Apartment Construction in Dublin – What Impact Have Policy

Changes in Past 3 Years Had on Apartment Building?1

Summary

 In an effort to make apartment development more viable, the Government

has introduced a series of reforms to apartment standards and planning over
the past 3 years designed to kick-start development

 An analysis of a unique dataset consisting of planning applications for new

apartments in the Dublin Region by Dublin Chamber suggests these reforms
may have had a dampening impact on the supply of new apartments

 The high frequency of changes to standards has created uncertainty for

investors, developers and builders, delaying new planning applications for
apartment building in Dublin

 The analysis suggests that substantial policy changes made over the last
three years to encourage more apartment development have not had the
desired effect. In fact changes to apartment standards have coincided with
distinct periods of decline in new applications in Dublin for apartment
construction

 For instance, in the 12 months prior to a reduction in minimum apartment

size regulations on 6th December 2015 6 new planning applications were
being made for apartment developments every two weeks. However in the 12
months after this change there was a 40% reduction in the number of
applications, with just 3.5 applications every two weeks from Jan-Dec 2016.
The number of applications during 2017 (from Jan-Oct 2017) picked up
somewhat, with 4.2 new applications being made every two weeks, but still
well below 2014/2015 levels

 The fact that new planning applications for apartments were so stunted in
2017 suggests that developers are holding back to see what changes are
made to apartment standards before designing their projects and seeking
finance. There was also a number of planning applications withdrawn after
the announcement by the Minister of his intention to change apartment
standards in October 2017

 Overall there has been a substantial decline in new applications for

apartments in 2016 and 2017, which suggests that we can expect fewer
apartments to be built in the short-term.

 The implications of our analysis is that any further changes proposed by the
Government to apartment building standards must be introduced without
delay, as these appear to be holding back new planning applications for
apartment construction. Furthermore, the market must be given assurance

1
Authored by Dublin Chamber, Feb 2018
 that no new changes in apartment standards will be introduced for the
foreseeable future

Outlook for Apartment Construction in Dublin

The building of new apartments in Dublin and other cities will be central to
meeting housing demand and easing the housing crisis in the Capital.
Estates of three-bedroom semi-detached houses located in car-dependent
commuter zones are not an answer to the housing needs of young professionals
who now constitute one of the biggest cohorts of prospective buyers and renters.
Feedback from international firms, particularly in tech sector, suggests that
younger staff have a lower tolerance for commuting times and generally expect
access to accommodation in central locations for convenience and quality of life.
Surveys of Dubliners undertaken by Dublin Chamber have found a much greater
degree of enthusiasm for urban apartment living among under-35s.
Despite this, output of new apartments in Dublin remains low, still 40% below
2009 levels.
While residential output overall has been muted since the recovery, this is
especially true of apartment construction. In Dublin during the period 2005 to
2009, apartments made up on average 60% output of new private dwellings. By
contrast 2015 to 2017 period has seen apartments make up on average 34%
output of new dwellings coming to market. Nationwide apartment output in 2017
was just 15% (2,959) of overall residential output, compared to 23% during
2005-2009.
Just 2,074 new apartments were completed in Dublin in 2017 and 1,282 in
2016. If apartment construction made up the same proportion of new builds that
they did in the pre-bust period, there would have been almost 2,000 more
apartments built in 2017 than there was. This differential suggests there is a
particular problem affecting the apartment construction sector, in addition to
those affecting residential construction more generally.
The Government, recognising that apartment development faces viability
challenges in Dublin, has implemented a number of far reaching reforms to
planning and building standards aimed at reviving apartment construction.
At least four sets of substantial reforms have been initiated since March 2014 at
the national level:
 In March 2014 building control was overhauled with the replacement of
self-certification with a certification by an assigned professional. In part this
was motivated by a number of high profile building and fire safety issues in
apartment developments, most notably in the Priory Hall complex in North
Dublin
 In July 2015, changes to Part V Planning and Development Act were
introduced, reducing the social housing obligation from 20% to 10% of new
developments while removing the ability of developers to fulfil their obligation
using cash transfers rather than an offer of units or land
 In Dec 2015, new national minimum apartment size standards were set by
Ministerial Order. This was in response to what were seen as excessive
minimum apartment sizes set in Dublin City Development Plan, that it was
claimed were holding back new apartment developments in the City. Passive
Houses standards that had been introduced in Dun Laoghaire-Rathdown were
also amended by Ministerial Order.
 Finally, in Oct 2017 the Minister for Housing, Eoghan Murphy, announced his
intention to overhaul a number of planning and building standards relating to
apartment construction, including those on building height, car parking
requirements, dual aspect, units per lift core and percentage of studios per
development. These draft standards are currently under consultation and are
due to be implemented in 20182

While there has been criticism of the substance of these changes3, some
commentators have also been critical of the frequency of the reforms to
regulations and standards for apartment construction.
Less concerned with the substance of the changes, this argument is that the
constant tinkering with standards has created uncertainty in the market.
Changes in standards – even where these are positive from the developers’ point

2
Design Standards for New Apartments - Guidelines for Planning Authorities - Draft Update (Dec. 2017)
available here: http://www.housing.gov.ie/planning/guidelines/apartments/design-standards-new-
apartments-guidelines-planning-authorities-draft
3
For example, a common criticism of the reduced minimum size guidelines was that it would allow the
proliferation of ‘shoebox’ apartments in Dublin City, such as by journalist Frank McDonald in Irish Times
https://www.irishtimes.com/news/environment/analysis-minister-dumbs-down-apartment-guidelines-
1.2475452
of view – have led to withdrawn and delayed applications for new apartment
developments. Apartment development proposals that have to be redesigned
also renegotiating their terms of financing, which adds to the time delay.

For example architect and commentator, Orla Hegarty, has argued that the
Minister’s announcement in October 2017 of changes to apartment standards
will cause delay in new development: “Anybody who has a site or has planning
permission is going to wait to see if they can do a more profitable development
under the new standards”. She claimed the lack of consistency and certainty was
holding back investors: “Investors need certainty and are also looking at the
competition…someone is not going to develop when they think the adjoining
sites will have greater density in 6 or 9 months’ time…..the real risk [of changes
in standards] is that everybody will have to sit back and wait”4
The central argument is that the frequent tinkering means that many
applications in the pipeline are either withdrawn or plans about to be submitted
for planning have been redesigned to take advantage of the new standards, such
as the Ministerial Order (known as ‘Section 28’ changes) mandating reduced
minimum apartment size standards in 2015.

Analysis of Planning Applications Data for New Apartments

The analysis assesses this argument, looking at trends in new planning

applications for apartments. Planning applications data is extracted from the
APAS Planning system in each of the four Dublin Local Authorities which holds
details on the progress of a planning application. We only used data on new
planning permission applications (not retentions). Data was extracted using
word search function in excel and an individual observation is a planning
application mentioning ‘apartment’ in the project description. Planning
Applications for Dun Laoghaire-Rathdown were excluded from time series
applications due to missing data.

4RTE News 6th Oct 2017, Interview with Orla Hegarty. Available here: https://www.rte.ie/news/player/2017/1006/21246295-interview-
orla-hegarty-of-ucd-school-of-architecture-on-housing-plans/
This analysis supports the argument that changes to apartments standards in
Dec 2015 led to a significant stymying of new development in 2016. There’s also
some evidence that anticipation of new Section 28 changes to apartment
standards – including those on building height, car parking requirements, dual
aspect, units per lift core and percentage of studios – that were signalled well in
advance of their announcement in Oct 2017, could have encouraged developers
to delay making planning applications for new apartment developments
(from Q1 to Q4 2017).
Overall, the data on planning permission applications tells a different story on
the state of the housing market to other commonly used metrics such as
planning permission applications granted (from the CSO) or measures of housing
activity, such as housing commencements or completions.
Data on new planning applications is more immediately sensitive to regulatory
and policy changes, than standard data on planning permissions granted. This is
because planning permissions that are granted in a specific month are already in
the system before policy changes are made. Planning applications can take
many months or even years to be granted and hence are not immediately
reflective market response to policy changes.
The graph below points to the importance of looking at the permission
applications data (extracted from the APAS Planning system in Dublin City, Dun
Laoghaire-Rathdown and Fingal Local Authorities), rather than just the
permissions granted data (from CSO) when assessing the impact of regulatory
changes.
The data on planning permissions granted show a linear recovery from Q1 2012
to Q3 2017 in apartment development in Dublin. By contrast, the data on new
applications made show a significant slow-down in new apartment activity during
2016 and into 2017. This is commensurate with the view that frequent
regulatory changes have delayed or stymied development of new apartments.
 400 18,000
Apartment Planning Applications vs Applications Granted (Dublin)
350 16,000

New apartment units

Planning applications

14,000
300 Planning Applications
Mentioning Apartments
12,000
250 New Permissions Granted -
Individual Applications
New Permissions Granted - 10,000
200 Apartment Units (Right Axis)
8,000

150
6,000

100
4,000

50 2,000

0 -
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

The slow-down in new applications could be due to the changes to minimum size
standards introduced in Dec 2015. Furthermore the continued lull in new
applications in 2017 could be due to the anticipation of further changes to
regulatory standards, such as those that were announced on 6th Oct 2017 to car
parking requirements, lift shafts, dual aspect etc.
It is important to note that our analysis using the data on new planning
applications submitted is different from the Department of Housing’s own
assessment of the changes. For instance, after the changes made to minimum
apartment size standards in Dec. 2015, the Department claimed an uptick in
planning permissions granted for apartment developments was indication of the
success of this policy change. A written reply from the Department in May 2017
cited the increase in planning permissions granted as evidence that the changes
to minimum apartment sizes were having the desired impact: “planning
permissions granted for apartments in 2016 stood at 3,894 units, representing a
39% increase on 2015’’5. Of course, in the majority of instances these
permissions would have been lodged prior to the decision on reduced apartment
sizes.

5
Response to Parliamentary Question, 10 May 2017; available here https://goo.gl/o3YW8o
The Department also claimed recently there is no evidence of a slowdown as a
result of regulatory changes to apartment standards: “My Department is not
aware of any significant withholding of applications or withdrawals as a result of
the introduction of the Guidelines in 2015. The intention of the focussed review
of the current Guidelines is to examine the scope for any further planning
measures that could be deployed in relation to the viability of apartment
development in our cities and towns, in the context of achieving more compact
urban development”6.
In actual fact, the four quarters after this change to standards experienced a
very substantial reduction in the number of new planning applications for
apartments, which is the opposite of what was hoped for and expected by the
policy change.
Overall, the analysis sheds light on the impact of the policy changes over the
past three years in encouraging new apartment supply coming on stream.

35
Planning Applications Mentioning Apartments (Bi-Monthly): Dublin City, Fingal, Sth Dublin

7 July 15
Planning Applications Mentioning Part V
30 Apartments (Bi-Monthly) for 3 Dub Reduced
LAS with Complete Data
4 Mth Moving Average
10 Nov 15
25 New Min.
Apartment
3 March 14 Size
Building Control
20 Amendment
Regulations

6 Oct 17
15 Changes to
Apartment
Standards
Signalled
10

0
01/01/2003
01/06/2003
01/11/2003
01/04/2004
01/09/2004
01/02/2005
01/07/2005
01/12/2005
01/05/2006
01/10/2006
01/03/2007
01/08/2007
01/01/2008
01/06/2008
01/11/2008
01/04/2009
01/09/2009
01/02/2010
01/07/2010
01/12/2010
01/05/2011
01/10/2011
01/03/2012
01/08/2012
01/01/2013
01/06/2013
01/11/2013
01/04/2014
01/09/2014
01/02/2015
01/07/2015
01/12/2015
01/05/2016
01/10/2016
01/03/2017
01/08/2017

6
Response to Parliamentary Question, 7 Dec 2017; available here https://goo.gl/9VYnug
Key Findings

1. No Evidence Recovery in New Apartment Output

The data on new planning applications suggest that the modest recovery in
apartment building in 2016 and 2017 could be short lived or not well
entrenched. While the number of planning permission applications being
granted has been steadily increasing since 2013, the recovery in apartment
output has been modest.
In 2017 there was still 42% fewer apartments built in Dublin than in 2009 which
was far from a bumper year for new construction. While planning permissions
granted for new apartments has increased in 2016 and 2017, our analysis
suggests that many of these planning applications were submitted in earlier
years, including 2014 and 2015.
There has been a very substantial decline in new applications for apartments in
2016 and 2017, which suggests that we can expect fewer apartments to be built
in the short term, not more.
The analysis also indicates that the substantial planning policy changes made
over the last three years to encourage more apartment development have not
had the desired effect. In fact, some have coincided with a distinct period of
decline in new applications. This could be due to developers redesigning their
planning applications to take advantage of more favourable standards, such as
reduced minimum sizes for apartments.
In the 12 months prior to reduction in minimum apartment size regulations on
6th December 2015 there were 6 new planning applications being made for
apartment developments every two weeks. However in the 12 months after this
change there was a 40% reduction in the number of applications being made
every two weeks, with just 3.5 applications being made from Jan-Dec 2016.
The number of applications during 2017 (from Jan-Oct 2017) picked up
somewhat, with 4.2 new applications being made every two weeks, but still well
below 2014/ 2015 levels.
This has implications for the extensive changes proposed to apartment standards
announced by the Minister for Housing in Oct 2017. The fact that new
applications for apartments are so stunted could suggest that many developers
are holding back to see what changes are made to apartment standards before
designing their projects and seeking finance.

Planning Permissions Granted versus Applications by Quarter, Dublin City,

140 Fingal & Sth Dub
6 Oct 17
7 July 15 Changes to
Part V Apartment
120
Apartment Planning Permissions Reduced Standards
14 March 14
Granted Intro. Signalled
Apartment Planning Permissions Building
100 Submitted Control
Amendments 10 Nov 15
New Min.
80 Apartment
Size

60

40

20

2. Withdrawal of Applications
There has also been an uptick in the number of planning applications that were
withdrawn after the announcement of recent changes to apartment regulations
in October 2017.
For instance, an application for 98 dwellings in Fingal, including 45 apartments,
was withdrawn in Nov. 2017 – one month after the Minister announced his
intention to change apartment density regulations. Another application in Fingal
for a five storey apartment block was withdrawn on 30th June 2017, two weeks
after appointment of the new Minister for Housing, who signalled early on his
intention to review planning regulations and issues around building costs, as part
of a review of the Rebuilding Ireland Action Plan.
3. No Evidence of Increased Applications Due to Planning Reforms
Furthermore there is no evidence that reduced Part V obligations on developers
had the desired effect on increasing number of planning applications for new
apartments.
However it is also the case that there was no noticeable increase in the number
of planning applications that were withdrawn after these planning changes, as
has been argued by some commentators. Reduced Part V contributions could be
renegotiated between developers and local authorities without going back to
planning, so this makes sense.
Finally there is no evidence that the new Building Control Regulation
Amendments in 2014 lead to a reduction in applications, as has been argued by
many. In fact, the introduction of new building control regulations in March 2014
coincided with the beginning of an upward trend in planning permission
applications for new apartments.