The return of bubble conditions in the Dublin housing market was confirmed recently with the news that RTÉ had sold a portion of its sprawling site at Donnybrook in south Dublin for €108m to a housing developer, without planning permission.

The site is not in the city centre: it is located 6km from O’Connell Bridge and in an area of south Dublin where there is much empty and underdeveloped land. This includes an 18-hole golf course, the sprawling UCD campus and an enormous bus garage that could better be located in the outer suburbs, where commuter bus routes originate.

The pattern of land use in Dublin is a relic of the time when the regional population was half today’s figure: when RTÉ and the university located to their current sites 60 years ago, this area of Dublin was on the edge of the city.

The land acquired from RTÉ extends to 8.6 acres, so the price equates to €12.5m/acre and the intention is to seek permission for 500 residential units. Almost all will be apartments. Before a sod is turned, these units are standing at €216,000 per unit for site costs alone. It is unlikely that the cheapest units will sell for under half a million.

The purchasers will face a battle to secure planning permission. The residents of Donnybrook are already objecting to the refurbishment of an existing derelict office block on the main street despite the project receiving the go-ahead from Dublin City Council. A plan for 71 apartments on a long-vacant site in the Greenhills area of Donnybrook is also facing opposition from residents despite approval from An Bord Pleanala.

According to the Irish Examiner, Patrick Clery, secretary of the Nutley Square Management Company, a local residents’ group, has told the council: “We consider the proposed development does nothing to protect, provide or improve the residential amenities of our neighbourhood.” It is the purpose of residential development to provide extra accommodation for new arrivals in an under-supplied market, not to improve “residential amenities” for established residents, but Mr Clery is voicing a view which is tacitly accepted by Dublin area politicians.

Any development on vacant sites, even in the outer suburbs 12km or 15km from the city, is opposed by the established residents, often under the leadership of their local councillors and TDs. The astonishing prices for vacant land, such as the RTÉ site, is evidence that their opposition usually succeeds.

Sites of up to an acre are available for sale (like the RTÉ site without planning permission) in many rural counties for as little as €30,000. The small premium over agricultural value reflects the expectation that planning permission will be available, as well as the current plentiful supply of residential units for sale in most parts of Ireland at affordable prices. The zoning and planning arrangements are utterly dysfunctional: new supply is being encouraged in the parts of the country where it is least needed, and site costs are astronomical in and around Dublin and a few other hotspots.

This is a problem caused by Government policy, and not by some absolute shortage of vacant or under-utilised land in and around Dublin. When Dublin meet Kildare in the Leinster football final on 16 July next, the Naas Road will fill up from mid-morning with displaced Dubs heading through the rolling prairies on either side, zoned for anything but affordable housing.

Dublin is not the only European city which has chosen a dysfunctional housing policy and avoidable urban sprawl, but it is an extreme example. London suffers the same problem but has the excuse of being home to nine million people. Most European cities of Dublin’s size have managed to provide affordable housing and sustainable commuting distances.

The new minister for housing, Eoghan Murphy, appears set on scrapping the first-time buyers’ grant introduced by his predecessor Simon Coveney. He is right to do so: any scheme which encourages demand without relaxing constraints on supply will accelerate the house price bubble. Relaxing these constraints is, however, politically challenging. The result of a sane housing policy in the Dublin region, and in other affected areas, will ultimately be lower prices for existing homeowners and hence lower collateral values for the banks which have extended mortgages at high ratios to current inflated prices.

But the creation of the exorbitant prices and rents in the Dublin area has taken 30 or 40 years of misguided policy and it cannot be wished away in a hurry. It will take several decades to reverse the damage. The minister would do well to announce, as an explicit objective of policy, the pursuit of zoning and planning policies which prevent any further increases in prices, the minimum needed to make affordable housing a credible objective.