cranial rectosis

Personally: I was delighted to see the Irish Independent getting stuck into the whole issue of mad-cap land rezonings today.

We spend a lot of time discussing the failings of the Banks, the Regulators, and the Government, but we often forget to consider the role of the people who created the “asset” that was used as collateral for the borrowings which got us into this mess.

I did an interview with Ian Noctor on WLRfm on the subject this evening and we went through the whole issue of County Development Plans, Regional Planning Guidelines, and the National Spatial Strategy. We looked at how the system is supposed to work, and then talked about how and why it didn’t work.

But let’s start with the articles in the Irish Independent.

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Editorial: Manic zoning cost us dearly

The councillors rezoned an incredible 44,000 hectares of land — equivalent to half the size of Co Louth — in the last decade. This amounted to almost four times the official estimate for the quantity of land needed to meet the country’s housing needs until 2016.

It would have meant enough land to accommodate almost 1.5 million houses and apartments. These could have housed more than four million people, nearly equal to the present population.

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The manic zoning helped to lead to perhaps as much as €20bn of the banks’ stupendous losses, for which the taxpayers will foot the bill.

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Paul Melia: Children with crayons would have made better planners

THE sorry rezoning mess alone is reason enough to turf most of the country’s city and county councillors out on their ear come the next election.

Every serving politican who calls looking for a vote should be quizzed in great detail about their zoning decisions because it is these people who have left us with a multi-billion euro mess that will take years to sort out. Toddlers with maps and coloured pencils could have made a better fist of proper planning.

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NOW is the time to decide whether or not we trust local communities (and their politicians) to plan their own futures, or should we leave the decisions with central government?

The current strategy hasn’t worked — 2,700 ghost estates is testament to that. But what’s the alternative? Let Dublin decide?

This is the last throw of the dice for the councillors. In the next year, they will have to bring their plans in line with national policy. And when the dust settles, and the country gets off its knees, those toddlers better have grown up.

We can’t afford to get it wrong again.

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Councils zoned land for million surplus homes

LOCAL authorities fuelled the property boom by rezoning enough land to build more than a million homes that were not needed, the Irish Independent can reveal.

The full extent of the zoning madness is confirmed for the first time today as new figures show the scale of the problem is worse than previously feared.

Councils across the country rezoned more than 44,000 hectares of land for housing over the past decade — 31,633 hectares more than was actually needed.

This equates to enough land for almost 1.5 million houses and apartments — but just 400,000 units are needed up to 2016, according to the Department of the Environment.

The revelation raises serious questions about the complete lack of regulation that allowed councillors to fuel the property bubble by deeming vast tracts of land to be suitable for housing.

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One-third of the toxic property loans going into NAMA are linked to land, meaning taxpayers could be stuck with €20bn of loans linked to fields that may never be developed.

An Bord Pleanala chairman John O’Connor has previously criticised the extent of the rezoning, saying “excessive and unsustainable zoning of land” had been a contributor to the property bubble and its aftermath.

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So what does all this mean?

If we take the excess land that was zoned, and compare its value as agricultural land with a price tag of €10,000 an acre with its value as development land with a conservative notional value of €200,000 an acre.

31,633 hectares = 78,166 acres.

78,166 acres x €10,000 = €781,660,000 at Ag values

78,166 acres x €200,000 = €15,633,200,000 at conservative development values

€15,633,200,000 – €781,660,000 = €14,851,540,000

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That is €15 Billion of wealth that was created out of thin air by Councillors making rezoning decisions on land that was not actually needed for development during the period through to 2016.

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So what did the owners of this wealth do?

They toddled down to see their local Bank Manager, and they borrowed money against the value of their “asset”.

Either that, or they got a visit from an Auctioneer who had a client who had borrowed money from the local Bank Manager with which to buy said “asset”.

Either way, the landowner was now worth €190,000 an acre more than they were the previous day.

Post the collapse of Lehman Bros, and the great unravelling of the International Money-Go-Round, most of that uplift of €190,000 an acre has been spent, invested, or is buried in a tea chest behind the old McCormick combine up the top of the haggard.

The acre is now only worth €10k again, and this will be formalised when it is de-zoned in the next County Development Plan, however the debt to the local Bank Manager for the €190k still remains.

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Lots of people had their heads up their arses when it came to the property bubble, and the incompetence, stupidity and greed was not just confined to the Bankers, the Regulators and the Government.

Likewise, the mistakes in Ireland were replicated in many other Countries, including the USA, the UK, and Spain. James Howard Kunstler coined the term “cranial rectosis” in his Blog today when he ranted eloquently about the incompetence, stupidity and greed of all and sundry involved in the US Banking collapse.

The banking authorities were shocked – shocked – to discover last week that an awful lot of mortgage paper in this country is not quite in order… appears to contain, er, irregularities… seems less than kosher… frankly, exudes an odor like unto dead carp or, shall we say, a heap of dead carp the size of the building at 3900 Wisconsin Avenue, N.W., Washington, D.C. Any day now we will hear that… mistakes… were… made.

Is it indelicate to say that the USA as an enterprise has its head so deeply and firmly up its ass that the all the proctologists alive on planet Earth could not extract the collective cranium from the collective cloacal chamber even with the aid of a Bucyrus-Erie 1060-WX bucket-wheel excavator? Like, where were we the past ten years?

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But the important thing now is not to play the blame game, but to understand what happened, why it happened, and to figure out how we make sure it doesn’t happen again.

If the Countries of mainland Europe could pull themselves back up out of the devastation of World War II, then there is no reason that Ireland can’t get back on track now.

We now need to focus on how we get going again.