Tuesday, 26 October 2010

House Swap on Ghost Estates

Nat O'Connor The Department of the Environment has published a report into the state of 120,000 dwellings in Ireland's unfinished, 'ghost' housing estates. (RTÉ news report here and report summary here). It will be some time before a full set of solutions are proposed as to how we deal with the surplus houses. And different decisions (knocking them down versus investing in them to make viable communities) will please or displease different sectors in the economy.

I want to suggest is that there are innovative, low-cost solutions available for people trapped on unfinished estates, and we should discuss a wider set of possibilities than are necessarily permitted by a legalistic or bureaucratic mindset. One solution would be to allow people on ghost estates to swap houses. Allow people in unfinished estates the option of moving - cost-free - to a same-size dwelling in another ghost estate. This would be a quick option to create viable communities, where vital infrastructure like sewers, road surfaces and lighting can be finished more cost effectively.

Such a proposal would require the Government to twist the arm of the banks a little, to allow mortgages to be moved from being secured on one asset to another. And stamp duty should be waived on the transaction, and 'first time buyer' status moved, which will require our bureaucrats to be flexible.

I imagine many people living on mostly unfinished estates have massive negative equity. Combined with the unfinished nature of the estate, these properties will be difficult to sell - which lessens people's ability to move after job opportunities or for family reasons. Allowing them to move to estates where the infrastructure is consolidated would relieve all of this.

But the main goal would be to allow people to get on with their lives sooner, and allow them to contribute to society and the economy, without spending years more trapped in 'limbo' (or hell in many cases).

Yet, as well as the administrative issues, one of the barriers to this kind of solution is the lack of any kind of coherent urban policy in Ireland. Our attitude to planning has been as laissez faire as our approach to financial regulation. Hence, the idea that the state could create such a house swap scheme comes up against the mental (but no less real) barrier that 'we don't do that kind of thing in Ireland'.

Just as we belatedly come to appreciate the merits of regulation, we should also begin to seriously consider the need for better urban policy built around the needs of people who are trapped in the many sub-standard built environments that resulted from the last decade.

7 comments:

Antoin O Lachtnain said...

I think you are completely correct and I don't think anyone involved (promoters, creditors, planning authorities) could dispute that value now needs to be maximized from what we have.

But in concrete terms, can this really be done? Has anybody identified any actual, viable swap projects?

Rory O'Farrell said...

I like the house swap idea. In some 'half finished' estates the half that is finished is fairly decent, so it make sense to move people into the good half, and then decide whether to knock or finish the rest.

The banks should agree to transferring the mortgage as I think houses in an occupied (half) estate should be worth more than in a dilapidated estate.

Nat O`Connor said...

Antoin,

I'd propose that a scheme is announced and go for a 'demand-led' approach. Let people look online (e.g. here), or drive to neighbouring ghost estates, and work out where they would prefer to live.

Basics, like schools, commuting time, access to transport and shops, should be the main factors people consider. But I would let people decide themselves.

Now that there is an 'official list' of ghost estates, there should be no trouble posting a letter to every occupied address. The rest is administration.

The new Housing and Sustainable Communities Agency could manage the process. (It was formed by the merger of four public bodies, as part of efficiency savings).

Antoin O Lachtnain said...

I think this is an opportunity for the third sector (i.e. not business, and not the government) to show some leadership and tell business and government what the people in these areas actually want.

The HSCA is realistically not going to take the lead on this. Maybe they should and maybe they would if the project was a bit more advanced. But they just aren't going to start it off.

I did put this idea to one of the big-three lenders about a year ago at a strategy session I happened to be at, and they liked the idea and could see the value in it for them, but the bank was just in no state to actually execute on it.

So one for the third sector I think.

Nat O`Connor said...

Antoin,

There are a couple of big housing associations, who might be up for it. But their core funding is state capital grants and/or rent supplement paid to their tenants. Whether or not they could raise enough money would be an issue, but they could certainly provide leadership on a house swap plan, expertise in consolidating estates, guidance to residents on what makes long-term 'locational value' (e.g. amenities), etc.

Of course, NAMA may end up owning a lot of these properties. They could turn a profit by doing a house swap - finishing the consolidated estates - and selling excess houses in each case (with all the extra added value).

As ever, the question is where the money comes from to fund this. But surely someone in Ireland has some money and can see the investment potential! And the state has the choice of spending money now or losing more money later, as these estates degrade.

colm said...

I've just been reading the report in this weeks Sunday Times magazine and an idea occurred to me. I know this post has come much later than the original but i'd be really curious to see if anyone thinks its a viable idea.
I would presume some of the unfortunate folk who have bought houses in these unfinished estates would rather be in negative equity in a nice estate then not.
A website could easily be created that lists all ghost estates in the country along with a basic description of the estate, problems, unfinished houses, finished, occupied etc.
New house hunters could register online and register an interest in a particular ghost estate. when registered interest has reached a potential 90% take up, a building contractor is drafted in to quote a price on finishing the estate.
After which the cost of each new house is a % of the cost of finishing the development, no profit, just costs. This should reduce prices enormously and allow people to buy a finished house for a fraction of the original price. It would be key that NAMA etc would release the debt on these lands. Maybe an option would be that NAMA could get a % of any profit made on resale of the properties over a set period of time (first 10yrs?) this way the community manage themselves and create duriable futures for everyone.

Nat O`Connor said...

Thanks Colm.

Some good ideas there.

I'd suggest 100% not 90%.

"the cost of each new house is a % of the cost of finishing the development, no profit, just costs"

NAMA holds (or will hold) these assets as a way of getting some kind of return on loans made by the banks. Hence, it would be good to get some kind of return on the security, rather than just giving the houses away for the cost of finishing the estate. However, the base price could be substantially discounted to get the scheme moving.

Unfortunately, some of the estates have locational problems, in addition to empty and/or half-finished housing. We may not want communities to settle in areas with poor roads, no schools, etc.

We may see in today's budget that stamp duty will be waived for people trading down out of unsustainable negative equity and/or mortgage arrears positions. That would be an improvement of housing policy.