Key development
The Land Development Agency (the LDA) was established on 13 September 2018. The objective of the LDA is nothing if not ambitious: the government has committed €1.25 billion and set a target of delivering 150,000 new homes over the next 20 years. The establishment of the LDA represents a significant change to the future operation of the housing market. Its success will ultimately be measured by how quickly these houses may be built in a market already facing significant capacity constraints.
How will it work?
The agency will be a commercial State entity with the ability to raise finance off balance sheet. However, it will still be subject to strict rules guiding the ratio of affordable and social units provided in each development. All public lands disposed of or developed by the LDA must constitute ten per cent social and thirty per cent affordable housing. The remaining sixty per cent of the homes constructed in such developments are to be sold at market value.
The premise of the LDA is to use lands already owned by various State agencies for the construction of new homes. Several sites have been identified such as the Central Mental Hospital in Dundrum, which has capacity for the construction of 3,000 homes, and Cork's docklands.
The manner by which such lands will be developed is contingent on the scale of each proposed development. For smaller developments of under 250 units the LDA may undertake the development itself – this would represent a significant intervention in the market not seen in decades.
Alternatively, a licence agreement would be used to allow developers build on State land while imposing strict rules in respect of the ratios as outlined above. It is understood that this mechanism would work best for medium sized projects. For the larger scale developments such as that envisaged for the site in Dundrum a joint venture between the State and large developers would be entered into in a similar manner to the public-private partnership model.
It is hoped that the use of existing State land banks would lower costs associated with the provision of homes and thereby reduce market volatility and lower prices in the medium term. For instance, the Dundrum site, which is owned by the HSE, would not be sold from one State Agency to a developer or another State Agency. Rather, the LDA would work with the HSE in relation to planning and the HSE itself would enter into a public private partnership agreement. The absence of a site purchase price will, it is hoped, considerably reduce the price of each finished unit thereby enhancing the affordability dividend.
Future goals
The long term strategy of the LDA is to assemble development sites by purchasing sites which are adjacent to State land suitable for development. This procedure has been previously used by the Dublin Docklands Authority. By driving a coordinated strategy of land assembly, it is hoped to accumulate sufficient land reserves to meet some of the inevitable peaks and troughs of the land supply issue, which in turn will contribute to enhanced stability in the market.
Comment
The LDA has the potential to have a significant impact on the home construction market and as such will be monitored closely by interested parties. The more active role envisaged by the State under the plan is a direct consequence of increasing public pressure and disquiet arising from a lack of affordable accommodation. The success or otherwise of the LDA will depend on its ability to make tangible progress in the short term in alleviating these pressures. Whether the agency will be marked by accusations of inefficiency or, by contrast, come to represent a prudent, necessary and well advised intervention in the market remains to be seen.
