In a document entitled "Measures to Encourage Home Ownership" published on 9 June 2022, the government has said that its measures to regulate commercial institutional investment in housing have had a significant impact and have led to an increase in home ownership. Since the introduction of new planning measures in May 2021, nearly 16,000 residential houses and duplexes have been ring-fenced for purchase by individual purchasers. These regulations will influence future strategies for developers and investors alike.
In May 2021, the Minister for Housing, Local Government and Heritage, Darragh O'Brien, issued guidelines to planning authorities and an Bord Pleanála, entitled Regulation of Commercial Institutional Investment in Housing. When announcing these guidelines, Minister O'Brien stated that he had worked closely with the Minister for Finance "to provide genuine solutions to the issue of institutional investors crowding buyers out of the market," and that while these investors have a role to play in supporting new supply, particularly that of high-density apartments which would not otherwise be built, "they should not be allowed to snap up already completed developments where there is a clear demand and no viability issues."
The Minister's power to issue planning guidelines derives from Section 28 of the Planning and Development Acts 2000 to 2021 (the "PDA"). When making decisions, planning authorities must have regard to any guidelines issued under this section. Section 39(2) of the PDA states that a grant of planning permission for a structure to be used as a dwelling “…may also be granted subject to a condition specifying that the use as a dwelling shall be restricted to use by persons of a particular class or description" and where such a condition is to be imposed, it must be subject to an agreement under section 47 of the PDA.
Section 47 grants a planning authority the power to enter into an agreement with any person for the purpose of restricting or regulating the use of land. On this basis, the May 2021 guidelines were issued. These guidelines contain two recommended planning conditions, the first of which should be applied to permissions granted for mixed-use developments containing houses and/or duplexes, and the second of which should be applied to permissions granted for developments where all of the units are houses and/or duplexes. The effect of both these conditions is the same: prior to the commencement of development, the developer of any housing units or duplex units the subject of the permission must enter into an agreement with the planning authority pursuant to section 47 of the PDA restricting first occupancy to individual purchasers and/or for occupation as social and/or affordable housing, including cost rental housing.
The guidelines go on to provide that the restrictions imposed by the conditions shall apply for the period of the duration of the planning permission, except where after not less than two years from the date of completion of each specified unit, it is demonstrated to the satisfaction of the planning authority that it has not been possible to secure an individual purchaser or make the units available for social and/or affordable housing. A salient point to note is that these guidelines do not apply to apartments.
Since the introduction of the guidelines last year, An Bord Pleanála advised that it had applied the condition to a total of 7,988 residential units across 23 Strategic Housing Development planning permissions, while 23 of the 31 Local Authorities confirmed that they have collectively permitted 7,895 residential units with a condition attached to prohibit multiple sales.
The Government's progress update states that the regulations have been "impactful" in helping to achieve the aim of levelling the playing field for "traditional family home buyers, including but not limited to first-time buyers, while facilitating vital investment in high density apartments."
The guidelines have had a distinct effect on planning permissions granted in the last year, as clearly illustrated in the statistics. Developers are impacted as they will have fewer potential purchasers for their houses and duplexes. They may have to alter the design of these units, given that owner-occupiers may bring a greater level of scrutiny than commercial investors. The policy also impinges on institutional investors as they are effectively removed from the new house/duplex market, for the first two years after completion of a development at the very least.
However, it is important to underline the fact that apartments are excluded from these guidelines. Indeed, the guidelines and the progress update issued by Government both emphasise the importance of institutional investors in the increase in supply of high-density apartments in urban areas. These guidelines will perhaps push both developers and institutional investors to put a greater focus on apartments. This will be greatly welcomed by the Government, given the cripplingly low availability of such properties in populated urban areas.
It will be interesting to see how the market plays out over the next few years.
For more information in relation to any of the above please contact a member of the Housing team Fidelma McManus or Joseph Horan in Beauchamps.