[Article] Government called on after housing plan collapses

Victor

http://www.rte.ie/news/2008/0520/housing.html

Govt called on after housing plan collapses
Tuesday, 20 May 2008 08:16

Opposition parties have called on the Government to step in after it was revealed that five social housing regeneration projects around Dublin city are likely to be delayed or scrapped.

It follows confirmation from Dublin City Council that a developer involved in the public-private partnership has pulled out.

Construction firm Michael McNamara & Co told Dublin City Council about its decision not to proceed with the public-private partnership developments yesterday.
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The company said the projects were now not viable because of the tough residential housing market and the costs of recent changes to building regulations involving increased apartment sizes and better energy efficiency.

Five projects are affected, including a €265m regeneration project at St Michael's estate, Inchicore that has been planned for seven years.

Fine Gael described the collapse of the deal as a blow to the most vulnerable in Dublin society and called on Dublin City Council and the Government to take immediate action.

The Labour Party has also called on Dublin City Council to make alternative arrangements for the construction of 138 units at St Michael's estate, which already have planning permission.

On RTÉ Radio's Morning Ireland, Chairman of the St Michael's Regeneration Scheme, Finbarr Flood said the project would not be abandoned.

http://www.ireland.com/newspaper/breaking/2008/0520/breaking4.htm

Last Updated: 20/05/2008 06:18
Calls for intervention after PPP collapse

Opposition parites have called for Government intervention following confirmation yesterday that plans to regenerate five areas in Dublin will not now go ahead following the withdrawal of one of the country's largets building firms from the public-private partnership (PPP).

Citing "current economic climate and the substantial changes" in the housing sector, Dublin City Council said yesterday that plans for the €900 million regeneration of St Michael’s Estate, O’Devaney Gardens, Dominic Street, Convent Lands in Sean McDermott Street, and Infirmary Road were "unviable".

The announcement was made following notification of the withdrawal from McNamara due to the "adversely changed circumstances" of the housing market, new guidelines forcing developers to build larger apartments and new energy regulations.

Much of the existing run-down stock of council housing at the five locations has already been demolished and tenants are waiting to be rehoused. The demolition of a further four blocks at O'Devaney Gardens is to go ahead next month.

Sinn Féin TD Aengus Ó Snodaigh called on the Government to "step into the builder's shoes" to ensure the social housing units were built.

Gerry Breen, Fine Gael group leader on the council, said the department would have to put money in to redress deprivation in the areas. He accused the council of putting "all its eggs in one basket" by granting so many contracts to Mr McNamara.

The council says it will now explore the options available for regenerating the project areas, but admitted it will take longer than planned to provide the social and affordable housing.

In a letter to the council confirming his withdrawal from the projects, Mr McNamara attributed his decision to the "adversely changed circumstances" of the housing market, new guidelines forcing developers to build larger apartments and new energy regulations. A number of PPP schemes involving rival developers have not proceeded either, he pointed out.

Mr McNamara is involved in a wide range of construction projects. Recently, he sold his stake in Superquinn and has put a number of valuable city centre properties on the market, including the Ormond Hotel in the centre of Dublin and two buildings on Grafton Street.

http://www.ireland.com/newspaper/frontpage/2008/0520/1211232309178.html

Council to seek State aid as social housing plan collapses

DUBLIN CITY Council is to ask the Government to help fund its social housing budget following the collapse of plans to build thousands of housing units in partnership with one of the State's biggest builders. PAUL CULLEN and BARRY O'HALLORAN report

Opposition parties also called on the Government to "fill the gap" after the council confirmed that developer Bernard McNamara had pulled out of five public-private partnership (PPP) schemes, worth a total of €900 million.

In a statement, the council blamed the current economic situation and "substantial changes" in the housing market for making the projects unviable.

It says it will now explore the options available for regenerating the project areas, but admitted it will take longer than planned to provide the social and affordable housing.

In a letter to the council confirming his withdrawal from the projects, Mr McNamara attributed his decision to the "adversely changed circumstances" of the housing market, new guidelines forcing developers to build larger apartments and new energy regulations. A number of PPP schemes involving rival developers have not proceeded either, he pointed out.

Mr McNamara is involved in a wide range of construction projects. Recently, he sold his stake in Superquinn and has put a number of valuable city centre properties on the market, including the Ormond Hotel in the centre of Dublin and two buildings on Grafton Street.

Recent estimates of his personal wealth say he is worth close to €230 million. Assistant city manager Ciarán McNamara said he would be asking the Department of the Environment for financial support for social housing programmes at a meeting later this week. Another funding option being explored is the sale of part of the sites owned by the council.

"While this is a setback we could do without, the council is confident we will be still able to provide high-quality social and affordable housing, possibly over a longer time span."

The largest affected project is the €265 million redevelopment of St Michael's Estate, Inchicore, which has been in planning since 2001.

The other abandoned schemes are the €180 million regeneration of O'Devaney Gardens in Dublin 7, a €200 million project on the convent grounds on Seán MacDermott Street, the regeneration of the Dominick Street flats and a €100 million project on Infirmary Road, near the Phoenix Park.

Much of the existing run-down stock of council housing at the five locations has already been demolished and tenants are waiting to be rehoused.

The demolition of a further four blocks at O'Devaney Gardens is to go ahead next month.

The announcement was greeted with dismay by the affected communities, who have been waiting for years for regeneration schemes to begin.

"I'm so angry. We've been on this road for 10 years now, and this is the third plan that has been pulled out from under our feet," said one resident of St Michael's Estate, Caroline McNulty.

Under PPP schemes, the council gives a site to the developer in return for a specified number of social housing units. The developer then makes a profit by building private apartments on the rest of the site. However, the collapse in property prices has made such schemes much less attractive to developers.

Council officials say they will meet the regeneration boards of St Michael's, Dominick Street and O'Devaney Gardens shortly to put an alternative plan in place to deliver social housing.

Sinn Féin TD Aengus Ó Snodaigh called on the Government to "step into the builder's shoes" to ensure the social housing units were built.

Gerry Breen, Fine Gael group leader on the council, said the department would have to put money in to redress deprivation in the areas. He accused the council of putting "all its eggs in one basket" by granting so many contracts to Mr McNamara.

markpb

Victor wrote: »

The company said the projects were now not viable because of the tough residential housing market and the costs of recent changes to building regulations involving increased apartment sizes and better energy efficiency.

Does this sound to anyone else like the developer is trying to put pressure on the council to drop it's changes to the minimum building spec?

"Look at the poor people, we'd love to build houses for them but you're making us put two windows and enough space to shake a cat in each room!"

SimpleSam06

Don't know why they are crying about the tough residential housing market, they aren't the ones selling them. Definetely a case of developers trying to push up their profit margins, although lots and lots of projects are being cancelled now the receipts from the property boom have dried up.

Whats astonishing to me was that people put their names to such projects when it should have been as clear as the nose on their faces that they couldn't pay for them. Maybe its just a case of "we tried sure".

Victor

No, I think its down to the banks pulling credit on everyone. McNamara in particular has spent (and earned) a lot of money over the last few years. Some bank manager is probably feeling exposed and is shutting things down.

At least its not like the 1970s, when I think some guy owned his own bank and was spending so much money, that he was driving the price of property by himself.

Insulation doesn't cost all that much (especially as some insulation would have been needed anyway).

The_Conductor

Its not just regular insulation though- its thicker walls, insulation foam pumped into external cavity walls, a totally different standard of double glazing to minimise heat loss, resdesign of internal partition walls and hallway layouts etc. Even so- its not a case that its not profitable, it is, its just profitable enough....... Margins have been squeezed- particularly in light of the expectations that construction staff, even foreign construction staff, have.

jdivision

Well if apartment sizes are larger than cost goes up but there's no guarantee you could add those costs (for all of the apartments) to the private ones and they would sell for a higher price to compensate. The city council has been messing around on these for a long time, they should have been built at this stage.

Tails142

The cost of labour has gone up about 30% in the last year - given that these projects have been in the pipeline for 7 years and contracts probably placed with prices agreed back then its no surprise - even allowing for standard inflation nobody could have predicted the recent labour hikes

Why has labour gone up when work is falling? My take on it is that companies aren't laying people off as much as they should, so a company with a hundred staff doing 10 jobs, now has 100 staff doing 7 jobs. Once the message hits home on inflated prices, people get laid off and it gets back to a situation of 70 staff for the 7 jobs I think the prices will stabilise and things will be back to normal.

Those houses would be prime locations to purchase, right in the city centre, they would be perfect, in fact they should be perfect, its a disgrace that such property is so run down - the sooner these projects go ahead the better

ircoha

If we care at all about the most vunerable people in our society then the abandonment of these projects is the clearest sign yet that the wedge between poor and rich is getting wider.

Based on 25 years working in financing PPP projects across Europe, here in Ireland they are simply a conduit for politicians to funnel taxpayers cash back to their supporters, nothing more.

John Purcell could not say that but he knows it.

It is sickening to see how they all want us to vote for Europe and let this skullduggery go on.

jmayo

Maybe I am reading this wrong but is the developer basically saying we are pulling out because the buidling standards are too stringent and we will not make enough money out of it ?

There should be a couple of questions asked about this whole scenario.
1. Are there any penalties applicable to the developer or did the council/government award more pro devleoper contracts that are overly beneficial to one of Fianna Fail's developer friends (FYI Bernard McNamara was FF councillor in Clare 1974-1985 and ran for the Dail in 1981 on FF ticket) ?
2. Why were all 5 projects awarded to the one developer ?

The_Conductor

It was competitive tendering- under EU rules, and the call for expressions of interest was published in the Official Journal of the EU (the OJ). McNamara construction was considered the appropriate tender to go with, based on the tenders received, for buidlings of the specification in the tender. Those specifications have now changed- and McNamara say they will not make sufficient profit based on the higher standards specified, for them proceed as they were originally contracted to do. If they do go to tender again- it must legally be open to all to tender for the project- but there are new safeguards in public tenders that were not there originally, which make it less attractive to developers to tender. (Previously the Councils/government agreed to cover any cost overruns encountered by builders/developers- however this encouraged lowball bidding from developers, safe in the knowledge they would not be held to account for their bids).

Interesting......

astrofool

ircoha wrote: »

If we care at all about the most vunerable people in our society then the abandonment of these projects is the clearest sign yet that the wedge between poor and rich is getting wider.

Based on 25 years working in financing PPP projects across Europe, here in Ireland they are simply a conduit for politicians to funnel taxpayers cash back to their supporters, nothing more.

John Purcell could not say that but he knows it.

It is sickening to see how they all want us to vote for Europe and let this skullduggery go on.

Thats a bit of a stretch isn't it?

The property market has hit hard times, thats not europe's fault.

The_Conductor

ircoha wrote: »

It is sickening to see how they all want us to vote for Europe and let this skullduggery go on.

Well- make sure you don't vote for them the next time around. If you feel strongly enough- try to make sure none of your family or colleagues do either. They have a democratic mandate- even if you think they were voted in by imbiciles- the only way you have around it is to make sure they don't get back in again.......

johnnyskeleton

smccarrick wrote: »

It was competitive tendering- under EU rules, and the call for expressions of interest was published in the Official Journal of the EU (the OJ). McNamara construction was considered the appropriate tender to go with, based on the tenders received, for buidlings of the specification in the tender. Those specifications have now changed- and McNamara say they will not make sufficient profit based on the higher standards specified, for them proceed as they were originally contracted to do. If they do go to tender again- it must legally be open to all to tender for the project- but there are new safeguards in public tenders that were not there originally, which make it less attractive to developers to tender. (Previously the Councils/government agreed to cover any cost overruns encountered by builders/developers- however this encouraged lowball bidding from developers, safe in the knowledge they would not be held to account for their bids).

Interesting......

I think the government should sue the developers for specific performance of the agreement(although as it's a tender it's more complicated). The developers are saying things have changed so they can renege on the contract, but if things had changed to put more money in their pockets and the government tried to renege, they would be into the High Court the very next day.

The_Conductor

johnnyskeleton wrote:

I think the government should sue the developers for specific performance of the agreement(although as it's a tender it's more complicated). The developers are saying things have changed so they can renege on the contract, but if things had changed to put more money in their pockets and the government tried to renege, they would be into the High Court the very next day.

I agree with you 100%.
Can you see the government suing developers though?
I certainly can't.
Sure the tent would be empty at the Galway races........
Gah......
Why do we elect these gombeens?

SimpleSam06

smccarrick wrote: »

Why do we elect these gombeens?

They were in office at a time when the global economy was booming, pure coincidence of course, but to many people the celtic tiger was their doing. Given a chance they'd probably vote them in again. Donkey cart politics in the twenty first century.

The_Conductor

SimpleSam06 wrote: »

They were in office at a time when the global economy was booming, pure coincidence of course, but to many people the celtic tiger was their doing. Given a chance they'd probably vote them in again. Donkey cart politics in the twenty first century.

They also bankrupted the country in the 1980s- no-one seems to remember that though.......

astrofool

FF are the most successful party at staying in power of any democracy in the world.

We harp on about how great proportional representation is, but ultimately it has led to, what is basically, a dictatorship on politics in this country.

In America there is a good chance of change every 4 years, in Britain, due to first past the post, when power switches, it does so in a way that gives the new party the power to push through their mandate.

Over here we are hoping for a rainbow hodge podge to ever shift FF.

jdivision

johnnyskeleton wrote: »

I think the government should sue the developers for specific performance of the agreement(although as it's a tender it's more complicated). The developers are saying things have changed so they can renege on the contract, but if things had changed to put more money in their pockets and the government tried to renege, they would be into the High Court the very next day.

I disagree, the council is at fault here. It's SEVEN years since they announced St Michael's Gardens and they spent five of them talking shop, changing their mind about what they were going to do, then changing it again, then changing it again and then brought in rules that make the project loss making. I don't have a problem with the new apartment sizes by any means but the thing is that the council should have renegotiated prices on that basis

merrionsq

I can understand the builders business case. Not sure entirely if I believe them.
Also, if the council put in some kind of binding legal constraints, then private companies would be afraid of bidding, or would charge more to cover their risks.
If the council steps in and does all the work, then once again the tax payer will be hit for all the costs (and more).

As for the residents, they still have accomodation provided for and maintained by the taxpayer. And good times or bad, full employment or 20% unemployment, they'll still get their social welfare.

orbital83

Are we not just moving all the affected people out to empties in Adamstown instead of building new units for them?

This was alluded to in one news article on the subject - "the Adamstown developers were unavailable for comment"

Bail out developers and eliminate surplus stock in one go - everyone would win! (Well perhaps except poor sods in Adamstown on a 40 year IO mortgage on a rapidly depreciating asset - but who really cares about them)

Victor

I'm wondering if McNamara and the banks would have ended up feeling stretched.

http://www.rte.ie/business/2008/0523/burlington.html

McNamara granted D4 permission
Friday, 23 May 2008 18:53

Developer Bernard McNamara, who earlier this week pulled out of five social housing regeneration projects around Dublin city, has been granted planning permission for a €1 billion development on a site which includes The Burlington Hotel in Ballsbridge.

The Burlington was one of Dublin's landmark hotels, and first opened in 1972.

McNamara bought the Burlington for €288m and over time he also spent about €100m buying adjoining land that was formerly the headquarters of Allianz.

The hotel closed for business last January, but re-opened again last month as the project had not yet been granted planning permission.

Today, Dublin City Council approved a mixed-use development made up of offices, retail space, leisure facilities and a medical centre. It will also have 180 residential units.

It is expected that the building project will begin in early 2009, after the expected planning appeal period with An Bord Pleanála.

Phase One of the project will involve 300,000 square feet of office space on the old Allianz part of the site.

The project will also have a public plaza and garden.

Victor

http://www.rte.ie/news/2008/0525/mcnamarab.html

McNamara says he did not quit PPP projects
Sunday, 25 May 2008 13:51

Property developer, Bernard McNamara, has said he did not pull out of the five Dublin public private regeneration projects he had been involved in.

Speaking on RTÉ Radio's Marian Finucane programme, Mr McNamara said that during a meeting with Dublin City Council ten days ago he was told that the projects were not progressing and that the council wanted to go a different route.

Mr McNamara said that during the meeting his company was also accused of not being as co-operative as it should be.

AdvertisementMr McNamara also said that there was no serious engagement with him on at least one of the five regeneration projects.

He described the public private partnership process as 'frustrating' because it did not allow planning permission to be applied for until contracts were signed.

He said if permission had been applied for at the start of the project he would not have been 'caught in size guidelines' which he said added 25% to the build space.

He said Dublin City Council has spent €27 million on the projects to date and implied that his company had spent even more than that.

He said there are ways such projects can be carried out successfully but that they need to be 'simplified extremely'.

Mr McNamara also said that he may have been 'naïve' in allowing the council to persuade him to co-operate with them in changing away from the public private partnership project.

The_Conductor

Ok- so PPP failed. The next question this poses is would the council be willing to proceed with the developments on a contract basis, if finances are an issue- possibly by front loading the purchase price on the end-owners, with a sufficiently robust contract with the developer to ensure they were delivered on-cost, on-spec and on-time, spelling out sufficient penalties to ensure that every reasonable effort would be made to follow through on them......