Specific planning rules would make housing cheaper, more popular and more plentiful
The first of a three-part series on housing. First up is planning; next will be construction costs; the final topic will be zoning.
The national debate over housing has evolved into a debate about money. The allocation of exchequer funding is seen as the most important lever for improving housing affordability.
Focused on creative ways to spend more money on housing, the parties are missing something important: the importance of clear and specific planning rules. Fast, clear planning rules turn funding into homes. Slow, unclear rules make housing scarcer, uglier and more expensive.
Ireland, like many other wealthy countries, has a housing shortage. Relative to other countries, policy has responded quickly. The previous government built new institutions, introduced an entirely new tenure type, and reformed the planning system. But what more can be done?
A consensus has formed that the state should take a more active role in housing delivery. All parties agree to spend more, increase industry capacity, and scale up state involvement. As UCD Professor Michael Byrne said, “the intensity, and intractability, of the housing crisis has pushed the whole debate very much to the left, blurring the difference between Government and opposition.”
The big thing this consensus leaves out is the importance of planning rules. There are rules governing regional development, housing density, housing scale, and housing shapes. What makes for good ones?
Good housing rules get housing built where it’s needed. They are broadly popular with the public. They result in beautiful buildings and public spaces. They result in housing that is affordable.What’s wrong with Irish housing rules? A big problem is that they are non specific and open to interpretation. For example, a key rulebook for housing in Ireland is the local development plan. Local development plans govern what can be built in a local authority area in a given time frame. They might run to 1,500 pages, including appendices. They reference hundreds of overlapping goals and priorities. On one page of the Dublin City Council’s local development plan, for example, the council commits to: build on local character, integrate active recreation, integrate community centres and halls, promote alternative modes of transport, promote low traffic neighbourhoods, promote sustainable design, promote liveable and attractive places and provide inclusive community facilities.
There are many policies, and the policies are rarely specific. It is left to planning officers to decide on a case-by-case basis how these overlapping policies apply to any given development.
In a more specific system, the council would say plainly what is allowed and what is not. Specific rules let the state clearly articulate its vision for sustainable communities. They let the public clearly understand what’s allowed in their areas. And they let developers know in advance what projects can and cannot go ahead.
Clarity can drive extra supply
The state wants to enable the delivery of more homes. But the location of new homes matters as much as the fact of them. The state’s goal is for just under half of new homes to go in towns and cities, as opposed to new suburbs. Getting people into towns and cities will reduce emissions by cutting commuting times. But it has proved difficult to deliver homes within existing settlements. Commuting times are up about 6 per cent since 2011 and are highest in Dublin’s growing commuter belt. That is one reason why the densest areas have up to 62 per cent lower emissions per person.
So, how can clear planning rules help get people living near their jobs? Two London Boroughs point toward an answer. In 2019, Croydon council introduced supplementary planning guidance. The council set out specific rules that allowed homeowners to build small apartment buildings on their plots.
Homeowners and investors had certainty about what and where they could build. Between 2011 and 2022, the number of new homes on small plots (<.25ha) delivered in the City of London was 14; in Kensington and Chelsea, it was 163; in Croydon, it was 2,735. The result was a boom in apartment development, and the growth rate of house prices slowed there relative to other boroughs of London.
Specificity can be popular with the public
Despite its success in delivering homes, the rules in Croydon proved unpopular. The local mayoral elections were partly fought on whether to retain the new rules. After a conservative Mayor was elected, the rules were scrapped in 2022.
Clear rules can be an important driver of housing supply, as the example of Croydon shows. But the Croydon reforms didn’t endure, because they weren’t broadly popular. In the London borough of South Tottenham, by contrast, planners crafted specific rules that both drove more housing and were popular with locals.
In South Tottenham, overcrowding had put pressure on the existing housing stock. In response, the council decided to create rules that would allow residents to add an extra story to their homes.
The council set about creating a supplementary planning document. The document showed in detail what upward extensions of traditional homes would look like. Early in the process, they engaged with the community to determine the look and feel of the new extensions.
Not only were the rules clear on permissible plot use but crucially on the design of the extensions. These extensions added to, rather than injured, the architectural heritage of the area.
Clarity, engagement and popular designs resulted in buy-in from the community. The new planning rules are still in force today and have delivered hundreds of upward extensions in a small area.
How specificity lowers housing costs
Why does specificity matter? Part of the answer is speed. Clear rules speed up decision making. When planning decisions can be made quickly, the lead time for each project is reduced. And when it’s clear in advance what developments are permissible, developers will be more willing to fund projects.
Ireland has its own version of the Croydon or South Tottenham plans. These are called Strategic Development Zones (SDZs). SDZs are areas designated by government due to their economic importance. The scheme is a set of clear and prescriptive rules about what is permissible to build within the SDZ.
The clear rules of the SDZ planning scheme significantly speeds up ‘activation’ times, that is, the time between when a planning permission is granted and the commencement of construction. SDZ sites are activated nine months faster, on average, than normal ones.
Every additional month of development time matters to the success of a project. According to the Department of Finance, a six month delay can reduce the return on a project by twenty per cent. This graph shows the relationship between the internal rate of return (IRR) on equity investment and planning delays. The longer the delay, the lower the IRR. A two year delay can reduce the equity return by 50 per cent. By these calculations, a nine month acceleration in the planning process would be expected to improve IRR by about 2 per cent. Or, expressed differently, a nine month acceleration would be expected to boost profitability by about 25-30 per cent.
We should obsess over the profitability of construction projects because it determines how much construction goes ahead. High construction costs stop homes from being built. By 2023, planning permission for about 100,000 homes were unactivated, of which about half were in Dublin. According to the Department of Finance, the data points to “a structural problem with the viability of high density development.”
This structural problem is partially a function of construction costs. But, as we’ve seen, it’s also a function of uncertain planning rules that slow down development times and add cost. Which brings us back to the importance of clear and specific planning rules. How can Ireland make its planning rules clearer?
The first thing to say is that the government has already recognised the importance of specificity in planning law. The new Planning and Development Act contains a provision called Urban Development Zones (UDZs). UDZs are designed to bring clarity and specificity to the planning of the biggest new developments.The Sustainable and Compact Settlement guidelines, issued by the Department this year, also mark a significant step towards a more prescriptive or plan-led approach. These guidelines provide instructions for local planning authorities on how to promote more compact urban designs.
However, we can and should go further. UDZs cannot be used everywhere. They require a complicated process to set up. Their designation is ultimately the decision of cabinet. And recent guidance still explicitly sides with flexibility over certainty.
Local authority development plans must make a trade-off between flexibility and specificity. They currently err on the side of flexibility. Words like “appropriate” and “promote” appear often. Explicit statements of what is permissible are rare. As the Housing Commission said, the process is “opaque” as a result.
The content of local Development Plans are controlled by guidance issued by the Minister. The next Minister could reissue this guidance. It is within the minister’s power to tell local authorities that their development plans be clear and specific.
By choosing clarity over flexibility, we can create a planning system that attracts investment, provides buy-in and clarity to neighbours, and results in popular development where it’s needed most.
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