In an article for the Independent (https://www.independent.ie/business/irish/economic-planningthat-fails-to-factorin-climate-costs-ispointless-40772483.html), Davy’s Conall Mac Coille asks whether cuts to residential zoning targets are beneficial to addressing the Irish housing crisis. He also writes that housing debates need to factor in climate change to remain relevant. Comparing construction to other industries, Mac Coille believes rather than curb the activity of these sectors, taxes should be designed to reduce their CO2 emissions.

In the background of the debate is the Irish housing crisis. With an anemic stock of housing, Irish house prices are now expected to rise above 10 percent in the coming months, with June seeing a 1.5 percent monthly rise. With the average Irish home now €325,000, housing inflation currently sits at 7 percent. Inflating the average price are elevated asking prices on property sites such as Daft and MyHome. Here, asking price inflation has risen to 13 percent, resulting in higher transaction prices after a lag.

Residential Zoning Cuts

To regulate prices, some market commentators have proposed incorporating the suggestions from the 1973 Kenny Report.  Amongst the measures proposed were an increase in capital gains taxes or levies if land is residentially zoned. For Mac Coille and others, this method is doomed to fail. Notably, it does not address the real issue of lack of zoned land with residential planning permission.

Compounding the issue are concerns that councils are now cutting the amount of residentially zoned land. According to James Benson of the Irish Home Builders Association (IHBA), this is to conform with the National Planning Framework’s push for higher-density urban development, such as apartments.

Benson and his colleagues at the IHBA point specifically to new plans for County Meath. Revised drafts see 55 percent less residentially zoned land, which translates to 11,000 fewer houses in the area.

Higher-Density Urban Development

The issue of zoning was also seen earlier in the year when the Irish Planning Regulator took issue with Dún Laoghaire-Rathdown council’s plan to zone land for 22,800 homes. The regulator believed this would lead to an excess of lands zoned for residential purposes. Mac Coille argues that this would have had the beneficial effect of driving housing prices down by creating a surplus.

The intended outcome is most likely to encourage higher-density urban developments, such as apartment complexes, however, these developments typically cost significantly more on average and can be less marketable to homebuyers.

The government’s ‘Housing for All’ scheme hopes to address the viability of such developments. The €500 million project effectively eliminates VAT and levies for brownfield developments. With a reduction in building costs, it is hoped that these higher-density developments will become more viable.

Mac Coille points out that such subsidies don’t necessarily solve underlying issues such as “over-zealous building standards, inefficiencies and the lack of standardisation”. While these brownfield projects may help reverse inefficient low-density development in areas such as Dublin, the demand for apartment living is yet to be established.

IPCC Warnings Getting Lost Amongst GDP Data

With the sobering conclusions of the IPCC’s sixth report still fresh in people’s minds, addressing both the housing crisis and climate change will prove a challenge.

Often reduced to graphs and figures, the effect of businesses and the global economy on climate change can sometimes be buried in abstraction. According to the 2019 World Green Building Council (WGBC) report, constructions accounted for 39 percent of all global carbon emissions. 11 percent of that figure comes in the form of embodied carbon and 28 percent in a building’s use.

The article refers to a report from the Dutch Central Bank last July, which found that environmental costs added up to 7 percent of GDP in 2015. The paper concluded that some industries such as agriculture, manufacturing, and transport did not generate sufficient profit to justify their damage to the environment.

Mac Coille argues that rather than put an end to these essential economic activities, taxes should be devised to address their CO2 contributions.

“The point here is not that activity should cease, but these sectors are very costly in terms of climate change, a key point in designing taxes to reduce CO2 emissions.”

In terms of construction, this could mean subsidies for greener buildings, but potentially also drawing inspiration from the Kenny report’s suggestion for more robust taxation.