How to bypass infrastructure roadblocks

How to bypass infrastructure roadblocks and reach housing targets in Ireland

Lack of critical infrastructure is a major roadblock to residential development in Ireland, and is an impediment to both the commencement and progression of projects. While there are other debilitating factors, such as cost of materials, County Development Plan reviews, and Judicial Challenges, infrastructure deficits continue to be the main reason why it is so difficult to achieve this country’s housing targets as demanded by our growing population and encapsulated in government strategies such as the ‘Housing for All’ plan.

The infrastructure deficits I refer to are usually one of the following:

● Waste Water Treatment Capacity

● Waste Water Network Capacity

● Availability of Water Supply

● Ring Road or Relief Road

● Roundabout

● Access road through multiple land owners to service zoned lands

● Bridges

● Rail Overpass or Underpass

These infrastructure projects are usually too costly for one developer to fund. Therefore, they require cooperation from other developers in that location who are ultimately in competition with each other. Additionally, this can lead to a type of stalemate or “first mover syndrome”, where no one developer will begin work on a piece of infrastructure necessary to the housing developments of multiple other nearby developers, as they will risk being left to fund it themselves. This can lead to a situation where there is no activity on residential development sites.

HISCo was established by the National Treasury Management Agency and Cork County Council. It reduces the risk for individual developers by providing the infrastructure required to complete residential development.

Many local authorities are recognising the opportunities presented by the HISCo Business Model and are examining methods to ensure there is no accusation of double payment by Developers when Development Contributions are being paid. Local Authorities are trying to be as innovative as possible as they play their part in ensuring that the speed of delivery of much needed homes is increased dramatically.

Irish Water, which plays an intrinsic role in the delivery of residential units, has limited resources to deliver much needed services throughout the country. It struggles to do this alone in the short to medium term. HISCo can service areas not included in Irish Water’s Capital Investment Programme, and may even be able to solve short term infrastructure deficits while they focus on longer term solutions.

HISCo will eliminate the site servicing challenge by funding these infrastructure projects for developers. The company works with the developer(s) to calculate a fee per housing unit based on the total cost of the infrastructure project, and will then wait to be repaid for as long as it takes to sell each house.

While acknowledging that off-site infrastructure represents the biggest challenge to residential development, HISCo will also consider the delivery of on-site infrastructure.

By recognising and taking advantage of the opportunities presented by the HISCo business model, you can play your part in ensuring the delivery of much needed homes faster and in line with demand.

During normal market conditions, when you are producing a product which is in high demand, you would expect your business model to be extremely successful. Unfortunately, the Irish Residential Construction Sector is not experiencing normal market conditions. As the challenges posed by the COVID-19 pandemic begin to subside, house builders in Ireland are now faced with the problem of rising costs for essential materials. It is well documented how these are increasing on an almost daily basis due to supply chain challenges, related to the ongoing war in Ukraine and to legacy issues following on from the pandemic. Contractors are also experiencing delivery delays, adding to the growing uncertainty in the industry.

These fluctuations in material costs provide builders with a serious challenge when they try to price a job or prepare a tender. It is creating new challenges for contractors that are trying to deliver housing under a fixed price contract for a local authority, particularly when the tender was probably prepared 9-12 months ago. The same issue arises for any contractor trying to deliver infrastructure for a state agency under a Public Works Contract.

The Construction Industry Federation have strongly advocated on behalf of the sector with Ministers in the Departments of Housing and Public Expenditure and Reform. To be fair to those Ministers and their officials, this is a difficult challenge to overcome. Ultimately, the additional financial burdens will be borne by the State, and this comes after the phenomenal amount of financial support the Government provided for all those impacted by the pandemic.

Credit must be attributed to some local authorities who have recognised the pressure being experienced by the providers of social housing, and have built in an annual review of unit prices which will be linked to the Construction Cost Index.

When you also consider the number of Judicial Reviews being lodged challenging the validity of planning decisions, you begin to realise how much uncertainty exists in attempting to plan a residential development. Once a Judicial Review application is lodged then a developer must await a hearing date in the relevant court. While there is an obligation on the courts to hear a Planning Judicial Review application as quickly as possible, there is no method for a developer to calculate how long the proceedings will take.

As all Stakeholders in the Residential Development Sector in Ireland try to meet the targets set in the Government’s “Housing for All” plan, it is important that we identify any area that can be streamlined to speed up the delivery of much needed accommodation. The recently enacted  Planning and Development (Amendment) (Large-scale Residential Development) Act 2021 attempts to take the positive elements of the Strategic Housing Development Regulations 2017 and improve the Planning Decision Process. This new piece of legislation restores the primary decision making powers for residential developments of 100 units or more to local authorities. It also reintroduces the time bound appeal process to An Bord Pleanála.

Notwithstanding the impact of global matters beyond our immediate control, it is incumbent on all of us involved in the residential development industry to ensure we do what we can to eliminate uncertainty in the delivery process.