Looking at the current economic climate, for perhaps the first time ever, Ireland is facing a significant issue on the supply side: demand is outstripping supply’s capacity to match it. The predicament isn’t a lack of overall demand, but a disrupted aggregate supply.
Whether it’s Leaving Cert economics or otherwise, it’s clear that when demand escalates and supply becomes restricted, the immediate outcome is rising prices which gradually steer towards stagflation — a condition where prices inflate while economic growth stalls. Supply blockages, labour shortages and worn-down capacity of the State to execute grand scale projects are some of the biggest issues currently facing the Irish economy.
Adding to the urgency, the Government’s spending has seen a massive 47% increase over the last five years, swelling from €71 billion to a staggering €105 billion. The question that arises is – where are the results corresponding to such a massive expenditure? The housing supply is insufficient, transportation infrastructure lags behind other affluent nations, hospitals are overburdened, and contrasting scenes of private wealth and public deprivation coexist. This paints a clear picture of the consequences of a disjointed focus on supply.
‘Due to arguments over supply, crises loom large. Meanwhile, demand is at an all-time high causing prices to surge sharply. This is Economics 101.’
For a country like Ireland, grappling with a plethora of housing and infrastructure deficiencies, there is an urgent need for the upcoming government to undertake a comprehensive ‘mine-sweeping’ operation aimed at dramatically mitigating obstacles to constructing homes and public infrastructure. This would require a shift in our building methodology, our planning process, and how we align the rights of dissenters with the collective societal obligation.
Unlike in Ireland, countries such as Denmark, Sweden and Germany boast well-equipped planning systems that facilitate large-scale development. If we don’t promptly free up supply, permitting unhindered construction, the country risks paralysis and an otherwise thriving nation could be swallowed by the politics of defeat.
To mend the supply side of the economy, the incoming government must prioritise the removal of administrative, legislative, and planning hurdles that are currently stalling development. Land availability should be increased while discouraging hoarding, and construction companies must be incentivised to build. The recent decision by the comparatively new Minister for Finance, Jack Chambers, to delay implementing a tax on landowners hoarding residentially zoned land, seems like a regressive step. It’s a basic principle we need to revisit.
In my local town of Dún Laoghaire, a regular home’s supposed “heritage” value saw the stagnation and eventual postponement of a project to construct 150 residential units situated nearby two convenient Dart stations. Earlier this week, this news caused consternation, shining a spotlight on the ongoing housing predicament that can only be resolved by augmenting building projects in areas with existing structures.
Simultaneously, Goatstown has been facing a continuation of delays on a venture due to legal objections by residents. These citizens perceive that the suggested high-density accommodation would adversely affect the neighbourhood’s unique features and put a burden on local facilities. The delayed project involves an eight-story residence catering to 698 UCD students, envisioned to be situated a mere 850m from the university.
The two examples illustrate how our judicial structure enables protests on diverse bases, extending from minor procedural errors to matters of environmental concern. Such objections can result in long-lasting legal conflicts, creating an environment where even those house-building projects considered crucial by central and local administrations get postponed for extended periods, if not entirely abandoned. The consequence is an entanglement of dispute and supply, generating crises while demand is at its peak, thus escalating prices.
The current judicial system regrettably facilitates the use of the interests of a minority against the majority, which leaves the latter at a disadvantage.
Whilst it’s understandable to want to safeguard the environment, raising objections on environmental bases has become virtually cost-free. The government’s implementation of Section 50B of the Planning and Development Act 2000, compliant with the Aarhus Environmental Convention, means that an applicant raising an environmental issue in a planning proceeding is exempted from the court’s legal fees, even if their claims do not succeed. Therefore, lodging such objections no longer presents barriers and, expectedly, there has been a significant increase in recent years, with many detracting from our broader environmental strategy in the name of preserving… the environment.
In May of last year, a fisherman from Wicklow initiated a judicial review, citing environmental concerns. This resulted in a substantial monetary agreement being reached with the German wind farm corporation, RWE. He challenged the State’s decision to grant a foreshore licence for a pre-project survey, in anticipation of a proposed €1.5 billion offshore wind farm, pointing out the potential damage to both marine life and fishing yields.
The Aarhus convention, laying out the 2030 climate targets which the State is on track to miss by a considerable measure, forms the backdrop for this dispute. Notably, a 2023 Clark Hill law firm report raised concerns about the endangerment of the Government’s loftier aims for offshore renewable energy, and more extensive climate change targets. It highlighted the risk posed by costly complaints from third parties, looming judicial reviews, delay in obtaining planning consent, and capital investment apprehensions relating to ports. These factors contribute to a overall slowdown in supply.
A complaint was lodged to Government Ministers by Uisce Éireann last year, pointing out the cumbersome planning procedures and protracted judicial reviews which stagnate the execution of vital infrastructure. The company’s CEO, Niall Gleeson, argued that even when granted ten-year planning permissions, the multitude of licences/permissions required, coupled with the need to negotiate legal hurdles, could mean waiting up to a decade for a project to materialise. Consequently, planning permissions would need to be reapplied for. This system, seemingly designed to inhibit supply, subsequently inflates development costs which are inevitably imposed on citizens.
In the planning realm, the only sector seemingly not suffering from supply constraints is the ‘consultant class’. This comprises advisors, lawyers, planning experts and similar professionals who profit each time an objection arises.
Countries including Germany, the Netherlands, and the Scandanavian countries have devised systems prioritising early engagement, legal certainty, and initial integration of environmental considerations in order to ensure punctual infrastructure execution. In the Netherlands, specifically, the planning model involves key stakeholders in early discussions. Local government representatives, environmental groups, and community members are all part of the initial planning stage. This early addressing of environmental and community worries reduces the possibility of drawn out legal conflicts later on in the project’s lifecycle. This approach appears prudent, wouldn’t you agree?
What are the implications of the Irish system? Who actually reaps the benefits? It emerges that the unrestricted sector in this context pertains to the “consultant cadre”. This encompasses an array of specialists spanning advisers, attorneys, planning consultants and their ilk, who earn a tidy sum every time they participate in dispute resolution, enormous demands, or financial indemnity disbursements. They endorse a mentality of disputation, often under the pretence of democracy and safeguarding individual rights. The pivotal concern, however, is – when the preservation of individual or limited group rights incurs the expense of the majority, how should we act?
To illustrate, by 2023, ongoing legal reviews for significant residential projects will compose 42% of cases, equating to a postponement of about 15,000 housing facilities. What this implies is that approximately 15,000 individuals or families face a substantial brunt of these few dissenters. In the meantime, housing prices are soaring, adding a hefty financial liability on the younger demographic. Does this seem just, balanced, or economically effective?
The forthcoming administrative body must prioritise boosting supply. The issue isn’t with demand, but a dearth in supply. Address the supply conundrum and the obstacles obstructing progress, and we shall then resolve a majority of our issues. Maintain the status quo, and the economy is likely to falter in the approaching years.