Unlocking the potential of Ireland's towns and cities
How Progress Ireland's newest policy, Street Plan Development Zones, could unlock the potential of our towns and cities
Progress Ireland has just launched its second housing policy: Street Plan Development Zones. You can read all about it here. But we thought we would explain it to our Substack readers.
Historically, cities around the world have gradually densified by a combination of simple rules and powerful incentives. The lack of modern transportation meant that cities' outward growth was constrained. When the need for living space in the city grew, property owners would respond by intensifying the use of their plots. In most of pre-war Europe, there was a simple set of rules governing this process, enabling the built environment to adapt to a changing environment.
However, this process no longer occurs as it once did. Planning policies make the steady intensification of plots in central areas extremely difficult. As a result, much of our built environment is frozen in time, unable to adapt to Ireland’s changing needs.
Our cities and towns are locked in place at precisely the moment we need them to adapt the most since addressing Ireland’s housing shortage will mean building a lot of new homes within our towns and cities. In fact, 40 per cent of Ireland’s housing growth has been earmarked for these areas.
So, why are our cities and towns frozen in the twentieth century (and in many cases, before that)? And how do we unlock their full potential?
They are frozen by planning restrictions. There are no strict rules preventing homeowners from building more homes on their plot. But that is because there are few strict and clear rules in Irish planning. The system errs on the side of flexibility over rigidness. The trouble is that flexibility is the enemy of predictability and confidence.
The planning system doesn’t restrict homeowners from building out of capriciousness or stupidity. It prevents building because that is, typically, what other homeowners in the area want. It is no coincidence that property-owning democracies like the United States, United Kingdom, and Ireland all have high levels of restrictions on building: homeowners do not like it!
There has been no shortage of complaints about NIMBYism in Ireland. But few solutions. The ongoing Planning and Development Bill (2023) has been criticised by some by its attempts to come to grips with the NIMBY problem. But the controversial elements of this bill, if they do anything, will probably only paper over the cracks of a more fundamental problem.
The fundamental problem–and one major reason why our towns and cities have been frozen in time–is that the interests of homeowners are pitted against the interests of newcomers. This has created a proliferation of veto points in the system. In short, there are many ways to block, but few ways to support, the delivery of new homes. As we wrote in the main article:
From the point of view of a neighbour, development next door is all downside, no upside. They get noise and potentially congestion. In return, they often get nothing. It is no surprise then that few ordinary homeowners decide to make the most of their land: they are locked in a stalemate with their neighbours.
So how do we get out of the stalemate? Progress Ireland’s answer is to create a pathway through the planning system that aligns the interests of existing and new residents. A win-win!
We call that pathway Street Plan Development Zones, or SPZs for short.
SPZs will work a little bit like the successful Strategic Development Zone policy which transformed areas like the Dublin Docklands. Here are two photos from East Road looking down New Wapping St taken ten years apart.
The way SDZs work is by creating a system of clear and simple rules outside of the usual planning system. The clear rules mean that developers can be confident of what is permitted within an SDZ.
A new and exciting policy in the Planning Bill that I mentioned will apply the lessons of SDZs to urban areas in particular (SDZs were originally tasked with building factories for the IDA), the government calls them Urban Development Zones or UDZs.
UDZs have a lot going for them. They will help bodies like Irish Water build infrastructure in advance of new housing coming in (currently that is quite difficult for them). They will be ‘plan-led’, meaning that we can expect transport and public realm improvements to come with the additional homes. And they will provide clear rules about what is allowed, reducing planning uncertainties.
But I doubt they will unfreeze a lot of the already occupied areas of our towns and cities. As we said in the main article:
But UDZs have their limitations. The fragmented ownership of small plots makes planned intensification extremely challenging. Where SDZs have delivered, there have been large swathes of industrial land, the potential for site assembly at scale, or heavy council ownership. Where local authorities have tried to encourage coordination across multiple owners, it has proved immensely difficult. The reality of delivering homes where they are needed most means gripping the problem of multiple ownership.
Multiple ownership means coordination problems. Back in the days of Gardiner or Fitzwilliam, when huge sections of our cities (and indeed the country) were owned by only a handful of people, developing across multiple plots was much easier. Even today, the reason why shopping centres are often nicer to walk around than high streets is because they avoid thorny coordination problems by having a single owner.
Progress Ireland’s plan to unleash the potential of Ireland’s towns and cities starts with solving the coordination problem at the heart of our housing problem. That’s what SPZs can do. They take the best of the plan-led and rules-based elements of SDZs (and hopefully UDZs) and bring them down to the level of a street.
The government decides on whether to designate an area as an SDZ or a UDZ. With SPZs, it is the residents who decide. Our policy would empower them to opt into a designation by a 50 per cent petition like those done for local parking rules or to change the name of a street (it would also allow the local authority to take the lead in designating areas as SPZs).
Once designated, locals can propose plans of what to do with their plots (within limits, set ahead of time). Streets would have strong incentives to be ambitious, given high land values in many areas. Permissions would be granted in line with the plan if 75 per cent of local residents approve in a ballot.
Take a street of relatively low densities near Dublin city centre, such as this street on Bargy Road in East Wall.
This section of Bargy Road ends at two T-junctions, on Forth Road and on East Road. The street is near amenities and several well-connected bus stops, a Luas stop, and the Port tunnel. It is lined with two to three-bedroom homes built in the 20th century.
There is significant land value in these areas given their proximity to jobs, amenities, and transport corridors. An SPZ designation would empower residents to capture some of this value and deliver more homes as a result. Residents of this area might propose developing their plots to three to four storeys in height. These greater elevations could enable internal subdivisions, delivering more homes on the same plot. Such a plan may enable plots on this street to build to heights resembling North Great George’s St, creating more homes on the same land.
SPZs would enable our cities and towns to adapt to a changing world. And we need to adapt if we are going to deliver the homes we need to sustain Ireland’s progress.
THE MODEL
We modelled that if 10% of properties for which it was financially viable added a few storeys in height, Ireland could add 150,000 extra homes (you can access the public interactive version of our model here, for a full explainer see the larger article here).
In our model, we randomly sampled 200 properties around the country using eircodes and divided them into three groups: rural, town, and city (Dublin, Waterford, Cork, Limerick, and Galway). We removed rural properties both from our sample and the population, since SPZs are focussed on onlooking towns and cities.
The model tries to figure out how many homes could be built if the rules were changed to allow it (ie if SPZs became the law of the land). The model focuses on how much additional floor area could be added (and how many additional homes could be added as a result).
We calculated the cost of delivering additional homes through upward extensions, including financing and relocation costs.
Financial viability was calculated as whether the gross uplift in property value (using a price per sqm value) was greater than the total costs (including relocation costs, construction costs, and financing costs) plus a 20% get-out-of-bed margin.
The estimate of how many houses would find it financially attractive to add storey(s) was calculated as a simple proportion: 52 per cent of our sample met the necessary conditions. If all viable houses built additional storeys, it would mean an additional 13962 square metres of floor area added across the 141 homes in our sample.
In order to estimate the number of new housing units this would provide, we used the regulations for the minimum size of a 2 bed apartment: 73m.
To be conservative in our assumptions, we then adjusted the uptake down to 10% -- people may have various good reasons for not adding storeys to their home and/or their street may vote against such a plan. Scaling up our results across all non-rural residential properties with these assumptions, we reach a figure of 147,079.
Once the inputs are changed, especially the number of storeys, the number of potential developable properties changes. You can access the interactive model here.
SIMILAR POLICIES HAVE HAD A LOT OF SUCCESS ABROAD
Israel has had a lot of success by allowing blocks of apartments to vote on whether to redevelop their building. The scheme works in a similar way as SPZs: by aligning the interests of existing and new residents. It has become a powerful tool for housing delivery.
By 2019, the program–called TAMA 38– was responsible for 25 per cent of all new homes in Tel Aviv. By 2020, 26 per cent of all homes built in Tel Aviv were due to this opt-in program.
Not only did the policy deliver homes, it was remarkably popular. The scheme has proved so popular that it has been repeatedly extended.
TAMA 38 delivers homes by incentivising homeowners to build on their own land. TAMA 38 was ostensibly tasked with addressing earthquake safety but it has had an outsized impact on housing supply. Mulam et al show that the economic incentive to homeowners drove the success of the policy. In fact, the correlation between seismic risk and TAMA 38 planning permissions was negative. The areas that unlocked the most homes were those with the highest demand, such as Tel Aviv, showing that land values were crucial to incentivising homeowners to build.
Homeowners are strongly incentivized to approve the plan in two ways. First, they will get a much bigger, more modern, and safer home out of it. And secondly, that home will be worth more than their current property. That is why it is unusual for block votes to reject plans.
The TAMA 38 policy shows that when incentives are right, homeowners can become champions of new development, delivering a greater supply of high-quality sustainable homes.
What makes TAMA 38 work is its employment of the combination of authority and incentives. Local communities are given both a reason and power to shape their areas.
That combination is a powerful tool for housing delivery. An example of a scheme in Seoul, South Korea is illustrative here. The scheme delivered homes at scale. In 1992 in Seoul, 53 per cent of new apartment or condominium developments came through the policy.
Seoul gave homeowners a central role in initiating and shaping new development in the city. Central to the policy was a profit-sharing opt-in model. The system permitted particular areas to vote on regeneration projects. The opt-in ballots became so popular that districts sought out participation in it.
Local democracy was central to the scheme – the city government identified and designated redevelopment districts through surveys of areas in need of urban regeneration. Next, homeowners in these areas would form an owner’s association to lead the redevelopment project. The association would democratically select a construction company as a partner, but the association itself would remain responsible for overseeing the project's progress and making key decisions.
Homeowners shaped the plan. The construction company would set out a detailed plan, including architectural drawings and infrastructure improvements. The plan would first be approved by the association. Once approved, the association would submit it to the planning authority.
Homeowners were strongly incentivised to approve the scheme. Members of the association could choose compensation or a home in the new scheme. Compensation was typically well above market prices, taking into account the uplift due to the development. New homes in the development typically went for much more than the initial homes. In some cases, the homeowners received a new home for themselves and another new home that they could give to their children or sell.
Homeowners who chose to apply for new homes had a lot of flexibility. Later in the process, those who decided to apply for new homes could sell their ‘acquisition rights’ to a third party. If the market was particularly strong, then homeowners could sell these rights for a significant premium.
Combining the incentive to say yes to development with the authority to approve of it was central to the success of Seoul’s policy. And it will be central to the success of SPZs.
As we concluded the main article:
Ireland needs to build a lot of homes, as all readers will acknowledge. That will mean, as former Taoiseach Leo Varadkar said, “pulling out all of the stops”. Addressing the housing shortage is going to mean layering solutions, some big, others small. No single policy is going to close a housing deficit as large as ours.
Current policy has de facto ring-fenced huge areas–the suburbs, occupied streets of low-density housing in our cities–and frozen them in the mid-twentieth century. This has forced young people into living with their parents far longer than they would like or into crammer homes often with groups of strangers. We need a way to unlock these areas, creating a new pipeline of sustainable homes. SPZs are one way to do just that.
SPZs reimagine the idea of delivering homes. Rather than seeing local communities as reluctant but bribable participants in creating sustainable communities, we should give them the power to shape their own areas.