Ireland's problem with land

How one government document has made housing even scarcer and more expensive

Look around Ireland – we have an abundance of land. Ireland’s population density is 73 people per square kilometre. In the UK, it is 279 people per square kilometre. And it isn’t just in the countryside: flying into Dublin Airport, you will see the city is surrounded by green fields. Whatever Ireland’s problem with housing is, it isn’t space.

It may strike you as paradoxical, then, that I am going to tell you that land supply is part of Ireland’s housing problem. Yes, we have lots of land to go around. But this land is not ready to be built on.

To build homes on land, it needs to be zoned. That means local authorities need to set that land aside for residential development. It needs to be serviced, meaning it has to be connected to water and electricity. When I say Ireland has a land shortage, what I mean is that we have a zoned and serviced land shortage.

This article is about how a single government document restricts land supply and ultimately prevents new homes from being built.

The process

Before launching into that, it is important to first understand how land is set aside for development.

Land is made available to build homes by the local authority in their development plan. In practice, what the process involves is a coloured map like the one below. Land can be set aside according to its use. There are about 15 categories of use, such as commercial, mixed, residential, industrial, recreational and so on. This is what is meant by zoning.

The amount of land zoned for residential use is supposed to reflect the demand for housing in the area. To find out their need, the local authority prepares a Housing Needs and Demand Assessment or HNDA.

The HNDA is a centralised spreadsheet used by local authorities to assess its housing demand under a range of demographic scenarios. The HNDA takes as its principal input the most up to date ESRI estimate of structural demand along with the government’s own target (more on this later). In short, the HNDA is the tool local authorities use to figure out how much housing is needed in their area.

The HNDA is used by local authorities to create Housing Supply Targets or HSTs. The HST is the number of new homes, given demographic, financial, and other factors, the local authority wants to see built.

These targets feed into the local authorities Housing Strategy. It is the strategy that identifies the extent of residential zoned lands to be set aside for development.

The National Planning Framework

On the face of it, there is nothing wrong with this process. We should have targets and those targets should be evidence-based.

But the closer you look, the more problems emerge. Many of these problems can be traced back to a single document: the National Planning Framework (NPF).

The NPF is the most important planning document in the country (besides the Planning and Development Act itself). It sets out the country’s high level approach to spatial policy.

The NPF is at the top of Ireland’s planning hierarchy. What is decided at the top flows downhill. The NPF feeds into Regional Spatial and Economic Strategies (RSES). The RSESs are a plan for entire regions, such as the Eastern and Midlands or the Northern and Western. These regional plans shape the content of the county and city development plans. What can be built and where is determined by planning officials using their city and county development plans.

The basic idea of the NPF is hard to disagree with. A growing country must make decisions about its priorities, and those decisions should be part of a broader strategy. The NPF and its predecessors set out the spatial dimension of that strategy.

But the problem with the NPF is not its priorities as much as its methods. The NPF and its predecessors restrict the supply of land and ultimately make housing scarcer and more expensive. They do this, to put it quite simply, by severing the connection between where people want to live and where we plan to build.

Concretely, the NPF restricts the availability of zoned and serviced land where it is needed most. It does this by restricting the growth of the Eastern and Midlands Region (EMRA).

The reason why the NPF restricts the growth of Dublin and its environs is because planners believe that by restricting Dublin’s growth, that growth will go to the rest of the country. In short, the NPF restricts growth to achieve what it calls ‘regional balance’.

Regional Balance

It is national policy to make sure that Ireland’s regions are not left behind as Dublin grows. As a policy aspiration, who could disagree with that?

This is sometimes called the Balanced Regional Development model or BRD. It has been contrasted with the Business as Usual or BAU approach. The BAU approach would see Dublin’s continued growth in an “unchecked” fashion. From the point of view of planning authorities this would be unacceptable. And the NPF is explicit in saying that it won’t let Dublin’s growth continue “unchecked.”

The problem with the BRD model is not the aspiration of regional growth, but the means by which the government is seeking to achieve it.

There are roughly two ways to achieve balanced growth, one is on the demand side and the other is on the supply side. In reality, government policy typically uses a mixture of these two strategies–and the NPF is no exception–but it is worth prying them apart to understand their differences.

The demand side strategy seeks to boost the attractiveness of regions. The basic idea is that if you want businesses and people to move somewhere, you make that place more attractive to them.

The demand-strategy was advocated by the so-called Buchanan report in 1969 which sought to establish nine ‘growth centres,’ including Dublin. The basic idea was to allow the growth centres to grow by empowering them politically (via directly elected mayors). Buchanan’s approach did not advocate for any restriction on Dublin.

Similar approaches have been proposed by the Irish Cities 2070 group, the Housing Commission, by economists, such as Eoin O’Leary, as well as an OECD report on the NPF. While the NPF does set out ways to boost regional attractiveness, it is not the only strategy it uses.

The other option, the supply side approach, seeks to ‘move’ or ‘divert’ growth away from areas that have too much of it and towards areas that do not have enough. This is achieved by restricting growth in one area in the hopes that it will be diverted in the desired direction. Like with a balloon: you squeeze one end and the air moves to the other.

The problem with the supply side strategy is that growth is not like air in a balloon. Growth cannot be easily directed by national plans. Take an example from the UK.

After the Second World War Britain attempted extensive supply side interventions to restrict the growth of London and other successful cities in the hope this would assist regional development. The majority of empirical analysis has shown this to be a failure. For example, previous European research into industrial relocation schemes–which sought to relocate industrial investment away from the Midlands and London– found that of all projects refused, only 18% instead went ahead in an area approved by the government. 31% were scrapped entirely. In other words, the policy destroyed several jobs for every job that was successfully relocated. Ultimately, this policy undermined the success of Birmingham.

As the urban planner and economist Alain Bertaud put it in Order Without Design (2018)

The assumption that the preparation of national or regional plans would result in a predictable urban growth rate is…demonstrably false. Unfortunately, in many countries this common planning conceit has resulted in misallocated public investments and regulatory impediments that have decreased cities’ productivity.

One example discussed in Bertaud’s book is that of post-independence industrial policy in India. The ‘Industrial Policy Resolution of the Government of India’, adopted in 1956, dictated that new industries should locate in “backward areas.” It sought to divert growth away from the large cities. The policy diverted much needed and scarce infrastructure to regions with weak potential for industry, away from the cities to which most people were migrating. According to Bertaud, this ultimately damaged India’s economy and ultimately hurt the living standards of Indian people.

How does the supply side strategy work in Ireland?

The NPF constrains growth by setting regional targets. One such target is the 50:50 rule. It says half of Ireland’s population growth should go outside of the Eastern and Midlands region. 25 per cent of growth should go to Dublin and its suburbs with the remaining 75 per cent distributed around the country. Up to 2040, Dublin is only permitted to grow 20-25 per cent, whereas other cities like Cork, Galway, and Limerick are earmarked to grow by 50 per cent a piece.

This rule isn’t purely aspirational. The 50:50 rule is incorporated into the HNDA and HSTs. The HNDA takes the 50:50 targets as its “default population scenario.” It includes other scenarios but divergence from the default must be rigorously defended by local authorities. This means targets are based on where the government wants people to live more so than predictions of where people want to live.

In practice, when setting HSTs, this means adjusting population predictions using the NPF’s targets. To illustrate, consider a hypothetical example of how the NPF down-regulates population targets. Since the NPF’s 50:50 scenario is taken as the default, let’s assume that a given area has an NPF target of 10 new people. For simplicity, let’s assume that we’re just dealing with single person households so that 10 new people means you need 10 more homes. Since the HSTs use the figures taken from the ESRI as well as the NPF, suppose now that the ESRI predicts demand for an additional 20 new people. The way the HSTs work is that if the ESRI’s numbers exceed the NPF’s 50:50 numbers, they split the difference. In this case, the local authority will adjust their Housing Supply Targets down to 15.

In this hypothetical, there are five homes missing in the area. Those five people do not just disappear. They end up commuting into the area, emigrating, taking a less well-paid job in their home county, or cramming into a shared house. And all of this is the result of policy choices made in the drafting of the NPF.

National policy has decided that, in areas like Dublin at least, the five people in the hypothetical example ought to live elsewhere in the hopes that this will result in a more spatially balanced country. To use the words of one planner, they will be “deflected”.

The trouble is this hasn’t worked. Restricting Dublin does not “deflect” migration in predictable nor desirable patterns. We can observe the failure of this policy to rebalance growth in the census data graphed below.

The graph shows two things. First, that growth outside of Dublin is lagging the NPF’s targets. And second that constraining Dublin has coincided with rapid growth in Dublin’s growing commuter belt.

The graph below shows the percentage change in population in given areas between 2016 and 2022. The NPF targets higher levels of growth in areas like Limerick and Cork but actual growth levels are concentrated in the Greater Dublin Area (GDA).

What this shows us is that, despite the NPF restricting the supply of homes in the GDA, people will move there anyway. But, instead of moving close to their job, they end up moving to places like Meath and Laois and commuting into Dublin. As Dublin is restricted, the effective footprint of Dublin expands toward places like Laois and Louth.

The policy isn’t achieving its desired effect of rebalancing growth. Instead it’s delivering fewer homes where they are needed most: Dublin. As the Housing Commission pointed out, there is no evidence that the 50:50 rule has resulted in the rebalancing of population across the country.

But the policy is worse than just failing to rebalance growth. It is actively harming Ireland’s capital. The last iteration of the NPF resulted in about 100,000 fewer homes being zoned for in the Greater Dublin Area (GDA) between the last two development plans. The National Planning Guidelines that preceded the NPF set a target of about 22,000 for the Greater Dublin Area per annum. In the last NPF, the GDA’s target was 12,000 per annum.

Land supply remains skewed toward the Northern and Western regions as a result of the NPF’s 50:50 rules. Of the 7,911 hectares of residentially zoned, serviced land with no active planning in Ireland, 40 per cent is in the Northern and Western region, compared to 34 per cent in the EMRA. This is despite the fact that it is the Eastern region which has most of the jobs.

This mismatch between land supply and employment opportunities is shown in the following graph. You can see that the EMRA contains 58 per cent of national employment growth but only 46 per cent of housing delivery.

This mismatch between jobs and homes is causing long commutes. Commuting times are up about 6 per cent since 2011 and are highest in Dublin’s growing commuter belt.

This mismatch shows a certain paradox in national policy. Ireland wants people to live closer to where they work. It also wants people to live in areas with fewer jobs than Dublin. The Housing Commission states this paradox as follows: “while the NPF has a goal that people should live close to their place of work, it also aims to restrict the growth of Dublin.”

How the new NPF can be improved

The NPF has undergone a revision and will soon be approved by the cabinet. The Programme for Government is right when it says that the new NPF will increase the availability of land. This is because the new NPF will use updated ESRI figures which incorporate the 2022 census and 2023 CSO data rather than the 2016 census.

However, the fundamental problem remains: the NPF will continue to limit the potential of Dublin and, as a consequence, the entire country. The right comparison is not between the last NPF and the new one, it is between the new NPF—which restricts Dublin– and a potential policy which does not restrict Dublin.

Removing the cap on Dublin does not mean leaving the rest of the country behind. The economic benefits of unleashing the potential of Dublin will help fund the rest of the country. Capping growth, as we have seen, doesn’t work. Instead, the NPF should try enabling more growth.

Enabling investment in Irish cities, like Dublin, can boost the wealth of the entire country through core-periphery spillover. The basic idea is that the redistributive element of the BRD policy would be better achieved through direct subsidy or through the natural spill over of economic activity from fast growing regions. After all, the Eastern region contributes the largest economic share of value.

Investors into Ireland make a choice typically between investing in Dublin or investing in some other European country. The choice is between Dublin and Frankfurt, not between Dublin and Ballina. A 2006 paper showed this dynamic play out with financial firms in the UK: those that were priced out of London did not move to Leeds, but to Frankfurt. If national policy continues to undermine Ireland’s largest economic engine, it will be the whole country that suffers, not just Dubliners.

This point was powerfully made in the recent Irish Cities in Crisis volume which claimed that the “damaging” policy of imposing a “growth cap” on Dublin has not only failed to redistribute growth, but resulted in less “core-periphery” spill over.

Undermining the success of Dublin means taking that success for granted. Within living memory, Ireland was a poor country from which people fled looking for a better life. My generation, born in the late nineties, knows only a prosperous and successful Ireland. There is a risk that we take our success for granted and, in doing so, risk losing that success. As Lee Kuan Yew, the first leader of Singapore, put it

The generation that produced my sons and my daughters was a generation that understood that we could have lost it all…

People take what they have as a new base…They believe that [progress] will always be there, they don’t need to make any effort. I don’t think they understand that there was a lot of hard work and planning before we got there, and a lot of effort has got to be put in to keep it like that.

Success is hard won. And Ireland has seen a lot of it. But the NPF undermines that success as a matter of national policy. It can and should be changed to be an enabler, not a blocker, of progress.