Thursday, 16 March 2017

Beacon South Quarter crisis reflects the worst of Turbo Capitalism

Paul Sweeney: De-regulation, privatisation, outsourcing, low taxes, bad housing policy, speculation, regressive tax policy, and poor public services reflect turbo capitalism. This is the tragedy that is hitting many in the Beacon South Quarter.  


Apartment owners in this Sandyford office block will have to pay an average of €10,000 because of gross deficiencies by building speculator Paddy Shovin’s Landmark Enterprises and bad regulation of building standards by Dun Laoghaire County Council. Owners of the 880  apartments face costs of €7,500 to 15,000 each in relation to fire safety defects they been told to pay into a Sinking Fund which will pay out €9.1 million for fire and remedial action. They agreed to pay this last night, 15 March 2017. Residents of two other blocks will have to pay over €1 million in water damage.These apartment blocks which look quite attractive, were poorly constructed by Shovlin’s Landmark Enterprises.  It was the time of the tax-incentivised property bubble when people were told by successive governments that “the market will look after all of your housing needs” and regulation was “interference in the market” and was not really necessary.

The Irish Times said “conceived at the height of the boom, the €500m Beacon South Quarter (BSQ) in Sandyford had been intended as a "world showcase" by Mr Shovlin and his fellow Landmark directors, reporting in 2013 that “Property developer Paddy Shovlin may be only weeks away from securing a clean bill of financial health after declaring bankruptcy in the UK last May, but that does not mean his creditors have given up the fight to recover the millions of euro they are owed.” The report continued “records filed with the courts here show how Dun Laoghaire-Rathdown County Council registered a judgement for €7.16m against the former Landmark Developments chief on April 12.” 

Shovlin, who had the largest collection of Ferraris in Ireland, was also part of a consortium that bought the former Bank of Ireland headquarters on Dublin's Baggot St for €200m in 2006. He was declared bankrupt in the UK in 2012, and is now said to be involved in new projects.

The government and its local authorities ceased to build local authority housing, na├»vely believing that the market and tax subsidies would provide all housing needs. They outsourced housing. They privatised it. Of course, tax subsidises are an interference/intervention in the market. There was rarely a free market, but regulation was greatly eviscerated, deliberately. 

At the height of the property bubble, the taxpayer was offering 100% tax write-offs to investors in apartment blocks in nearly Dundrum. This was typical non-free enterprise–Turbo Capitalism, Irish-style. The tax incentives were in fact subsidies to the builders. They were totally unnecessary. They were deadweight. But they cost the taxpayer. 

All were supposed to provide their own homes, no matter how poor.

The apartments are owned by many individuals, companies and housing bodies and Dun Laoghaire-Rathdown County Council but the largest owner is the country’s largest landlord I-Res Reit which owns a quarter of the apartments. 

20% of the apartments are owner-occupiers, and the rest is divided up between Cluid housing scheme, Circle voluntary housing scheme, the Council, Reis Reit and other investors. Some of the owner occupiers bought their apartments under the state’s Affordable Housing Scheme. Cluid owns block B1, a smaller block of 58 apartments. It is not affected by water damage, but does need €541,523 in fire safety work, according to BSQ Management Company Ltd.

We know that the council failed to regulate the construction, like most other local authorities, as it was following the line that low regulation was the order of the day. This line had been advocated by the Right and had been adopted with vigour by most in authority under political direction in public service in all areas from banking, labour protection to fire standards and safety in buildings.  The public sector and local authorities in particular decided not to build public housing and left it to the market. 

Today the lesson has still not been learnt and public housing is still being built by private speculators under Public Private Partnerships, a more costly and bureaucratic way than direct builds. Direct public housing builds were more costly than spec private housing, being of a much higher standard. But in the long run, they were often cheaper - when defects emerged in private builds. 

While public housing is also provided by local authorities buying in places like Beacon South Quarter by local authorities this is reasonable in a deep housing crisis. A further point is that sometimes the centre, the government, did not provide sufficient capital for local authorities to build, even during the boom (“the market will provide”). Another mitigating factor on bad regulation by local authorities during the bubble was that they were seriously under-staffed. The private sector wooed many with bigger pay cheques.

BSQ reminds us of the many downsides of Turbo Capitalism for the little people. But the big boys were hit too. Shovlin was forced to trade his Ferraris for a bike.

Paul Sweeney is chair of TASC Economists’ Network




1 comment:

James Wickham said...

Paul, this is a crucial piece. There should be an outcry about the deliberate run-down of regulation on construction during the boom. Yet it seems that there is no real attempt to restore any effective regulation.
Your piece also shows how attempts to solve the crisis are nearly all within the extreme market-oriented framework that got us into the mess in the first place. The solutions put forward seem to deepen the hold of private enterprise on the housing market, even if this is actually done with public money!