Leave things as they are, and Ireland’s economy will stumble and fall in the years ahead

From a macroeconomic perspective, maybe for the first time ever, the major problem in Ireland is a supply side problem: demand is surging, but supply is not responding. It is not a case of deficient aggregate demand, but dysfunctional aggregate supply.

Leaving Cert economics tells you what happens when demand soars and supply falters – prices go up and queues form, ultimately leading to stagflation, a scenario where prices go up while the economy stagnates. The problems facing the Irish economy are supply bottlenecks, labour shortages and degraded State capacity to deliver large projects.

If you doubt this, consider the fact that Government spending has ballooned by 47 per cent from €71 billion to €105 billion over the last five years. How can we have spent so much money with so little to show for it? There aren’t enough houses, transport infrastructure lags behind other wealthy countries, hospitals are overcrowded and, in many places, private opulence exists side by side with public squalor. This is what happens when you don’t focus on supply.

In a country such as Ireland, which is faced with so many housing and infrastructural challenges, the next government should embark on a sort of “mine-sweeping” exercise to radically reduce impediments to building homes and public infrastructure. This means altering the way we build, the way we plan and the way we balance the rights of objectors with the responsibility to society as a whole.

Countries such as Denmark, Sweden and Germany have systems of planning that enable large-scale development; we don’t. If we fail to liberate supply so that we can build without delay, the country will grind to a halt, and an otherwise successful country will become enveloped in the politics of failure.

In order to fix the supply side of the economy, the new government must, as a matter of urgency, sweep away bureaucratic, legislative and planning impediments which are constraining development. Land must be made available to build on, rather than hoarded, and builders must be encouraged to build. Last week’s decision by the relatively new Minister for Finance, Jack Chambers, to defer a tax on landowners who sit on residentially zoned land is an obvious step backwards, as it encourages hoarding. Again, basic stuff.

This week, down the road from where I live, in Dún Laoghaire, planning delays regarding the “heritage” value of a bog-standard house have delayed and ultimately blocked the provision of 150 homes that would have been within walking distance of two Dart stations. It was reported on on Wednesday, – read it and weep. We are in the middle of a housing crisis that can only be fixed by more homes, ideally built in places where infrastructure exists.

Another project in Goatstown has been delayed for years due to judicial reviews filed by locals arguing that proposed high-density housing would negatively impact the character of the area and strain local services. The project was for an eight-storey apartment block with 698 much-needed beds for students of UCD, to be built within 850m of the university.

These are only two examples of how our legal framework allows for objections on a wide variety of grounds – ranging from procedural missteps to environmental concerns – which can easily lead to protracted legal disputes, creating a situation whereby critical housing projects, even those deemed necessary by national and local authorities, are delayed for years or sometimes abandoned altogether. Supply is entangled in disputes, leading to crises. All the while, demand is greater than ever, and prices skyrocket. Again, basic stuff.

With such a legal framework, the interests of the few are deployed against the many, leaving the majority worse off.

While it is clear that we should protect the environment, objecting on the basis of environmental concerns is now an almost zero-cost option. To comply with the Aarhus Environmental Convention, the Government introduced Section 50B of the Planning and Development Act 2000, which means that when an environmental issue is raised in planning proceedings, the court cannot award legal costs against an applicant, even if their claims are ultimately unsuccessful. That is, the barriers to lodging such complaints have been all but removed and, unsurprisingly, there has been a flurry of them in recent years, many undermining our overall environmental policy on the grounds of protecting... the environment.

Following a judicial review lodged last May on environmental grounds, a Wicklow fisherman reached a significant financial settlement with German wind farm group RWE. Citing the impact on both marine ecosystems and catch hauls, the appellant took issue with the State’s issuance of a foreshore licence to conduct a survey off the coast in preparation for a proposed €1.5 billion offshore wind farm.

The State is already set to miss its 2030 climate targets – the basis for the Aarhus convention – by a wide margin. A 2023 report by the law firm Clark Hill notes that the Government’s offshore renewable energy ambitions and wider climate goals are “at risk due to the challenges posed by costly third-party appeals, expected judicial reviews, delays in planning consent, and concerns over capital investment in ports”. Supply is being restricted at every hand’s turn.

Last year, Uisce Éireann complained to Government Ministers about bureaucratic planning processes and lengthy judicial reviews delaying the delivery of critical infrastructure. The company’s chief executive, Niall Gleeson, claimed that even instances in which the company is granted a 10-year planning permission, the various licences/permissions it must obtain and legal challenges it has to manage mean that a decade can pass before a project can be implemented – at which time they must reapply for planning. Think of the myriad of objections to everything from MetroLink, bus routes and residential developments, and we have a system designed to hinder supply, pushing up the costs of development, which is ultimately passed on to the citizen. Join the dots...

Zeroing in on planning, countries such as the Netherlands, Germany, and Scandinavian nations have developed systems that ensure timely infrastructure delivery by focusing on early engagement, legal predictability, and integrating environmental concerns from the outset. In the Netherlands, the planning model emphasises early meetings with all concerned where local government, environmental groups and community representatives are involved at the beginning of the planning process. By addressing environmental and community concerns early, the Dutch system minimises the risk of prolonged legal disputes later in the project life-cycle. Seems sensible, doesn’t it?

So, who benefits from the Irish system?

Well, the one area where supply is not being constrained is in the “consultant class”, the legions of advisers, lawyers, planning experts and the like, who make a fine living taking a cut every time there is an objection, an exorbitant claim or a financial compensation payout. These professionals enable a culture of objecting, and they do so in the name of democracy and the protection of the individual. And here is the nub – if protecting the right of the individual or a small group of individuals comes at the cost of many, what are we to do?

For example, as of 2023, 42 per cent of ongoing judicial review cases related to large residential projects, equating to a delay of nearly 15,000 housing units, meaning 15,000 people or families are paying for the price set by the objections of the very few. All the while, house prices head skywards, and impose a massive financial burden on young people. Does that sound fair, equitable or, from an economic standpoint, efficient?

The incoming administration must be a supply-side government. Demand is fine, supply is the problem. Fix supply and the impediments to developments, and we fix a lot of our problems. Leave things as they are, and the economy will stumble and fall in the years ahead.