Finfacts Ireland: Dublin to run out of rezoned residential land in 4 years

Dublin will run out of rezoned residential land in 4 years according to an official of the Dublin City Council.

The city of Paris is divided into twenty arrondissements municipaux — administrative districts. The area is 105 km² (kilometres) and with a population of 2.2m, it has a density of about 21,000 people per km² — one of the highest in Europe. The area of the city of Dublin is 115 km² and the 2018 population is about 565,000. The density is 4,910 inhabitants per km².

France's capital city is the core of the Paris Region called Île-de-France with an area of 12,011 km²where about 12m people live. Its population density in 2018 was 1,019 per km². The area of County Dublin is 921 km² and its population in 2016 was 1,345,402, giving a density of 1,461 per km².

In 1975 the average price of a new house nationally was €13,254 and in Dublin was €13,137 while the national price of a second-hand home was €12,478 and the cost in Dublin was €12,774. In 2016 the average price of a new house was €313,483 nationally and €397,676 in Dublin while the respective average prices for second-hand and new houses was €276,272 and €351,354.

In 2016 the average prices of both a new house and second-hand house in the Dublin area were both 27% above the national averages.

Land rezoning in the Dublin area since the 1960s resulted in an artificial scarcity of development land as in 1963 Ireland copied the UK planning system that had been in place since a 1947 Act.

A basket of goods and services that cost €13,137 in July 1975 would have cost €91,762.56 in July 2016 and the year 1975 was a record for consumer prices when they jumped to 22%.

In 1973 an official report from a committee chaired by Mr Justice John Kenny of the High Court said that in the period 1963-1971 the average price of serviced land in County Dublin increased by 530% while the consumer price index rose by 64% in the period — Ireland had no capital gains tax until the mid-1970s. The committee recommended that the price of development land should be based on the agricultural use value plus 25%.

In the developed world research shows that in 14 countries the main driver of housing costs since 1950 has been the price of land.

A hectare (ha) of agricultural land in 2016 cost an average of €24,000 in Ireland and €6,000 in France — in Germany in 2015 the average cost was over €19,000 and almost €19,000 in the UK in 2016.

While rising real earnings have been a factor, official data show house prices have grown by 6 times more than the cost of construction in Dublin since 1975 while nationally the rate is 4.7 times the cost in other big cities and by only 3.9 times the cost of construction in the areas outside the major cities.

There are no official Irish data available on development land prices — mainly because of the strong traditional vested interest power of the construction industry and the farmers’ union.

The national agricultural land value based on data then available show that in 1963-1971 prices rose by 239%.

Irish land prices peaked in 2006 — the craziest year of the property boom — at €58,000 per ha, when Ireland built a record 93,000 new housing units and 800,000 new homes were built in Spain, which amounted to more than in the UK, France, and Germany combined.

One hectare is equivalent to 2.47 acres and in September 1966 a UK acre cost £161 and £7,672 per acre in September 2016, according to Knight Frank, a property agency firm.

Adjusted for inflation, the rise in land prices almost trebled in Ireland in 50 years while doubling in the UK.

Land price per acre at IR£127.50 in 1966 converted to euros and hectares was €400 per ha. CSO data show that the 1966 land price in 2016 euros was €6,450 compared with the actual per ha in 2016 of €24,000 — a real rise of 2.8 times the 1966 Irish value.

Bank of England data show that the 1966 UK land price of £161 per acre in 2016 pounds was valued at £2,752 compared with the actual value of land per acre of £7,672 — a real rise of 1.8 times the 1966 UK value.

According to the Property Industry Ireland unit of Ibec, the business lobby group, "between 1995 and 2015 the value of agricultural land in Ireland grew by 161% per acre. Over the same period total output in the primary agricultural sector grew by only 22.6% and total profits (before the cost of land rental and interest payments) grew by only 5% in nominal terms.

This was driven by farmers having to compete with housing developers for land with development potential. In fact, in a European context, both Ireland and the UK (which suffers from similar housing policy problems) are outliers in the mismatch between agricultural productivity and the cost of agricultural land."

Dublin land for residential house building

In a July 2018 Dublin City Council policy paper a question was posed: “In Dublin City Council, is there sufficient land for housing development over the period of the city development plan (to 2022) and further out to longer-term horizons as envisaged under the MASP (Metropolitan Area Strategic Plans: 12 years) and the NPF (National Planning Framework to 2040)?”

The paper says that “the total zoned land for Dublin City Council area is currently 10,074 hectares (ha). Within this 3,793 ha are zone Z1 for residential development (general) and 693 ha are zoned Z2 for residential development (conservation areas), giving a total of 4,486 ha or approximately 44.7% of all zone land. In addition, there are a number of land use zonings summing to 2,624 ha that also allow for residential development to some extent (i.e. either permissible or open for consideration in certain circumstances).

Ibec says in a 2018 report:

“Figures are often quoted of land zoned in Ireland for more than 400,000 housing units and over 116,000 units in (County) Dublin . The reality, however, is that not all this land is in easily developed brownfield or greenfield sites, serviced by critical infrastructure, water and public transport or likely to receive planning permission. Various estimates from Construction 2020 and the Dublin Housing Supply Taskforce put the actual figures at closer to 30,000 to 50,000 units worth of zoned and serviced land in Dublin. Even within this, a limited amount of that land will be available on the open market where prices are set.

The amount of residentially zoned and infrastructure-serviced land coming into the market needs to increase substantially to limit price increases driven by scarcity alone. There are a number of measures that can be used to achieve this including increasing the amount of zoned land available over the longer-term, improved targeting of infrastructure funds aimed at accessing sites and discouraging inefficient use of sites through a site value tax.

Considerable landbanks are also owned by non-housebuilders, both private and public sector. More efficient use of these landbanks for affordable housing could provide a large number of properties and may reduce urban sprawl. In this context, resourcing and fast-tracking the work of the new National Regeneration and Development Agency (NRDA) will be crucial.”

The Irish Times reported last August that Brendan Kenny, head of housing at Dublin City Council, said the city would “run out” of residentially zoned development land in four years and must turn its attention to industrial estates as a source of new housing land.

The sites would be suitable for high-density apartment development, Kenny said, and could provide for some high-rise buildings, taking advantage of the Government’s removal of caps on height.

The Irish Times said: “The rezoning of the hundreds of acres could result in a windfall for land owners whose sites are no longer commercially viable, but who have been unwilling to sell up because of the lower property values attached to industrially zoned lands.”

However, as outlined in Part 1 of this series, there should not be big windfalls from such a redesignation — you have had an idle site for years and then a housing crisis would give you a windfall!