusses on the planning-zoning side but, as the authors state, this is not the whole story. Sorry to repeat myself (and others) on this.

Reforming planning-zoning is extremely important but it should not be treated as the only cause of the recent boom-bust cycle. The macro credit side is critically important in understanding that cycle.

The latter had implications for productivity and food production as young prospective farmers could not afford to buy.

The piecemeal system of rezoning coupled with hoarding in a rising market, had a major impact on prices.

In May 2004, Mary Harney said in an address to her party members at the launch of the Progressive Democrats’ Local Elections’ Manifesto: ‘“In this manifesto, we are… committed to ending private windfall profits arising from re-zoning decisions.” In an ad-lib, she had the gall to warn that she might have the Competition Authority investigate hoarders of development land.

The same politician had binned several Competition Authority reports.

Absolutely nothing was done to change the corrupt land rezoning system and today, a public tribunal inquiring into planning corruption, remains in office since 1997 and ZERO has been done to change Ireland’s crack cocaine.

In April 2004, the All-Party Committee on the Constitution unanimously concluded that constitutional change was not necessary before the introduction of legislation allowing for the compulsory purchase of land required for development by local authorities, at existing use values plus 25%.

Harney’s colleague Tom Parlon, the former farmers’ leader, who in 2001 forced the Government to agree terms that made land account for 23% of the national roadbuilding budget — double the average in the EU - - had said in 2003 that any change in the existing bonanza system for farmers’ would be “an approach..gift-wrapped in an ideology somewhere left of Stalin, which has no place in a modern dynamic open economy like Ireland.

Any measure giving the State the power to control the value of private assets would have major negative ramifications for thousands of property owners and would be a jump back to the dark days of the 19th century.

A Shakespeare aptly wrote: “The devil can cite Scripture for his purpose.”

Economist Jerome Casey, the editor of the Building Industry Bulletin in a report in 2003, said that site costs account for 42.5% of a house nationwide. Casey said that ‘typically in the mid 1990s, Durkan Brothers sold apartments off O’Connell Street for £35,000 to £40,000 (€44,440 to €50,790) for which the site cost was £5,000. Currently, both the Irish Council for Social Housing and private house builders are reporting city house site costs at up to 50% of the house price. Outside the cities, site costs can represent up to 40% of the house price. For the country as a whole, site costs may now constitute 42.5% of the house price, an increase of almost 30 percentage points on the pre-boom position.” In Dublin that increases to 50%. Overall the Irish figures were grossly out of line with the rest of the developed world.

In his report Casey said the major issue was that just 25 individuals or companies controlled more than half of the housing development land in the Fingal area. That includes Balbriggan, Lusk, Donabate and other well- known areas targeted for development on Dublin’s expanding north side.

So if all this land wasn’t rezoned wouldn’t propery prices have actually climbed higher?? Or did the fact that land was being rezoned drive prices higher in a bit of a buying frenzy?? Seems to be a bit of a chicken and egg situation.

In addition to the very much more complex gaming of permissions for housing developments, we had gaming of the credit system which supported it all. Misrepresentation of credit status at both lender and borrower end was actively fostered by ‘our’ banks.

Thanks for the Pierre Bourdieu reference. Thanks also for the Karl Polanyi reference. You have offered that reference to me before, and thanks for the reminder to follow up on it. Lets look at how the lenders fit into the beer game, from a system dynamics point of view. Normal market operation would indicate, where asset is high, a shortage may exist. The unusual thing about the Irish property market, was the more supply that came on the market, the higher the price seemed to go. Of course, we know over the course of the building boom, our lenders were lending at higher and higher loan-to-value ratios. In doing so, they were supporting a market which sent every increasingly inaccurate signals to suppliers in that market. Producers most usually do their business plans based on price trends, and the trends that producers saw, were all positive for them. Of course, the producers were banking with the same institutions as the consumers. That is one dis-functionality that existed in the Irish market. The other, was the introduction of planning levy charges to support fiscal situation for local authorities. If you look at it in terms of Senge’s beer game, and bear in mind the fancy new headquarter buildings that all local authorities procured for themselves during the Celtic Tiger - what you see is the beer factory was really building that new production line I talked about. The new local authority headquarters was staffed with professional planning departments, who would keep the wholesale warehouses supplied with adquate acreage of re-zoned lands. The wholesale warehouses, as I said would hold onto their stocks and release it to the builder, at an optimum maturity of four years. Giving the builder, who like the corner liquor store, a year to get the construction half built up to roof level, and thereby lock in the planning permission to the site. Even though the teenagers ended up with more expensive beer than they would have liked. The reason that we have the National Asset Management Agency, is to relief the corner liquor store. The wholesale warehouses, largely got out in time. The beer factory facility, the local authority, has ended up with a production line which is useless. All of their re-zoned land, which has to be de-zoned. That is, the production line will need to be dis-mantled at additional costs to taxpayers. Also, I noticed Dublin City Council introduced standards for larger apartments in 2006. Right at the very height of the boom, just prior to demand dropping off a cliff. If you look at it like Peter M. Senge’s beer game model, the request had passed all the ways back up to the beer factory. A new production line was created, to supply a bigger bottle, just when the party was over! Of course, most warehouses knew the bigger bottle was on its way. Therefore it forced the warehouses to push as much of its stock through the corner stores as it could, before its price was de-valued. Byt its actions the beer factory had encouraged the oversupply of 2006/07 even more. BOH.

I would suggest the central question needs to be - what can Ireland learn from these normal affordable housing markets, so that it does not repeat the mistakes of history, by neglecting to deal with the real political / regulatory issues, so that artificial scarcity induced housing bubbles occur again?

Further unnecessary housing bubbles will occur again, if the problems are misdiagnosed, leading to inappropriate policy solutions.

Readers may wish to read a recent article “How Texas avoided the Great Recession” by my colleague and co author of the Annual Demographia Surveys Wendell Cox on the New Geography website ( http://www.newgeography.com ), where he compares Texas and California. There are two very interesting comments by firstly, Rick Harrison, a well known US development consultant and secondly tx1234, a fellow from the tech sector, who is relocating from California to Austin Texas for half the salary, because of the lower housing and living costs in Texas.

The wideranging and long term costs of these unnecessary housing bubbles are not acceptable. Does Ireland need to constantly repeat the Californian mistakes of history, or are the Irish smarter than that?

As most of my forebears came from Ireland, I sincerely hope the latter!

Hugh Pavletich
Performance Urban Planning
http://www.PerformanceUrbanPlanning.org
Christchurch
New Zealand

Another thought that has been growing on me lately, particularly after reading the 2008 OECD review of the public service here, is that these issues are often only possible because each individual organisation in the public service doesn’t have to worry about where the money is coming from - “that Finance’s job”. Rezoning, planning permissions galore, none of these decisions had any direct consequences for the councils.

All public bodies and institutions function rely on a recurrent budget. It would be nice in the private sector too.

Planning has long been broken in Ireland. For a country with a very small population it beggars belief that the process has continually thrown up the same anomalies.

The current planning system almost completely overlooks aesthetics. It might be advantageous to have a laissez faire model (allowing more liberal zoning but with greater interest in design aesthetics and innovation) emphasizing architectural and build quality aspects than the current model. It couldn’t hurt to experiment for a set period of years and then assess the results.

‘What the planning system still is waiting for is its Black-Scholes model’

What happended to LTCM, whose management included Merton and Scholes ? As Taleb and others have shown, the Black Scholes model can’t cope with ‘fat tail’ unusual events. Assset pricing is a quasi-science, which serves to obscure some old truths about power and society. We have to think our own way through this stuff because it is political to the core.

Your transactional description of the planning/construction nexus rings true. As you say, it is a game, and it follows that there are various kinds of participants (eg landholders, planners, politicians, auctioneers, builders), various kinds of stakes (eg money, votes, prestige) and various strategies. There are insiders and outsiders, and, as in all games, there is the gaming of the rules of the game. Pierre Bourdieu’s work is a useful adjunct to Senge in this area.

You have described the ‘local trading and arbitraging of permissions’ very nicely. Experiantia docet. Doubtless there were many other quids pro quo, even in rural Ireland. As @ Michael H suggests, many things are done in a fairly crude fashion. Populist, clientilist politics lets the small man in for a slice of the action, while the insider (or would-be insider) rides the wave.

The Dublin game is played for higher stakes, with a larger set of propertied, statutory and professional vested interests to be serviced. ‘Good’ addresses, lifestyles and private schools don’t come cheap.

In addition to the very much more complex gaming of permissions for housing developments, we had gaming of the credit system which supported it all. Misrepresentation of credit status at both lender and borrower end was actively fostered by ‘our’ banks.

Breaches of professional standards were sanctioned, tacitly or explicitly, by reputable individuals and firms. Like so many other events in history, many people knew it was wrong but they kept mum for all the usual human reasons. The big boys were doing it.

We may not be the world’s most advanced country, but where boostering is concerned, we are up there with the best. As Karl Polanyi showed many years ago in the The Great Transformation, land is not an ordinary commodity. Thanks to @ Hugh Pavletich for some sane and sensible ideas and to the NIRSA researchers for their hard work.

It is very pleasing indeed to see the public conversation finally getting underway in exploring the real structural reasons why the housing bubbles got underway in Ireland.

It is extremely important to recognise that the housing bublles are not unique to Ireland - and that the Irish learn from other jurisdictions - and most importantly, the appropriate solutions to these problems.

What the planning system still is waiting for is its Black-Scholes model. How do you value a planning permission in itself, based on its maturity and its underlying connection to the physically constructed article. In Ireland, the planning permission term is standard for all kinds of construction, whether it be a new shopping centre, a domestic house, a dozen homes or a multi-storey office building. The rule related to ‘maturity’ states the construction shell must be completed to roof level by the time the five year expiry date comes. In other words, it puts pressure on the holder of the planning permission to organise construction within a set time period. But of course, it is far easier to organise the resources to finish standalone homes to roof level, in five years, than it is a larger and more complex project. In other words, what you witness in domestic homes, is a larger period in which to trade the said legal ‘option’. That is exactly what we witness in reality in Ireland. The overwhelming volume of planning applications are for low rise residential construction. The successful planning applications are traded extensively. Because if you wait four of the five years after receiving the permission to build, chances are, in a bubble market you will make significant profit on this option paper. As pressure on the market becomes more intense, builders will pay more for a certificate which gives them permission to build. This is one of the reasons why we have so many ghost estates in the upper Shannon region today. There was an intense amount of trading of those options, prior to the estate being built. The fact that so many were only half completed is very interesting too. Because the half completion of a ghost estate effectively locks in the permission, which otherwise would have expired after five years. It becomes an economic decision - is it cheaper to go back through the whole process of re-applying for permission - or is it cheaper to take a chance and half build the houses. In many cases remember, the party who executed construction purchased the option to construct, from a separate party who walked off the stage with their maximum profit after four of the five year term of the option. Bear in mind also, that four year mature planning permissions are actually more valueable to a build-er than are one year maturity planning permissions. Because the less mature planning permissions tend to have the latest building regulation standards attached to them - which means higher costs of construction. Also, the less mature planning permissions also had higher levy costs attached to them. So the party who lodges the planning application, tries to lock in as much savings as they can, at the lower levy rate and earlier building regulations - and can then extract more profit from the sale of the planning permission. Basically what we need in Ireland is different ‘maturity’ dates set in different areas and in different types of construction. This is why I referred to the Black-Scholes derivative trading valuation technique. BOH.

It is extremely important to recognise that the housing bublles are not unique to Ireland - and that the Irish learn from other jurisdictions - and most importantly, the appropriate solutions to these problems.

To trigger housing bubbles there must be scarcity. Finance - whether it be equity, bubble equity or debt is simply the fuel to the bubble fire. I explained this within a recent article “Americans slow learners about housing bubbles”, where i incorporate the recent remarks from Mike Inselmann of Metrostudy in the United States, who explained this extremely well within a speech he gave recently to the Real Estate Editors Conference in the United States.

The New Zealand Government is well advanced on the path of getting the legislative changes coupled with the appropriate institutional arrangements in place to deal with these structural issues. Refer the writers website for further information.

On the Welcome Page of my website I provide a definition of an affordable housing market.

Hugh Pavletich
Co author - Annual Demographia International Housing Affordability Survey
Performance Urban Planning
http://www.PerformanceUrbanPlanning.org
Christchurch
New Zealand

It was inevitable that in a small country with 88 planning authorities and a culture where conflict of interest is almost an alien concept, there would be serious consequences for the economy and much of the population, when there was a spike in demand for development land.

Development land is the main driving force of corruption across the globe and Ireland has been no exception.

In Ireland, the rezoning system has been used to create an artificial scarcity of land and during the boom site costs as a proportion of the cost of a house jumped and a small number became immensely wealthy from the system.

Restrictive planning is a big factor in house price inflation and in England, Tory controlled shires have traditionally restricted housebuilding to preserve the so-called green belt while in the cities, it has been in the interest of the Labour Party to keep populations hemmed in to preserve their core support base. In one year in recent times, there was no new house built in David Cameron’s constituency!

In Ireland, local government power had been transferred to county and city managers to reduce the opportunities for corruption but local councillors were left with the power to rezone agricultural land for development. It gave the often uneducated elected officials, a powerful means of raising funds, ostensibly for election campaigns.

RTÉ’s Prime Time programme in Nov 2007, disclosed statistics about the involvement of elected representatives in the land development and property business.

A total of 22% of councillors dealt in or developed land through their day jobs as estate agents, landowners and builders. In Mayo, that figure rose as high as 45%, in Offaly it was 44% and in eight other counties it was 33% or more.
Prime Time found that in Clare, declarations of interest showed that 97% of elected members had no beneficial interest even in their family home. In ten counties, two-thirds or more of the councillors had not declared an interest in the family home.

In Scandinavian countries, if a councillor intervened behind the scenes to influence a planning or rezoning decision it would be considered corruption - a criminal offence - but in Ireland, it’s the norm.

So in a country that is estimated to be 4% urbanised and despite the huge rise in new stock, Ireland has poor housing conditions compared with other countries with similar living standards, with floor areas per person of around a fifth less than the western European average, even though a large number of dwellings (45%) are detached houses.

The UK’s Policy Exchange think tank, argued during the boom that the Irish planning system creates too many ‘starter homes’, of often mediocre quality on monotonous estates, and allows insufficient quantities of larger, better quality properties. The lack of better properties has fuelled house price inflation, it argued, so that the high headline housebuilding figures gave a misleading picture of the true supply situation.

The quality of some apartments built in Dublin during the boom is a national disgrace; occupiers have not only to deal with negative equity but very limited storage space and poor soundproofing. In the Gas Works development in South Dublin, bicycles have to be stored on balconies. At least they don’t have to worry about storing coal in the bath — that’s if they have one!

When they cut output they are accused of driving up prices and when they increase output accused of driving down prices. The issue obviously is to have good information on population and any changes thereto whether caused by migration or economic factors and to build to meet the needs of the country.

Similarly Ray, if you are to look at it through the lense of Peter M. Senge’s model, you will know that delays in the information pipeline lead to huge bubbles of supply, which clog up the system and leave everything in a mess. This happens even with the right information, even in ideal conditions, despite the best of attempts. The trouble is the planning permission lasts five years. There is normally someone, who serves like an intermediary, and sells on the land with planning permission attached. Frank McDonald has written about this pretty extensively in his novels (co-authored with others). But what Frank McDonald has failed to do is look at it through the same lense as Peter M. Senge. Think of the party who acquires the land initially, without the planning permission, as like the distribution warehouse for the crates of beer in Senge’s beer game. The re-zoning of land by the local authority, is like the factory which produces the brand of beer in the first place. Think of the politicians as being like the one-hit-wonder boy band, that does the TV commercial in which they drink the brand of beer. That has the effect, of making all the teenagers want to run down to the corner liquor store to buy a crate of beer. The problem is, the corner store runs out of that brand, because they only ordered a small quantity, and the delivery guy from the distribution warehouse only calls ever fortnight. The warehouse eventually runs out of stock, because the corner shop over-orders its supplies, in case they run out. So eventually, the information feeds back up to the top of the chain, and the beer factory builds on a new production line to ramp up its supply capabilities to its warehouse distribution network. By the time the summer is over, the teenagers are back in school and the boy-band commercial is no longer cool - all members of the supply chain have fortunes invested in the whole endeavours. And then require an asset management agreement to enable them to dispose of the excess stock onto the market in the most organised fashion possible. BOH.

And, even more difficult though it is to believe now, back then, left-wing politicians and commentators like Vincent Browne and Fntan O’Toole were attacking the evil developers for not building enough houses and claiming that they were doing so to keep prices up. And then in the mid 2000s, the evil developers failed to predict the dramatic slowdown in population growth and built too many houses.

I will give readers a big hint. The same hint probably, as I have been dropping for over a year now at the Irish Economy blog site. Get your hands on a book about dynamic systems thinking, such as The Fifth Discipline, by Peter M. Senge. His chapter on the beer game would provide an excellent model with which to develop a theory on house supply and demand in Ireland. I don’t know exactly what the cross-section of the readership at the Irish Economy blog site is like. But I know that if no one here has read Peter M. Senge, then I can conclude we have not read sufficiently well enough about supply and demand, to see the full picture. JTO, is correct. We like to see the developers as the evil ones in Ireland. Not because the developers are evil. But as long as the developers are there, it removes the spotlight from Mr. and Mrs. Joe Soap in Ireland. And their contribution, which is necessary through property taxation, water charges, refuse disposal charges and so forth. In those kinds of taxation were properly organised, the payments would have been factored by first time buyers into their decision making process. In other words, we could not have found ourselves in a situation where nurses in Boston speculated on second homes back in Ireland. We could not have found ourselves in a situation where house prices spiralled. It was because the house prices spiralled, that we got over-production. The higher the price rose, the more over production we got. It had nothing whatsoever to do with developers deciding what inward or outward migration was going to do. It was simply to do with prices. The reason that market prices spiralled was because we had no effective way of taxing property. The only people it was politically correct to go after were the developers. They got a planning permission levy charge slapped onto them, which was supposed to cool them down a bit. But everyone else, simply kept partying like it was 1999. JTO has got a point. We need to stop beating up on ‘evil’ developers and get real about how we share our taxation burden, in a way that prevents future house price spirals and consequent over-production. I guarantee you, there are leagues of build-er(s) waiting right now, with spades and shovels ready to go, once prices begin to climb upwards again. With business plans ready to submit to the same lenders we are now bailing out. Tha is the saddest part. Check out Peter M. Senge’s writing though. Have a crack at that ‘beer game’ of his. It really would open one’s eyes. BOH.

In my innocence, I thought that developers had both political agendas (”get the political process to enrich us”) and the political strategy (”elect auctioneers and other Friends of Developers”) to implement them.

Or does it qualify as “political” only if an agenda might restrict the enrichment of developers?

bjg

You make a very good point that the “evil” devolopers cannot win. When they cut output they are accused of driving up prices and when they increase output accused of driving down prices. The issue obviously is to have good information on population and any changes thereto whether caused by migration or economic factors and to build to meet the needs of the country. God save us from the bureaucrats/academics if they are given control of the system when you have people with political agendas running the system. We will be back to the planned slums like Ballymun again.

In conjunction with reading the full report, I take that to mean that NIRSA are saying that from now on we need far greater involvement by planners, academics and bureaucrats to predict future population growth and future demand for housing and limit house building accordingly, because the evil developers have miscalculated and built too many houses in recent years. If that is not what it means, then the rest of this post is probably a waste of time reading.

This is the nub of the matter. Maybe the evil developers did indeed build too many houses in the mid 2000s. They built too few in the mid 1990s. I merely ask what makes people think that planners, academics and bureaucrats could predict these things better than the evil developers?

We’d all like to be able to predict the future. I would. I’d love to be able to predict migration flows in Ireland over the next decade. I’d even settle for being able to predict the result of Tyrone v Dublin and Down v Kerry this afternoon, as I’d then be a lot less tense than I am now. But, I can’t. I’m afraid that the future is inherently unpredictable, and we have to live with that.

Population growth, and therefore demand for new housing is more dfficult to predict in Ireland than in any other country. This is for a variety of reasons. First, the birth rate and the excess of births over deaths is far higher in Ireland. In most European countries, the number of births and the number of deaths are about the same. In Ireland, the number of births is 3 times the number of deaths. Second, Ireland has a large populaton of its own nationals living abroad AND a large population of foreign nationals living in Ireland. I don’t think any other European country has both those. As most people who have emigrated aspire to return permanently to their homeland at some stage in their life, although only a minority manage to, that makes migration flows almost impossible to predict in Ireland. And, over the years, they have fluctuated violently and unpredictably, far more than in any other European country.

There is no doubt that the evil developers have twice in the past few decades miscalculated future population growth and miscalculated future housing demand. In the early 90s, they failed to predict the imminent population boom and ran new house bulding down to too low a level. The result was a shortage of houses in the late 90s, when the population rocketed. Difficult though it is to believe now, if you read ESRI and other reports on housing published in the late 90s, they are all about how Ireland was building too few houses for its soaring population, and how that was contributing to soaring prices. And, even more difficult though it is to believe now, back then, left-wing politicians and commentators like Vincent Browne and Fntan O’Toole were attacking the evil developers for not building enough houses and claiming that they were doing so to keep prices up. And then in the mid 2000s, the evil developers failed to predict the dramatic slowdown in population growth and built too many houses.

But, while acknowleding the failure of the evil developers to match supply and demand exactly, in the way that NIRSA would like, what makes them think that they (NIRSA), or increased control of new house building policy decisions by various planners, academics and bureaucrats, could do better? The record is not encouraging. I’d merely give these as small examples, the tip of the iceberg:

(a) in 1990, DKM Consultants (Davy, Kelleher McCarthy) published a report predicting that the population would fall to 3.3 million by 2010. Its actually 4.5 million almost.

(b) In December 2008, ESRI predicted that NET emigration would amount to 50k in the year to April 2009. It turned out to be 7.8k. So, their forecast was massively out, even though the year in question was two-thirds over when they made the forecast.

(c) In August 2009, Joan Burton forecast that the population would fall by 500k in 2010. It now looks as though the population will be about flat in 2010, with currently equal possibilities of there being a small increase or a small decrease.

So, why would anyone imagine that these people could predict future population growth and future housing demand any better than the evil developers? In my opinion, for what its worth, while the evil developers can be legitimately criticised for producing a housing surplus, if the planners, academics and bureaucrats had been in charge in the past few decades, they’d have failed to predict the population boom and Ireland would have ended up with a massive housing shortage which, whatever about the financially ramifications, would from a social point of view have been far worse.

Rather than giving unfettered control of new house building policy to an army of planners, academics and bureaucrats, who I venture to suggest would have a distinct left-wing bias and would be more interested in seeing that the construction industry makes no profit than in seeing the people housed properly, I’d suggest the following:

(a) Accept that it is virtually impossible to predict future population growth and future demand for new housing in Ireland.

(b) Accept that future migration flows will probably fluctuate violently but that, averaged out over lengthy periods, they will probably follow a pattern of there being a net inflow during periods when the Irish economy grows faster than other European economies and a net outflow during periods when the Irish economy grows slower than other European economies. In recent decades, the former periods have far outnumbered the latter, and I hope that continues, although no one can be certain.

(c) Aspire to have a construction industry that is not immobilised by red tape and restrictive planning (as is now the case in the UK where supply has been simply failing to cope with demand for several decades), but which is flexible and can shift its output up or down quickly in response to violently fluctuating migration flows.

This is not the prettiest solution, of course. It would be much prettier if the population grew at the same amount every year, and migration flows were the same every year. That is the case in many countries. But, in Ireland it is simply not the case for the reasons I gave above. So, we have to live with volatility in regard to migration flows and population growth. That being the case, flexibility in response to violently fluctuating demograohics, rather than pretending that the future can be predicted, should be the goal. Anyway, enough of this for now, Ryanair and Croke Park await.

Very well said. One has only to examine the list of references at the end of your Haunted Landscape paper to realise the amount of work and research that went into the paper. It is trully impressive, the breath of viewpoints and data sources, you have managed to compile together. The height of congratulations on achieving that. I know it is a major challenge to take on board so many different sources of opinion and condense it all, into a neat, read-able document. The Haunted Landscape is a document, that anyone from anywhere else in the world could pick up and read. In order to gain a deep understanding of the Celtic Tiger economy and its consequences. I am positive that many researchers abroad will be greatful for the work your team has carried out. I do hope to return to your document again in future years, when the memory of current events has receeded into the background of my own memory. As I am sure, many other visitors to the Irish Economy blog will do. I don’t know, if there is anything more to add. BOH.