Sinn Féin’s answer to underinvestment in the water system is that developers should pay for it.
That was the view of the party’s infrastructure minister, John O’Dowd, during an assembly debate in April.
The UUP, which had brought the debate, as well as the SDLP and Alliance, warned this would just put up house prices.
O’Dowd insisted developers could meet the cost themselves.
The argument resurfaced this week, with the SDLP’s Patsy McGlone saying “it cannot all be left to developers to bear the costs as, in many cases, that simply doesn’t stack financially up”.
The Mid-Ulster MLA was responding to a statement from NI Water that almost 40,000 homes are held up in the planning system due to overloaded sewers. Half might proceed if developers self-fund connections; the other half require major upgrades to water treatment works.
Sinn Féin has not expanded on O’Dowd’s statements and other parties are right to be suspicious of a position that looks like a populist passing of the buck. However, the surprising truth about this policy is that its finances stack up rather well.
Instead of domestic bills, Stormont gives NI Water an annual grant of £350 million, a sum that has not kept pace with inflation since this funding model was introduced after the St Andrews Agreement – and it was too low even then.
According to the Audit Office, an extra £150 million a year is required long-term to upgrade and maintain the water system.
Northern Ireland’s private sector should be completing around 10,000 houses per year to meet demand. Putting the full burden of NI Water’s extra funding onto those new properties would add £15,000 to their average cost.
That is a lot of money but it must be set against the rise in average house prices: £5,000 last year and a projected £7,000 this year. Much of this rise is due to the housing shortage, which is partly due in turn to the constrained water system.
So house-buyers will either not find a house to buy, or they will end up paying what it would have cost to fix the sewers, yet the sewers will not have been fixed.
Who wins from this ridiculous stand-off? Even the developers are losing out on profits they would make if they could build more houses.
Northern Ireland was completing 13,000 private homes a year at the peak of the property boom two decades ago. That figure slumped to 4,000 by 2012, took a decade to climb back to 7,000, and is now heading back down to below 5,000. Although many factors have contributed to this stagnation and decline, the condition of the water system is increasingly responsible.
Legal powers already exist to require developers to pay for water upgrades – planners have effectively limitless scope to demand a financial contribution to almost anything.
When these powers are used for water it tends to be for a small facility on or near the development, creating a fiddly and inefficient network. What NI Water needs is cash to upgrade its major facilities. There is no legal obstacle to obtaining this from developers; only the political obstacle of enacting something that looks a lot more like a tax.
All these figures exclude the target of 2,000 social homes a year – only a few hundred will be built this year.
As a rough guide, new developments by housing associations receive half their funding from Stormont and half from private investors. There is little point in Stormont charging itself more to fund water. It might do so anyway as an accounting exercise and get private investors to pay the other half.
Alternatively, it could exempt social housing from any water surcharge to encourage investment. The boom in purpose-built student accommodation in Belfast has been encouraged by its exemption from rates.
Planners have recently begun exploring their options to require social housing in private developments. Belfast City Council requires 20 per cent, funded by the developers.
The surprising truth about this policy is that its finances stack up rather well
This is genuinely uneconomic in many instances. It might make more sense to focus on water improvements from developers and social housing from other investors.
O’Dowd’s department covers water and planning; housing comes under the DUP-controlled Department for Communities. Stormont’s top two parties are as unlikely to take on developers as they are to take on farmers, which is a great pity.
Somewhere in here lies the potential for a policy holy grail: a way to fix the water system without introducing water charges, while fixing the housing crisis as well.