Just a few years ago, politicians of every party came together to agree a way to save the most vulnerable from Covid-19. They listened to the science and agreed an extraordinary set of measures that slowed the virus and saw Ireland emerge with no increase in the death rate over the normal.
Housing is the most serious issue we face now but there is no Covid-type approach. Instead, we’ve seen a failure to acknowledge the scale of the problem – and to seek consensus for dealing with it.
Consider the targets in the Housing for All strategy – 40,000 units per annum by the end of the decade. But last year’s census data shows population levels far above what was forecast just a few years ago, suggesting that demand is now running at about 60,000 units per annum.
In 2023, we built barely over half that amount.
The 60,000 figure could only deal with demand going forward. It doesn’t include the deficit, built up over 10 years, which means there is already a shortage of 300,000 homes to buy and 100,000 units to rent. If we only deliver 40,000 of the annual requirement of 60,000 each year, the pent-up demand continues to rise.
The Department of Housing borrowed from Scotland the idea of a Housing Needs and Demand Assessment (HNDA) tool to assess the number and type of units required in different parts of the country. However, unlike Scotland where the tool is used to set a floor on the minimum number of units required, here, the HNDA sets a cap on the numbers – a cap that is based on out-of-date population projections.
Because of this, local authorities around the country continue to sign off on development plans that prevent the zoning of enough land required for the numbers of housing units that are actually needed to house people in areas impacted by those caps. This is widely known and yet it is not being addressed. Concern about supporting increased zoning is continuing a policy that prevents increased housing delivery at this crucial time.
This has real world implications. I have spoken to numerous leaders working in international businesses with locations in Ireland who are very concerned about further investment in Ireland given the lack of available housing.
The SCSI report The Real Cost of New Housing 2023 is based on the real cost of real houses in real developments. The figures show that the average cost of delivering a three-bedroom semidetached house in the greater Dublin area is €461,437.
The drivers of the increased cost of house building are outside the control of developers and anyone seeking to deliver housing, including the State. Anyone proposing to deliver houses in Dublin cheaper that this needs to explain how this is possible.
Let’s pretend that land has no cost because it is owned by the State, and that it costs absolutely nothing to run State agencies. If we remove from the current verified land cost, administration costs, and the developer’s margin, that still only gets the cost of building an average three-bed house in Dublin down to €337,611.
It is appealing to voters to suggest that house prices in Dublin can be reduced dramatically, but even with significant State subsidies it is not realistic, and it is the taxpayer that would have to fund those subsidies.
State land has a value and will have to be replaced. That comes at a cost. We must assist the current generation of home purchasers as much as possible but also acknowledge that taxation will have to be used to cover the replacement cost of the land, and fund the State bodies to deliver housing.
The data analysed by the SCSI suggests that the costs of public sector housing can be 5-10 per cent more expensive than the equivalent privately-built house. I fully support increased State delivery of social and affordable housing but to suggest that the State can build more cheaply than the private sector is simply wrong.
The private development sector is more than happy to have these claims scrutinised – and is ready to help the State meet the housing need of its people.
It is a matter of fact that construction costs have risen as a consequence of Covid, the war in Ukraine and rampant inflation. Other costs including professional fees, levies and finance have also increased via inflation. VAT is a fixed 13.5 per cent. Planning delays and the slow pace of delivery of infrastructure to service new housing also add to the cost.
Initiatives like the Help to Buy (HTB) and First Home schemes have also been blamed for stoking price inflation, but this shows a failure to understand the true drivers of the cost of housing. They have been critical to the recent small increases in supply. Without them, a generation of young people would be unable to buy a home. It is worth noting that these initiatives do not apply to the second-hand market and yet we have not seen any reduction in second hand house price inflation.
Not one of the input costs referred to above can be reduced by withdrawing the HTB or First Home Scheme. The only impact their removal would have is to leave the current generation out in the cold.
The lead time for housing can run to several years from site purchase, through the mire of the planning process, including appeals and judicial reviews as well as site mobilisation. Is it too much to ask that our political parties would put their differences aside and come up with emergency plans to address the current requirement and the deficit in housing?
The housing crisis gripping Ireland can be resolved. But only with reasoned and informed debate, cross party co-operation, and collaboration between public and private sectors. Real lives and real jobs are dependent on stable policy, collaboration and improving the pace of delivery.
As with Covid, the scale of the problem we face is daunting. It is time to take the politics out of housing, and face this crisis together.
Michael O’Flynn is chairman and chief executive of O’ Flynn Group
