Published on April 27, 2014
Planning Issues, Volume 1, No. 3, Autumn 2011 10 Analysis ALICE CHARLES, MIPI and thus lost much of its strategic focus. In terms of its implementation, the strategy was largely ignored, even by Central Government when implementing its decentralisation plans and introducing property tax incentives. At a local plan making level, mere ‘regard’ was given to national and regional policy and, despite often the best advice of planners, councillors and management succumbed to pressure from developers and vested interests, who exerted undue influence on plan making. As a result, bad zoning decisions were made, which led to an abundance of zoned land, often in the wrong location and lacking services. When developers were contemplating the purchase of land or property, they had little regard for statutory plans and similarly bankers ignored planning parameters in lending. In developers haste to make profit on their hefty investments, good design often fell by the wayside. As a result, planning authorities were increasingly faced with determining planning applications for intensive development of a poor design quality and with limited social and community infrastructure. Whilst planners often rejected such applications, in some cases they were granted and it was left to An Bord Pleanála to interpret the relevant Development Plan and refuse such development - that’s if the application was appealed to the Board. Not only should the planning profession have been more vocal in outlining its concerns but the planning system should have acted as a counter balance to the development frenzy. Planning should have controlled the level and location of development in the interests of the “common good” and subject to the principles of proper planning and sustainable development. The legacy Our downfall has been well documented by the global media and it has unfortunately led to the development of new phenomena, such as the ‘unfinished/ghost estate’ and increased the level of employment and wages commanded and so the multiplier effect kicked in and the Celtic Tiger took off. On entering the single currency, interest rates were dramatically reduced and suddenly developers found that banks had a lot of cheap money available, so borrowing large amounts became the norm and construction intensified. In turn, those buying properties were encouraged to borrow larger amounts of money and as the affordability gap widened, the amounts and percentage borrowed increased and construction activity started to drift from urban centres to the more affordable rural hinterland. When the pace of the Celtic Tiger started to slow, the Government responded by introducing property tax incentives to prop up the construction industry. This resulted in areas like the Upper Shannon being littered with Section 23 properties. Whilst many may have quietly questioned the sustainability of such practices, few voiced their concerns and when they did they were shot down by Government and the mass media who promoted property as a sure bet. However, the Celtic Tiger came to a grinding halt in 2008, with the onset of the global financial crisis and in particular the level of exposure of our banks to land and property loans. Where was planning? Many would rightly ask, where was planning during the Celtic Tiger and whilst we may find it difficult to accept, we must acknowledge that the planning system failed. This may be attributed more to the politics of planning than the actual profession, but the system nonetheless failed. Planning in Ireland historically lacked joined up thinking and often pandered to political and local interests. In an attempt to overcome this problem, the National Spatial Strategy (NSS) was produced in 2002. The document identified Gateways and Hubs to accommodate balanced regional growth, up to 2020. However, the document was politically watered down Irish Property Market Collapse: the Cause, the Legacy, NAMA and the Role of Planning Whilst the current Irish property market collapse is by no means unique, the extent of the collapse is arguably greater than that experienced internationally. This is essentially a result of poor planning, property tax incentives and lax regulation, in the preceding decade; the legacy of which is a plethora of unfinished estates, zombie hotels and golf courses and an abundance of zoned land. NAMA is but one mechanism that has been employed to deal with the banking and corresponding property market collapse. In this article Alice Charles explores the cause, the legacy, the solution (NAMA) and the role of planning. What happened? The roots of the Celtic Tiger can be traced back to the early 1990’s, when Ireland started benefitting directly from prosperity resulting from the influx of multinational companies. Ireland became the destination of choice for multinationals, due to the workforce’s educational attainment relative to other English speaking countries. This resulted in a dramatic increase in employment and as employment grew so too did the demand for houses. The construction industry responded by increasing output and in so doing
11 Planning Issues, Volume 1, No. 3, Autumn 2011 Analysis the ‘zombie’ hotel. The legacy of the Celtic Tiger is not only a collapsed economy and development sector, but a surplus of partially completed or completed developments, comprising 2,846 unfinished estates, zombie hotels and golf courses, with a excess of 15,000 bed spaces, struggling private hospitals, vacant commercial property and derelict historic properties. In addition, there is an abundance of raw land, some of which has permitted proposed development, is zoned or unzoned. There is more than 44,000 hectares of land zoned for development, yet at most there is only a requirement for 12,450 hectares. In cases where our infrastructure was not upgraded in tandem with development, we have a huge physical, social and recreational infrastructure deficit, with investment critically needed in water, wastewater, public transport, education and health to meet the needs of the existing and future population. The solution The National Asset Management Agency (NAMA) was established in 2009, as a key part of the solution to the Irish banking crisis. NAMA operates under the confines of the NAMA Act 2009, and is a mechanism to deal with the riskiest land and development loans on banks’ balance sheets. These loans were preventing banks from lending into the economy, thus preventing economic recovery. NAMA involves the removal of land, development and associated loans off the bank’s balance sheets and their acquisition by NAMA, for which NAMA has to date, paid the banks €30.5 billion in redeemable securities. NAMA is an asset management company that acquires good and bad loans at market value from the Irish banking institutions. NAMA has acquired more than 11,500 property- related loans from the Irish banking institutions involving 850 debtors, 16,000 properties and loan balances of €72.3 billion. The loan book will shortly increase to €74.2 billion after the residual tranche of loans are removed from the bank’s balance sheets. 60% of the loans are secured by commercial or residential property and 40% by undeveloped land or by properties under development. 60% of the loans are in Ireland, nearly 30% are in the UK, whilst the remainder are in the wider world. The objective set under Section 10 of the NAMA Act 2009, is to recover, at a minimum, the amount paid, plus whatever additional funds achievable as working or development capital for projects. When the loans are acquired by NAMA, it requests debtors to submit a detailed 3-year business plan within 30 days of acquisition. Business plans are then reviewed and NAMA determines whether these plans are viable and will either approve them, reject them or refer them back to the respective borrower for amendment. Where plans are approved, NAMA will monitor the debtors’ subsequent performance to ensure they adhere to the targets contained in the approved business plans in relation to the agreed debt repayment/disposal strategy. Where business plans are rejected and borrowers are considered to be no longer viable, enforcement is pursued against the debtor and receivers working on behalf of the organisation offer the land and property for sale. It must also be acknowledged that the foreign banks also have mechanisms in place to manage land and development loans. The model is somewhat similar to that of NAMA, with many forming global restructuring teams to manage major corporate clients in financial distress. The principal aim of the banks is to maximise debt recovery and in so doing, they require borrowers to prepare revised business plans for approval or rejection. If plans are approved the bank will work with the developer towards the implementation of the plan, but if rejected then the bank can appoint receivers and seek to realise whatever value they can for the asset. It is also worth noting that land and property assets managed by foreign banks often sit alongside NAMA assets and it may be in the public interest for both parties to work together to realise best value for the asset. NAMA and Planning: The legislature NAMA is a commercial entity that is focused on recovering for the taxpayer what it has paid for the acquisition of the assets plus any additional project funding, working capital and other costs. Whilst this may appear contrary to the basic premise of planning for the ‘common good’, when the legislation is scrutinised, planning actually plays a greater role than first envisaged. This is demonstrated in various sections of the National Asset Management Act 2009 (NAMA Act), but specifically in Sections 2, 11 and 12. Section 2 of the NAMA Act explicitly states that one of the purposes of the Act is ‘to contribute to the social and economic development of the State’. Section 11 of the NAMA Act indicates that in exercising its ‘functions NAMA shall have regard to the need to avoid undue concentrations or distortions in the market for development land’. Section 12 refers to the powers of NAMA and it explicitly states that NAMA has the power to ‘make any planning application in relation to land, and intervene in any planning application made by another person’ and ‘ make any application to develop minerals on land’, and ‘undertake development for the purpose of realising the full value of any asset’, and in exercising its powers ‘NAMA shall have regard to proper planning and sustainable development as expressed in Government policy and in any relevant regional planning guidelines (within the meaning of the Planning and Development Act 2000) and development plan...’. Section 148 Schedule 1 of the NAMA Act also provides Statutory Receivers with similar powers to that of NAMA indicating that they have the power ‘to apply for and maintain any planning permission, building regulation approval or any other authorisation’. In addition, the NAMA Act refers to the need to give consideration to planning in relation to the valuation and acquisition of assets from the banking institutions in various Sections of the Act.
Planning Issues, Volume 1, No. 3, Autumn 2011 12 housing developments (both houses and apartments), infrastructural development, special problems associated with hotels and golf courses, development contributions, bonds and the new planning legislation. The Committee guided NAMA’s participation on the Expert Advisory Group on Unfinished Housing Developments which was established to advise the Ministers of State for Housing and Planning on actions to ensure the effective management of these developments. The Group’s report was published by the Minister for Housing in June 2011. That report identified 2,846 unfinished estates and categorised them by reference to the extent to which they required remediation. The report identified 225 Category IV estates, which are deemed to require immediate remedial attention. NAMA debtors have loans with an exposure to 31 of those Category IV estates. NAMA is undertaking an analysis of these estates with a view to developing site resolution plans, which will address the most pressing matters that require resolution and has committed to investing €3 million to fund urgent construction works. NAMA has proactively engaged with both the DoES and the HSE and other State bodies in relation to their possible need for land and property for schools and health care facilities, etc. A number of locations have been identified for further consideration by State bodies. There are also ongoing discussions with the HSCA about their interest in land and properties (mainly in urban areas) for social and affordable housing and rent and leasing schemes. In this regard a member of staff has been seconded from the DoECLG to review the residential units managed by the organisation, to establish if any of the assets may be suitable for the provision of social and affordable housing. In accordance with the Board’s direction, such land/ properties will be offered at NAMA’s minimum reserve price (independently appraised) to such State Departments or bodies for four weeks, subject to a definite decision, contract and closing planning and sustainable development generally, as well as the specific issues such as housing policy, public transport, key infrastructure, amenity and community facilities, provision of sites for public purposes, economic and social development objectives, planning legislation and processes and long-term public interest. As advised by the Committee, the Board has had regard to these submissions in the development of NAMA’s strategies and policies. The Committee had discussions with a number of Government Departments and with other organisations in relation to planning and development matters of mutual interest. These bodies included the Department of Environment, Community and Local Government (DoECLG), the Department of Education and Skills (DoES), An Bord Pleanála (ABP), the Health Service Executive (HSE), the Housing and Sustainable Communities Agency (HSCA) and the County and City Managers’ Association (CCMA). The following are some of the issues which have been covered in these discussions and which have been the subject of the Committee’s advice to the Board: Recognising the pressing need for a national planning information system, the DoCHLG (with the support of other interested organisations, including NAMA) plans to establish, by the end of 2011, an internet browser-based GIS planning information system, incorporating national planning spatial data including zoning, unfinished housing developments, housing land availability and developing areas. The Committee has worked closely with the Department in terms of NAMA’s contribution to the system. On completion of the exercise NAMA will supplement the GIS planning information system with information pertaining to its assets, to inform a strategic overview of its assets. Discussions have taken place with DoECLG, ABP and the CCMA on issues which have an impact on NAMA’s work including the extent of over- zoning, housing densities, unfinished NAMA Planning Advisory Committee and its workings Section 33 of the NAMA Act 2009 provides that the NAMA Board may establish advisory committees and two have been set up to date: the Planning Advisory Committee (PAC) and the Northern Ireland Advisory Committee. The Planning Advisory Committee is comprised of the following people: William Soffe (Chairman, Board• Member) Brendan McDonagh (Chief• Executive, NAMA and Board member) Michael Connolly (Board Member)• John Mulcahy (Head of Portfolio• Management) Michael Wall (External Member)• Alice Charles (External Member)• The purpose of the Planning Advisory Committee is to provide strategic advice and recommendations to the Board on planning, land and related matters that may exert an influence on the valuation and realisation of development potential of NAMA assets and thereby affect the achievement of NAMA’s purpose and functions. To date the Committee has had two priorities: To consult widely with other1. interested parties so as to develop an understanding of their perspective on a number of key issues and, thereby, in turn, inform the NAMA Board’s policies and strategies. To enter into discussions with2. Government bodies and with other parties, so as to determine how best to align NAMA’s role with other public policy objectives. On its establishment, the Committee sought and received written submissions from selected prescribed organisations listed in the Planning and Development Regulations, 2006, including the Irish Planning Institute who submitted a comprehensive response. The submissions spanned a wide range of views covering proper Analysis
13 Planning Issues, Volume 1, No. 3, Autumn 2011 Analysis nursing homes, private hospitals, social and affordable housing, etc. Commercial Property: As the Irish economy regains momentum over the coming years and as investor confidence grows, demand for commercial property will improve. There is, of course, overcapacity in all commercial sectors at the moment but there are significant sectoral and regional variations. For instance, vacancy rates for city centre office space in Dublin are falling and with no completions expected in the short term and evidence of strong demand from technology companies and from new multinational companies, the outlook for this sector is quite positive. On the other hand, a pick-up in activity in the retail and industrial sectors is heavily dependent on a general resurgence of economic activity. Undeveloped land, future development land and back to agriculture or forestry: Undeveloped land accounts for 40% of NAMA loans. The most valuable of these loans is within, or close to, major centres of population and will in time lend itself for development. However, some land will not be developed and will revert to agricultural use and with the outlook for the agriculture sector much improved in the short to medium term, there is likely to be solid demand for agricultural or forestry land. Develop Public Sector Land Register / Vest Public Sector Land in the Organisation: NAMA is likely to support the development of a public sector land register, which would enable the State to strategically assess the potential of its assets. This would allow for the preparation of joint masterplans and ultimately achieve best value for the taxpayer. Alternatively the State may seek to vest or sell surplus public sector lands to the organisation, where it would be in the interests of the State. Engagement with Non-Participating Institutions: NAMA will need to proactively engage with non- participating institutions, in accordance with the approved code of practice, in servicing, transportation linkages, site designations, development/energy / agricultural potential. Assets that are located in major centres of population are likely to offer the most potential for development in the short to medium term and are likely to be prioritised. Use of Unfinished Estates: Whilst the organisations immediate priority is to ensure that the estates that present a health and safety hazard are remediated, the organisation is also actively looking at future uses for surplus stock. On completion of the DoECLG staff member’s spatial analysis of the unfinished assets managed by NAMA, it is hoped that the Department will have a clear view of the assets that offer potential for the previous of social and affordable housing and the organisation will happily offload its assets, at the price paid, to Local Authorities and social and affordable housing providers, within the confines of planning legislation and policy guidance. In the interest of ensuring sustainable balanced communities and indeed recouping taxpayer’s money, NAMA is also exploring mechanisms for offering residential property to the market. However, it is acknowledged that some assets will not readily lend themselves for the purposes of social and affordable housing and are unlikely to be taken up by the market. In such cases solutions will need to be employed on a site by site basis, which will include retrofitting, exploring alternative uses i.e. community, sheltered accommodation, etc, and in some cases demolition, which may require the relocation of residents from estates allocated for demolition to superior property. Hotels and Golf Courses: Where a number of NAMA-funded hotels and golf courses are competing in a location where there is only potential for a single facility, NAMA will more than likely have to make a decision based on the optimal commercial outcome. Therefore NAMA will have to actively consider alternative uses for hotels and golf courses that are considered to not be economically viable i.e. student accommodation, period of up to 90 days, prior to open market offering. Finally, the committee actively sought and inputted into the process of recruiting a full time Planner for the organisation. The organisation has now recruited Chris McGarry, who has more than 20 years town planning experience. He commenced employment with NAMA in September 2011 and is already hard at work both providing the organisation with planning advice in relation to specific assets, but also putting the processes in place to ensure that the organisation plans strategically for the collective use of its assets nationally and internationally. Chris has also been charged with commencing active engagement with planning authorities, in relation to assets within their functional areas, having regard to proper planning and sustainable development principles and to NAMA’s commercial remit. Future planning consideration for NAMA and State bodies Whilst NAMA faces formidable challenges ahead, it presents an opportunity to facilitate a “plan led” rather than a “developer led” approach to future development in the State. This will not only enable NAMA to achieve best value for the taxpayer but will be in the interest of the ‘common good’ and represent proper planning and sustainable development. In order to achieve such a goal, it requires collective action from both NAMA and State bodies. For NAMA’s part, this might include the following: Use GIS planning information system to analysis and plan: Proper planning is built upon research, analysis and planning. DoECLG in cooperation with NAMA are hard at work developing a GIS planning information system and on completion later this year, this tool will be used by NAMA. NAMA will supplement this system with all data in relation to existing assets managed by the agency and will then undertake a spatial analysis of the strategic strengths and weaknesses of assets in relation to location, zoning, planning history,
Planning Issues, Volume 1, No. 3, Autumn 2011 14 Analysis requirements of proper planning and sustainable development will need to measure the cost and the benefits to society of one-off housing. DoECLG and local authorities would be prudent to promote the development of serviced sites in small villages and towns and offer housing choice and help to regenerate rural settlements. It is recognised that some degree of need will exist for one-off housing, in serving the needs of the agriculture community, but the intensity of such unsustainable development cannot persist. Conclusion The ultimate outcome of NAMA will not be known for many years to come, but if it is to be successful it’s vital that proper planning and sustainable development practices are at its core. NAMA welcomes the engagement of the planning profession to date and would welcome continued engagement with DoECLG, regional and local authorities and the wider profession. Alice Charles, MIPI Alice Charles, MIPI is Director of Alice Charles Planning and serves as an External Member of the NAMA Planning Advisory Committee. This article has been provided with the kind permission of the National Assets Management Agency. in the future, the DoECLG may have to consider asking local authorities to prepare Infrastructure Capacity Assessments that identify the physical, social and recreational needs of the existing and future population and the cost of realising these objectives. This would provide an equitable means of developing costed development contribution schemes and provide some degree of certainty in relation to the cost of development and servicing development. 4. Brownfield Land Policy It would be prudent for DoECLG to promote a Brownfield Land Policy, which would not only promote the development of urban “brownfield” land first, but would provide guidance on the remediation, planning and servicing of such sites. 5. Support density The promotion and achievement of medium to high densities enables the delivery of economically viable infrastructure in tandem with development and prevents further unnecessary urban sprawl onto “greenfield” sites. Therefore DoECLG is likely to support continued medium to high densities. Building height is not necessary to deliver higher density development. This is evident in the Georgian areas of Dublin city where the highest densities of development are concentrated. In order to achieve density, consolidation must be the central theme of local plan-making. 6. Discourage the continued development frenzy of one off houses The cost of providing all public and private services together with providing and maintaining infrastructure to dispersed one-off rural housing is significantly more expensive and inefficient than in a village, a town or a city. In addition, with the surplus of housing stock in villages, towns and cities, each one-off house that is developed provides a further burden to the tax payer, in that if such a development didn’t take place, potentially an asset managed by the State could be acquired. DoECLG in embracing the fundamental order to optimise returns on common assets and debtors. NAMA also expects non-participating institutions to operate in a reciprocal way taking account of NAMA’s objectives. Use of CPO Powers: The NAMA Act provides the organisation with CPO powers which can be availed of. The organisation may have to consider compulsorily purchasing land and property to facilitate access to assets or where it is in the best interests of realising the overall value of assets. DoECLG, Local Authorities and other State bodies may consider the following: 1. Revise and Focus the NSS around 5 Key Cities Whilst NAMA is a State body with no direct involvement in the drafting of legislation or guidance, it is likely to support any review of the National Spatial Strategy (NSS) by DoECLG. The NSS not only needs to prioritise development around the major centres of population, but it needs to provide a strategic framework for the development of energy, waste and agriculture, which will act as major drivers of future growth. 2. Urban Capacity Studies prepared by Local Authorities when Plan- making If DoECLG were to introduce Urban Capacity Studies, as part of the local plan-making process, this would be of great use to NAMA. This would provide the housing and employment capacity, empty homes and employment land and property strategy for a local authority area, which would be of immense use in planning for the future use of assets nationwide. 3. Infrastructure Capacity Assessments prepared by Local Authorities, with linked Development Contributions Infrastructure development did not keep pace with development, during the boom and as a result there are huge infrastructure deficits, particularly in relation to water, waste water, transport, education, health and recreation. If this problem is to be not only resolved, but prevented
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