This week, developer Bernard McNamara decided to walk away from five public-private housing projects in Dublin. Why was the city council unable to prevent a disaster for inner-city Dublin?
THIS HAS BEEN the week when the slump in the construction industry was thrown into the sharpest relief yet. As the State's biggest builder walked away from €1 billion worth of business, even the most optimistic talker-uppers in the industry were forced into silence.
It might have been just coincidence that Fianna Fáil decided at the same time to fold its tent at the Galway Races, but the demise of its traditional thank-you bash for loyal and supportive developers was yet another sign that the game was up in the property sector.
Economic fortunes rise and fall, but, when the history books are eventually written, the question that will preoccupy academics is likely to be how we managed to squander so many of the fruits of the longest boom in the State's history.
We know already about the ailing health service and our bulging classrooms. To the list, we must now add the failure of the Celtic Tiger to improve housing conditions for our poorest and most vulnerable citizens. Almost 20 years of prosperity and we are still left with crumbling flat complexes and their accompanying social problems in many parts of Dublin.
The withdrawal of developer Bernard McNamara from five public-private partnerships (PPPs) in the capital is a disaster for inner-city Dublin, and not just for the estates that were to be regenerated. The rebuilding of St Michael's Estate in Inchicore, for example, involved not only the provision of private and public housing, but also a library, a civic centre, a health clinic and a shopping centre.
"It wasn't just about rebuilding a few flats, it was about social regeneration," says Peter Ward, chairman of the O'Devaney Gardens Regeneration Board. Because the surrounding communities were so closely involved in drawing up the plans, and both private and public housing was envisaged, the regeneration schemes held out the promise of an end to social segregation and the sink estates that had grown up over time in the city's social black spots.
The writing has been on the wall for the schemes since last year, when McNamara first started dragging his heels.
"We all knew from last summer that he was starting to get cold feet," says Ward.
Yet Dublin City Council seemed to be the last to know. Almost a fortnight ago, when The Irish Times, having heard rumours about the projects' demise, first contacted the council's press office, the reply was that it was "business as usual" between the council and the developer. Even as all involved in the projects insisted they were doomed, the council and McNamara continued to claim for five days that they were still in negotiations. The plug was finally pulled this week.
If the council was using this time to come up with a plan B, its existence wasn't evident when the axe fell. The council could sue the developer, as contracts were signed for at least two of the schemes, but sources say it has no stomach to start such a fight. Litigation could block development on the sites for years and, it is thought, the council's decision to set increased minimum sizes for apartments, agreed after the PPPs were signed, could give McNamara wriggle room in the courts.
Going to the underbidders is another option, but not one that inspires much hope. Developers everywhere are strapped for cash, and the cost of borrowing has rocketed. Few will take on these projects without being allowed to build significantly more private housing, which would be resisted by local interests.
As Ward points out, the communities involved have already made significant compromises in agreeing to the PPP route. In O'Devaney Gardens, for example, this involved accepting an eight-storey block of private apartments beside the social housing.
Perhaps the Government can be persuaded to cough up more capital funding for social housing, but this isn't a solution either. At St Michael's, for example, there is already planning permission to build social housing for the existing residents on four of the 14 acres. But such a plan threatens to repeat the mistakes of the past by creating ghettoes bereft of social supports and unintegrated with the local community.
THE COLLAPSE OF the schemes highlights the continuing failure of the Government to tackle the housing crisis. There are currently 44,000 households on housing waiting lists, and some have been there for up to a decade. The old, discredited model of segregated social housing has not been replaced by a working alternative.
Part V of the Planning and Development Act 2000 was supposed to improve matters by requiring developers to provide 20 per cent social and affordable housing as part of their schemes. However, this stipulation was stiffly resisted by developers, the Act was watered down, and for years the scheme has failed to provide social housing to any meaningful extent.
Only in the past year has Part V begun to provide the promised housing units, which, ironically, are now coming on stream in a glut, according to David Burke of Focus Ireland. He says the money available for social housing is being diverted to pay for Part V housing provided by developers, partly because local authorities are afraid of being sued if they don't pay up promptly. Yet the housing provided under Part V is more likely to be affordable units, which enjoy greater public acceptance, than it is to be social housing.
"Social housing has not been able to perform in the housing market of the Celtic Tiger," he says. "It simply can't compete with the likes of Bernard McNamara, Sean Dunne, etc."
PPPs were vaunted as the mechanism for delivering the houses and apartments needed. The idea is simple: the council gives the developer a valuable plot of inner-city land, the developer builds an agreed number of social and affordable housing units and community facilities and is then free to develop the rest of the site for private accommodation at a profit.
But here again, as Burke points out, it was an "unequal match" in negotiations between local authority officials, earning €40,000 a year, and the developers with their battalions of advisers. The result, despite years of consultation within communities and a bidding process, was a series of deals that seem to be insufficiently binding.
"It's clear the negotiations dragged on for years. If you don't nail down something comprehensively and you leave negotiations ill-defined, this is the kind of thing that is bound to happen," says Burke.
QUESTIONS HAVE ALSO been asked about how McNamara managed to secure so many contracts, effectively leaving the council with far too many eggs in one basket. The local regeneration boards don't know what's happening because, once McNamara was chosen, they withdrew from the process and left the fine print to the council. Board members haven't even seen the contracts and don't know why the developer has been able to walk away so easily.
Having handed over the construction of new units to the private sector, local authorities are also busily offloading their existing stock. Some 330,000 housing units have been provided by the State since its foundation; of these, two-thirds have been sold off. As many an owner of a bijou two-up-two-down house in Dublin will know, these dwellings were in many cases sold off for a pittance to tenants, who then sold them on at greatly increased prices.
Now, Dublin City Council wants to sell off individual flats in its complexes and, surprise surprise, enterprising tenants are lining up for a bargain. Furious efforts are being made to overcome the quite obvious legal and practical difficulties involved in the part-sale of flat complexes, and up to 16,000 apartments in the city could be sold to their owners within a few years.
But, as Burke explains, this is creating a process known as "residualisation". "The best-quality units will be sold to the best-quality tenants. That leaves the worst accommodation for the most needy people." And all the accompanying social problems too.
Bernard McNamara has pulled out of his deals with the council because Dublin already has thousands of unsold apartments, and prices are plummeting. The credit crunch is hiking up the cost of bank loans, of which he already has plenty.
Much of the building boom from which McNamara and other developers benefited was driven by generous tax breaks from government. In some counties, up to 30 per cent of housing units lie empty. In Dublin, council planners helped to drive the developers' profits up further by raising the roof on the city and permitting the construction of multi-storey blocks.
The result is a glut of housing which isn't needed, isn't occupied and is in the wrong places, and a dearth of housing which is urgently needed and which is suitable for families to live in. In Dublin alone, 2,000 households are trying to come out of homelessness each year, yet places can be found for just 300 of them.
In a state of half-demolition, the five PPP schemes "look like Beirut", in the words of one councillor. Such dereliction is a magnet for anti-social activity - fights in the alleyways, drug-dealing on the stairwells, drinking parties by the braziers.
So what now, now that the kitty is empty and the developers have bolted? For now, no one really knows, but as Peter Ward insists of the regeneration of O'Devaney Gardens: "No matter how it's done, it has to happen."