The dilapidated state of our cities and towns is an embarrassment. The sight of such urban vandalism should make us wince. With a homeless crisis, vacant buildings, no matter how outdated, are a monumental waste. More perplexingly, wholesale urban dilapidation is evidence of a bizarre collective attitude concerning our heritage and culture.
Why have we allowed this to happen? Who is benefiting from it and in what world is dereliction a positive thing?
The good news is that from a commercial perspective dereliction is eminently fixable. To sort this out and kickstart a process of renovation and care, it must be profitable to renovate old buildings – for developers and buyers. Owners of derelict buildings have to be part of the process – and if we create a profitable window for sellers to coax them to sell quickly, then they will clear off. After that window elapses, we should impose an extremely severe penalty for owning a derelict building. This is all doable immediately.
Economics involves incentivising the right sort of behaviour. The tax system is the instrument used to reward good behaviour and punish bad. Dereliction should be seen for what it is, an antisocial activity carried out by individuals that is detrimental to the community at large. Dereliction creeps because every derelict building gives permission for more dereliction. Dilapidation begets more dilapidation and dereliction spreads like a slow virus, engulfing entire streets and areas. This is precisely what we have seen in Dublin 1 – the Georgian and Victorian heart of the city.
Ireland needs to send a signal that this stops now.
Owners of derelict buildings are the first part of the problem. They need to be made aware that they have a duty of care to the building and the street; they are not simply faceless landlords: they are custodians of culture. We don’t allow children to drive cars because society deems them not responsible enough to do so, and we should regard these agents of dereliction through the same lens. Are they responsible citizens?
When it comes to old buildings and vacant sites, there are inappropriate owners and appropriate owners. Owners who allow their buildings to become derelict are not civically mature enough to own them – they do not have the requisite social responsibility. Once we have framed the war on dereliction through the prism of bad and good social behaviour, things become pretty simple.
Hoarding is bad, building is good. Dereliction is bad, renovation is good.
Owners need to be turned into sellers and be given a profitable opportunity to sell for a specific period of time. This could be 18 months. During this period, they avoid capital gains tax if they sell.
Before you argue that this rewards bad behaviour, it is important to understand that it would be for the greater good. A dereliction amnesty would use the same logic as a tax amnesty. When previous late 1980s governments introduced tax amnesties, they were overwhelmed with revenue. Amnesties work. They give people an exit strategy. As the old saying goes, you catch more flies with honey than vinegar.
Derelict Dublin: Why are there so many rotting buildings in the capital?
The derelict buildings and unused sites would become available and moved from inappropriate owners to appropriate owners. This changes the game. If some owners of derelict buildings and sites still refuse to sell, the State should impose a crushing dereliction levy, which if they fail to pay in a short period – say a fiscal year – the property is compulsorily purchased at a fraction of its value and all the legal and selling costs and fees are paid by the owner.
Just to focus minds, the tax bill of the delinquent owner/hoarder is levied on total worldwide income to prevent tax evasion/avoidance.
Finally, like the register of tax defaulters, a register of delinquent owners should be published to name and shame.
The second part of the process is to make it profitable to buy, renovate and redevelop derelict buildings and sites. It should also be made profitable for owner/occupiers to move into these buildings. Remember, we are operating under the ‘dereliction bad, renovation good’ principle. We reward renovators. A 100 per cent tax deductibility allowance could be introduced, so that the cost of purchasing could be set off against taxes over a set period.
To accelerate development there could be a time-sensitive kicker, so that if building starts immediately the allowance is 100 per cent and this begins to fall as each year passes. The sooner the developer starts, the bigger the tax break. If they buy and delay, their tax allowance falls. In addition, the cost of materials could also be tax deductible. The incentive has to be so enormous as to make it a no-brainer.
Buying and moving into renovated buildings or apartments in renovated buildings should also be tax efficient. The way to do this is make the mortgages for owner-occupiers fully tax deductible over a 20-year period. If the mortgage is €300k, every year the owner get a €15k tax allowance off her mortgage, meaning her monthly payments would be negligible. A whole generation of first-time buyers would bite your hand off to live in previously dilapidated areas.
The objective of this project would be to repopulate dilapidated parts of our cities with residents. Cities live and die by footfall and footfall requires residents, not commuters.
The scale of the problem in Dublin was exposed last week in this paper. There are 14,500 residential and commercial properties vacant across the city. Of these, 4,000 are in prime locations in the city centre. Things are getting worse, quickly. There has been a 20 per cent increase in vacancy in only one year. According to GeoDirectory, the figure was 12,000 last year, and is now 14,500. This is a huge problem, but also a huge opportunity.
Dereliction and vacancy don’t happen on their own. They are the result of choices made by individuals and companies. It is time to put a price on those choices because dereliction destroys not just the buildings themselves but the streets, and allowing your building to become derelict can be seen as antisocial behaviour.
One obstacle is the expense of renovation, and many builders and developers argue that it is too expensive to refurbish. Once we have identified this as a problem, the tax system can be used to make it cheap to build.
This is precisely the way a derelict Temple Bar was renovated in the early 1990s: no matter what your opinion of the “cultural quarter” is now, the point is that tax incentives worked. The same must happen in Dublin 1 and other run-down areas in all our cities and towns.
The Department of Finance might baulk at a potential loss of revenue, but the issue is there is no revenue at all from vacancy and dereliction. The medium-term multiplier effect of new residents living and working in the city will far outweigh any short-run tax revenue concerns. The Department of the Taoiseach needs to take the lead on this, as it did in the Temple Bar example.
Can it be done? Of course. As our cities fall down around us, the only question is, if not now, when? A war on dereliction must be declared.
